How to Make The Fiscal policies Greener in China?——Based on The Perspective of Environmental Macroeconomics

Lu, Hongyou and Xu, Wenli and Xu, Kun (2016): How to Make The Fiscal policies Greener in China?——Based on The Perspective of Environmental Macroeconomics.

Abstract

From the perspective of environmental macroeconomics, in addition to environmental equilibrium effected by environmental policies, the fiscal policy have an impact on the environment equilibrium. On this basis, this paper constructs a RBC model with environmental equilibrium, that contains different financing mode of government environmental expenditure, within which incorporating fiscal spending shocks, labor income tax rate shock, capital income tax rate shock and environmental tax shock. Utilizing the historically macroeconomic data during 1978 to 2014, this paper estimate the long-run steady-state of macroeconomic and environmental variables, then simulate short-run fluctuation of these macro-variables. The results show that:(1) government environmental expenditure being arranged in the general budget, taxing emission achieve the "double dividend" that output increase by 0.13%, and the stock of carbon dioxide fall by 1.1%; (2) changes of environmental tax rates is one important source of volatility in the stock of carbon dioxide, volatility contribution rate of 87%; (3) changes in fiscal policy have a significant impact on short-term fluctuations of carbon dioxide, and the environmental effects of direction caused by expansionary fiscal policy depend on the fiscal policy type. Based on the above conclusions, this paper suggests the introduction of environmental taxes as quickly as possible, government environmental expenditure take the general tax financing mode, and a combination of modest increase in fiscal expenditure, reducing labor income tax rate and inceasing capital income tax rate in order to promote green development during "Thirteen Five Plan" period.

• Item Type: MPRA Paper
• Language: Chinese
• Keywords: environmental tax; finacing mode; fiscal policies; business cycle
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities ; Redistributive Effects ; Environmental Taxes and Subsidies; H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics

