Abstract: Reducing greenhouse gas emissions, energy-intensive industries will bear the main task. However, how to distribute the emission intensity reduction task among firms with different technologies will has a impact on abatement costs, the competitiveness of firms and social economic welfare. Tax on emissions discharged in production process is widely recognized as one of the effective policies. This paper constructs a two-stage dynamic game model based on two representative iron and steel firms (eastern and western) to examine uniform or discriminated emission tax levied by central government effects on abatement costs, social economic welfare and the competitiveness of firms. The empirical results show that: under a unified emissions tax, the steel industry production declines smaller, the emission intensity reduction task is distributed more average among firms and the western steel firm competitiveness losses smaller; Under discriminated emission tax regime, a smaller emission abatement cost is achieved, social economic welfare loss is smaller, eastern steel company competitiveness is improved with a bigger margin, but the negative impact on western iron and steel enterprises is obvious. Therefore, it should take full account of the emission intensity reduction task distribution, iron and steel industry production, social economic welfare, the specific impact the competitiveness of firms on designing the emissions tax and trade-offs between lower abatement cost and the less affected competitiveness of individual firms.

Key words: carbon dioxide emissions reduction, two-stage game, emission abatement mechanism, steel and iron industry