CGE Model Based Natural Gas Tax Exemption Analysis in Beijing Area with Emphasis on Social Welfare and Energy Usage

Abstract

Acting as a cleaning and great efficiency fuel, natural gas has gained more and more notice. Reflect on the low percentage of natural gas usage in China, how to motivate natural gas production and usage from macroeconomic view worth discussing. Although carbon tax can be efficiently used to promote carbon emission reduction, the implementation of levying carbon tax might negatively impact natural gas industry and other clean energy industry. Based on this, with the employment of CGE theory, this paper applies GAMS advanced modeling system to construct a CGE model which takes natural gas tax exemption as the target, and takes Beijing as an example to simulate and analyze the impact of gas tax exemption policy on carbon emissions, economic system and social welfare. The paper reveals that the exemption of natural gas might be a possible choice which can control the CO2 emission in Beijing to a certain extent. At the same time, it has a positive impact on the macroeconomic variables and social welfare of the residents in Beijing. Therefore, I suggest that during the early periods of the design and implementation of carbon tax, the protection of natural gas industry can be considered.