A Simulation Analysis of the Introduction of an Environmental Tax to Develop Biomass Power Technology in China

Shanshan Wang,Nan Xiang,Ruiqin Zhang,Helmut Yabar,Feng Xu,Yoshiro Higano,Takeshi Mizunoya

doi:10.5539/jsd.v6n1p19

Abstract

Despite rapid growth in the past few decades, biomass power development in China continues to face several barriers, such as a lack of supporting policies and core technologies. This study proposes the introduction of an environmental tax to promote biomass power technology development in China. We construct a dynamic input-output model to evaluate the effects and economic feasibility of an environmental tax, considering the interrelationships among China’s economy, energy and environment. The GDP is maximized as the objective function subject to greenhouse gas (GHG) emissions constraints and a series of socio-economic constraints. The model uses 2007 as the base year and 2020 as the target year. The simulation results illustrate that a 10 Yuan/tCO2e carbon tax is sufficient to stimulate biomass technology development, in addition to economic development and GHG emissions mitigation. According to the simulation, the total biomass power generation from 2007 to 2020 with the environmental tax will be 2,334 TWh, the annual growth rate of GDP will be 9 percent and the GHG emissions intensity will be 0.15 kgCO2e/Yuan, a 46.5 percent reduction compared with 2005 GHG emission intensity levels. Electricity substitution and industrial structure adjustment are two key approaches to achieve the optimization of economic development and GHG emissions mitigation in the model. Furthermore, the introduction of an environmental tax is shown to be economically feasible by the cost-benefit analysis.

Highlights

As a renewable energy, biomass power has attracted more attention and has had rapid growth in the past several decades in China (Zhao, 2011)
In 2009, China made a commitment to the climate to reduce its greenhouse gas (GHG) intensity by 40-45 percent by 2020 compared to the 2005 levels
The government expressed the expectation of levying a carbon tax during the 12th five-year program (NDRC, 2010)

Summary

Introduction

Biomass power has attracted more attention and has had rapid growth in the past several decades in China (Zhao, 2011). By the end of 2008, the total installed capacity of biomass power generation in China was 3,150 MW. Because of low commercial profits, many biomass power plants in China must rely on government subsidies to maintain operations (Zhao, 2012). The reasons for this situation, which are analyzed briefly, are the absence of supporting policies and core biomass power technologies. Due to this lack of incentive policies and proper technologies, the development of the biomass power generation industry has many barriers in China, such as the high construction cost of a biomass power plant, the high cost of raw materials and fewer financing channels. In this paper, we propose the introduction of an environmental tax to promote biomass power technology development in China

Methods

Results

Discussion

Conclusion