Abstract
This paper considers hypothetical options for the transformation of the Bolivian power generation system to one that emits less carbon dioxide. Specifically, it evaluates the influence of the weighted average cost of capital (WACC) on marginal abatement cost curves (MACC) when applying carbon taxation to the power sector. The study is illustrated with a bottom-up least-cost optimization model. Projections of key parameters influence the shape of MACCs and the underlying technology configurations. These are reported. Results from our study (and the set of assumptions on which they are based) are country-specific. Nonetheless, the methodology can be replicated to other case studies to provide insights into the role carbon taxes and lowering finance costs might play in reducing emissions.
Highlights
Scientific evidence of the human influence on the climate system suggests that the increased concentration of anthropogenic greenhouse gases in the atmosphere is the dominant cause to the observed climate change [1]
Life cycle costs of renewable energy technology (RET) are more sensitive to variations in the weighted average cost of capital (WACC) due heavier upfront capital costs compared with technologies dominated by fuel costs
The methodology presented in this article evaluates the effect of the WACC on marginal abatement cost curves (MACC) when applying carbon taxation to the power generation sector
Summary
Scientific evidence of the human influence on the climate system suggests that the increased concentration of anthropogenic greenhouse gases in the atmosphere is the dominant cause to the observed climate change [1]. In this regard, investments worldwide in the order of trillions of US$ in low-carbon energy generation and energy efficiency are needed to reach the 2 ◦ C climate stabilization goal of the UNFCCC Carbon taxes are aimed at reducing emissions according to the ‘polluter pays principle’. If the goal is to reduce carbon emissions, a carbon tax is more
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