The influence of environmental tax rates on the Levelized cost of heat on the example of organic and biofuels boilers in Ukraine

Abstract

In December 2019, the European Commission officially presented The European Green Deal, a new EU economic development program aimed at achieving climate neutrality on the European continent by 2050. Many previous global, European, and national programs also aim to reduce emissions of pollutants into the atmosphere. In this context, one of the ways to reduce emissions is the development of alternative energy sources (in particular the wider use of biofuel boilers) and increasing environmental tax rates. When choosing the optimal heating boilers, the practice of using the levelized cost of heating (LCOH) indicator is common. Environmental pollution tax (as a component of LCOH) is calculated for the three most common types of boilers (for Ukrainian boiler houses) with a capacity of 4.65 to 58 MW, burning natural gas, coal, and fuel oil, as well as low-power boilers burning organic and biofuels, for existing environmental tax rates, for projected increasing in 4 times (according to the bill) and subject to the introduction of minimum and maximum rates in EU countries. It is established that at the current environmental tax rates in Ukraine there are almost no economic incentives for the introduction of technologies to reduce the concentration of pollutants in emissions, but increasing environmental tax rates may change this situation. This, in turn, once again suggests that changing environmental tax rates can be an effective tool for achieving sustainable development goals.