References

[1]. 卢洪友，许文立，2015：《中国生态文明建设的“政府-市场-社会”机制探析》，《财政研究》第11期。 [2]. Evangelos V. Dioikitopoulos, Sugata Ghosh, Eugenia Vella, 2016, Technological Progress, Time Perception and Environmental Sustainability, The University of Sheffield, SERPS no. 2016002. [3]. G. I. Galinato, S. P. Galinato, 2016, The effects of government sending on deforestation due to agricultural land expansion and CO2 related emissions, Ecological Economics, 122:43-53. [4]. G. E. Halkos, E. A. Paizanos, 2013, The effect of government expenditure on the environment: an empirical investigation, Ecological Economics, 91:48-56. [5]. T. R. Barman, M. R. Gupta, 2010, Public expenditure, environment and economic growth, Journal of Public Economic Theory, 12(6):1109-1134. [6]. S. Gupta, K. Miranda, I. Parry, 1995, Public expenditure policy and the environment: A review and synethesis, World development, 23(3):515-528. [7]. R. Lopez, G. I. Galinato, A. Islam,2011, Fiscal spending and the environment: Theory and empirics, Journal of Environmental Economics and Management, 62:180-198. [8]. A. M. Islam, R. E. Lopez, 2015, Government spending and air pollution in the US, Int. Rev. Environ. Resour. Econ. 8(2):139-189. [9]. R. Lopez, A. Palacios,2014, Why has Europe Become Evironmentally Cleaner? Decomposing the Role of fiscal, trade and environmental policies, Environ. Resour. Econ. 58:91-108. [10]. T. Bernauer, V. Koubi, 2013, Are bigger governments better providers of public goods? Evidence from air pollution, Public Choice, 156:593-609. [11]. E. Vella, E. V. Dioikitopoulos, S. Kalyvitis, 2015, Green spending reforms, Growth, and welfare with endogenous subjective discounting, Macroeconomic Dynamics, 19:1240-1260. [12]. G. I. Galinato, A. Islam, 2014, The challenge of addressing consumption pollutants with fiscal policy, Washington State University, School of Economic Seiences, WP2014-1. [13]. Karl Goran-Maler, Macroeconomic aspects of environmental policy, In “Economic analysis of environmental problems”, NBER, 1975, p.27-64. [14]. Herman E. Daly, Towards an Environmental Macroeconomics, Land Economics, vol.67, No.2(1991),pp.255-259. [15]. Craig S. Marxsen，1992，Towards an Environmental Macroeconomics: Comment，Land Economics, Vol. 68, No. 2, pp. 241-243. [16]. Herman E. Daly，1992，Towards an Environmental Macroeconomics: Reply，Land Economics, Vol. 68, No. 2, pp. 244-245. [17]. A. Heyes, 2000, A proposal for the greening of textbook macro: IS-LM-EE, Ecological Economics, 32:1-7. [18]. P. A. Lawn，2003，On Heyes’ IS–LM–EE proposal to establish an environmental macroeconomics，Environment and Development Economics 8: 31–56. [19]. P. A. Lawn，2003，Environmental macroeconomics:extending the IS-LM model to include an ‘environmental equilibrium’ curve，Environmental Economics，3: 118–134. [20]. N. C. S. Sim，2006，Environmental Keynesian macroeconomics: Some further discussion，ecological economics，59:401-405. [21]. Jonathan M. Harris, 2008, Ecological Macroeconomics: Consumption, Investment, and Climate Change, Global Development and Environment Institute, Working Paper No. 08-02. [22]. Daron Acemoglu, Philippe Aghion, Leonardo Bursztyn, David Hemous, 2012, The Environment and Directed Technical Change, American Economic Review, 102(1): 131–166. [23]. Daron Acemoglu, Ufuk Akcigit, Douglas Hanley, William Kerr, 2014, Transition to Clean Technology, NBER Working Paper No. 20743. [24]. Carolyn Fischer,Garth Heutel, 2013, “Environmental macroeconomics：Environmental Policy, Business Cycles, and Directed Technical Change”, Annu. Rev. Resour. Econ. 5:197–210. [25]. Konstantinos Angelopoulos, George Economides, Apostolis Philippopoulos, 2010, “What is the best environmental policy? Taxes, Permits and Rules under Economic and Environmental Uncertainty”, CESIFO Working Paper, NO.2980. [26]. Carolyn Fischer, Michael Springborn, 2011, “Emissions targets and the real business cycle: intensity targets versus caps or taxes”, Journal of Environmental Economics and Management, Vol.62, 352-366. [27]. Yazid Dissou, Lilia Karnizova, 2012, “Emissions cap or emissions tax? A multi-sector business cycle analysis”, University of Ottawa, Working Paper NO.1210E. [28]. 曹静. 走低碳发展之路：中国碳税政策的设计及CGE模型分析[J]. 金融研究,2009,(12):19-29. [29]. 石敏俊，袁永娜，周晟吕，李娜，2013：《碳减排政策：碳税、碳交易还是两者兼之？》，《管理科学学报》第44卷第9期。 [30]. Kim I. M, Loungani P., 1992, “The role of energy in real business cycle models”, Journal of Monetary Economics, Vol.29, 173-189. [31]. Davis S, Haltiwanger J, 2001, “Sectoral job creation and destruction responses to oil price changes”, Journal of Monetary Economics, Vol.48, 465–512. [32]. Barbara Annicchiarico, Fabio Di Dio, 2015, “Environmental policy and macroeconomic dynamics in a new Keynesian model”, Journal of Environmental Economics and Management, Vol.69, 1-21. [33]. 陈思霞，卢洪友，2014，公共支出结构与环境质量:中国的经验分析，经济评论，01. [34]. 卢洪友，杜亦譞，祁毓，2015，中国财政支出结构与消费型环境污染:理论模型与实证检验，中国人口，资源与环境，10. [35]. Christopher S. Decker, Mark E. Wohar，2012，Substitutability or complementarity? Re-visiting Heyes’ IS-LM-EE model，Ecological Economics 74：3–7.