【Abstract】We evaluate the potential of China’s pendent carbon tax policy in CO2 (carbon dioxide) mitigations from the perspective of inter-factor/inter-fuel substitution. The analysis is conducted by region given that inter-factor/inter-fuel elasticities of substitution are often discrepant among different areas. The resultsindicate that nearly 3% reduction inCO2 emissions from the 2010 level can be achieved by levying acarbon tax at 50 Yuan/tonne. The inelastic demand for fuel inputs in the face of rapid processes forindustrialization and urbanization limits the effectiveness of China’s carbon tax to a great extent. Specifically, a total amount of more than 130 million tonnes CO2 emissions can be reduced in the East coast and Southwest areas, and the areas of Municipalities and Northwest could also achieve CO2 mitigation bymore than 3%. In contrast, the areas of Midland and Northwest can merely cut their CO2emissions by1.6% and 0.92%, respectively.
【Keywords】Carbon tax；CO2 emissions reduction；Interfactor/interfuel substitution；Regional disparities