Bi-model optimization of a carbon tax for emission reduction

The Paris Agreement mandated high-greenhouse-emitting countries implement carbon pricing to accelerate emission reduction to cope with environmental challenges posed by climate change. We emphasized a research analysis of the reciprocal feedback mechanism between micro- and macro-economic systems in response to the carbon tax in the economy, facilitating the adoption of renewable technology for social welfare. This research utilized a bi-model comprising the dynamic computable general equilibrium model and energy system optimization model for analysis. Results revealed empirical and positive evidence of carbon tax efficacy of three times emission reduction related to a less than one-time economic contraction, while significant environmental benefits positively influenced the individual welfare and technological advancement in Tianjin, China. The conclusion offers concrete long-term benefits of cleaner energy adoption, public health, and environmental sustainability to align with the Paris Agreement goals. The study suggests that policymakers implement a gradual carbon tax to maintain economic growth and fund carbon tax revenue to renewable energy technology, industrial efficiency upgradation, and social welfare programs to balance economic trade-offs.