Effects of carbon and environmental tax on power mix planning - A case study of Hebei Province, China

Abstract

The growing energy crisis and severe atmospheric pollution have put much pressure on the Chinese government and resulted in a lot of revolutionary changes. Considering the upcoming new environmental and carbon tax, how would the tax reform affect the power sector; which types and how much of the different power generation technologies would be added are important questions that need to be answered by decision makers. In this study, a deterministic optimization model is proposed for determining the optimal power mix through the introduction of environmental and carbon taxes. A case study of Hebei Province in China is provided to illustrate the effects of these two taxes. The capacity additions of different generation technologies, air pollutants and CO2 emission amounts, system costs, and regional power security under different tax levels are profoundly examined. The modeling results indicate that such tax policies could significantly improve to the power mix adjustment as well as the quality of the ambient air quality. Higher tax levels would promote the development of renewable power generation. Meanwhile, different degrees of CO2 and air pollutant emission reduction can be achieved. The modeling results could help the decision makers identify the satisfactory tax levels in the future.