Economic measurement of distorted cost of tax in China's coal industry

Liu Yancheng; Li Yanan; Li Xiang

Abstract：The report of the 20th National Congress of the Communist Party of China put forward"actively and steadily promote carbon to achieve peak carbon neutrality".This paper deduces the Hicks compensative demand function and the price elasticity of demand under the consumer utility function in the form of Cobb-Douglas,and uses the price elasticity of demand combined with the Harberger triangle formula to estimate the approximate value of the distorted cost caused by China's tax on coal mining and extraction industry during 2006-2020.At the same time,the environmental benefits brought by the taxation of coal mining and selection industry are approximately estimated,and the environmental benefits are compared with the distortion costs,and the former is greater than the latter,which indicates that although the taxation of coal industry reduces the efficiency of resource allocation,the environmental benefits of taxation can compensate for the efficiency loss.In addition,through further comparative analysis,it is found that the growth rate of environmental benefit is not as fast as the distortion cost,and if the tax scale continues to increase,the distortion cost may eventually be greater than the environmental benefit.Overall,the current scale of government taxation is efficient and reasonable.