Thehybridpolicyisaflexiblepolicytoolthatcombinesfeaturesofcarbontradingandcarbontaxation.ItseconomicandenvironmentaleffectsunderChina’sbackgroundarestillnotstudiedindetail.Giventheexogenouscarbonreductiontargets,carbonprices,andcarbontax-rates,bycomputablegeneralequilibriummodelingmethodsandfactordecompositionmethods,thisarticleinvestigatesdirectandcascadedeffectsofthehybridpolicyoneconomicgrowth,energyutilization,andcarbonemissiononthenationallevelandthesectorlevel,withChina’snationalinput-outputdata-set.Stepwisely,policyscenarioswithirrationalestimatedresultsareselectivelyexcludedbasedoncomprehensiveevaluationamongeconomic,carbonreductionandotherpolicytargets.Asaresult,againstnationaleconomicconditionsin2007,thehybridpolicy,withacarbonreductiontargetof-10%,acarbontax-rateofaround$10,andaceilingcarbonpriceof$40,ishighlyrecommended,becauseofitssignificantlowereconomicloss,lowerenergyutilizationcost,andpracticalrobustnessagainstfluctuationofenergymarketandcarbonmarket.Furthermore,bydecompositionanalysis,carbonreduction-relatedcostsaredecomposedintoadirectpartthatincludescarbonallowancepriceandcarbontax,andanindirectpartastheenergypriceincrementalinducedbydirectcarboncosts.Grosscarbonreductionmaybedecomposedintothreepartssuchasenergyintensity,economicscale,andtechnicalprogress.And,carbontaxationisthemainpolicytoolthatstimulatestoimprovetheenergyefficiency.