"ASSESSING THE ECONOMIC IMPACTS OF CHINA'S ENVIRONMENTAL PROTECTION TAX"

Abstract

The implementation of China's environmental protection tax in 2018, replacing the earlier pollution fees system, has shown clear success in reducing pollution and emissions. However, its impact on economic growth warrants further examination. This study utilizes urban panel data and combines theoretical analysis with empirical evidence to assess the economic implications of the environmental protection tax.

At the macroeconomic level, Pigou's concept of the "Pigouvian tax" proposed in 1920 highlights the potential of taxation to mitigate negative externalities. Pearce's work indicates that the environmental protection tax can yield a "double dividend" of environmental enhancement and increased efficiency. Nevertheless, recent evaluations of China's environmental protection tax policy emphasize its favorable environmental outcomes but question its ability to stimulate economic growth.

Microeconomic investigations have examined the tax's influence on corporate innovation investment, revealing a positive correlation with business upgrading. Subsequent analyses based on data from Chinese listed companies illustrate how the environmental protection tax affects corporate behavior, profitability, and environmental performance.

While existing research has explored the environmental protection tax's impact on economic growth, this study adopts a comprehensive perspective by introducing an economic quality evaluation system based on the Five Concepts for Development. By examining both the quantity and quality of economic growth, we aim to provide a more nuanced understanding of the tax's economic consequences