Employing the CGE model to analyze the impact of carbon tax revenue recycling schemes on employment in coal resource-based areas: Evidence from Shanxi

Whether or not the carbon tax is conducive to alleviating the pressure on employment reduction in coal resource-based areas is a subject worthy of in-depth study. We take the province of Shanxi, a typical coal resource-based area in China, as an example, and use the dynamic computable general equilibrium (CGE) model to simulate the impact of carbon tax on employment under various carbon tax revenue recycling schemes. We disaggregate the employment effect into demand effect, cost effect, factor-shift effect, and investment-pull effect to analyze the transmission path of the influence of carbon tax on employment. The results show that the carbon tax is conducive to alleviating the pressures on employment reduction in coal resource-based areas. Compared with the scenario of no carbon tax revenue recycling, the pressures on employment reduction under the scenario where carbon tax is returned to residents or enterprises in different forms, are allayed. More into detail, carbon tax has the least inhibiting effect on industry employment in case that tax revenue is returned to residents in the form of transfer payment. In addition, there is a prominent difference in the transmission path through which the carbon tax promotes employment, that is, the single effect, or the combination of demand effect, cost effect, factor-shift effect, and investment-pull effect. However, the carbon tax would obstruct employment principally through the demand effect. [Display omitted] •Carbon tax is conducive to alleviating unemployment in coal resource-based areas.•Carbon tax hinders employment lightly when tax revenue is transferred to residents.•Employment effect divides into demand, cost, factor-shift and investment-pull effect.•The transmission path of carbon tax to promote employment varies.•Carbon tax would obstruct employment principally by demand effect.