Abstract
The tax structure capable of achieving an energy transition in the power sector was analyzed by applying the Pigouvian tax on generation fuels. Under the 2018 Tax Act Amendment, the tax rate criteria for the excise tax on power generation fuels changed from the calorific value to environmental externalities of the fuel. However, to reverse the merit order of bituminous coal generation with liquefied natural gas (LNG) generation, reflecting only some external costs of the environment as a tax is not enough. In this paper, we established four tax reform scenarios for bituminous coal and LNG considering environmental externalities, and we analyzed the reversal of dispatch priority using the electricity system unit commitment and M-Core economic dispatch model. According to the analysis results, the share of bituminous coal generation will be reduced to 10–20% depending on the scenario, reflecting the relative tax rate equalizing the fuel costs of bituminous coal and LNG power. To achieve an energy transition by reversing the merit order of bituminous coal and LNG generation, the tax rate of bituminous coal must be more than twice that of LNG. Moreover, to achieve an eco-friendly generation mix through tax reform, the external costs of the environment by fuel source should be accurately estimated and efficient taxation that can adequately reflect these external costs of the environment while considering tax fairness, neutrality and simplicity should be established.
Highlights
The Korean government has an environmentally oriented energy policy
In the tax reform scenarios, the transition effect of the merit order is estimated by the fuel cost of bituminous coal and liquefied natural gas (LNG), the capacity rate, the generation share, fuel consumption, etc
Since the Amendment, the excise tax rate criteria for LNG and bituminous coal have changed from the calorific value to the external costs of the environment
Summary
The Korean government has an environmentally oriented energy policy. This orientation has been embodied in state-run tasks related to energy policy, such as the discovery and development of eco-friendly future energy (Minister of Trade, Industry and Energy of Korea, MOTIE), the creation of pleasant air without particulate matter (PM) (Minister of Environment of Korea, MOE), the transition to safe and clean energy based on the policy of phasing out nuclear power (MOTIE and NuclearSafety and Security Commission of Korea, NSSC) and the establishment of an effective implementation system for new climate change (MOE).The generation sector has clearly shifted to follow this policy orientation. The Korean government has an environmentally oriented energy policy. This orientation has been embodied in state-run tasks related to energy policy, such as the discovery and development of eco-friendly future energy (Minister of Trade, Industry and Energy of Korea, MOTIE), the creation of pleasant air without particulate matter (PM) (Minister of Environment of Korea, MOE), the transition to safe and clean energy based on the policy of phasing out nuclear power The government announced a policy to abolish old coal-fired power plants and to suspend the construction of new coal-fired power plants to reduce both greenhouse gas (GHG) and PM emissions. Safety concerns have prevented an extension of the life of nuclear power plants and cancelled the construction of new nuclear power plants. The 8th electricity supply–demand basic plan (the 8th basic plan) included tax reforms to reduce both PM and GHG emissions, but it mostly relied on a Energies 2020, 13, 5233; doi:10.3390/en13195233 www.mdpi.com/journal/energies
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