Environmental policy, tax, and the target of sustainable development

This paper examines whether governments should adopt stricter environmental policies—such as raising environmental taxes—in closed and open economies. It reconsidered the policy effects of enterprise heterogeneity in an open economy and studied the relationship between environmental policies and sustainable development. In the case of self-sufficiency, it is possible to replace punitive environmental policies with environmental subsidies, which is beneficial to sustainable development. However, when trade is opened up, as less productive enterprises withdraw from local and export markets, the stricter environmental policy is the optimal strategy for environmental and energy sustainable development.