Are Tax Revenue Recycling Schemes Based on Industry-Differentiated Carbon Tax Conducive to Realizing the "Double Dividend"?

Tax revenue recycling schemes are key to realizing the "double dividend" of the carbon tax. However, few researchers have analyzed the policy effect of tax revenue recycling schemes dynamically from the perspective of an industry-differentiated carbon tax. This paper investigates the economic and environmental impacts of carbon tax revenue recycling schemes based on industry-differentiated carbon taxes, by adding a module of industry-differentiated carbon taxes to a dynamic computable general equilibrium model. The results show that: Carbon tax revenue recycling schemes can effectively mitigate the negative impact of the industry-differentiated carbon tax on macroeconomy and industry output. Indirect carbon tax recovery measures are more beneficial to reduce the loss of GDP than direct recycling, while corporate income tax reduction is the best option to mitigate the reduction of total social investment. In terms of emission reduction benefits, the reduction of corporate income tax and subsidies for the renewable energy industry will generally have a better performance in terms of emission reduction. However, the formulation of differentiated carbon tax revenue recycling schemes should be based on the characteristics of each industry, as an inappropriate formulation may even hinder the emission reduction effect