Proposed Carbon Tax Research Articles

A Proposed Carbon Tax Framework for Malaysia and The Challenges of Implementation in the COVID-19 Economic Recovery Plan

A Proposed Carbon Tax Framework for Malaysia and The Challenges of Implementation in the COVID-19 Economic Recovery Plan

Dynamic modeling to analyze the impacts of carbon reduction policies, Iran's electricity industry.

Sustainable development and reducing greenhouse gas emissions require optimizing the structure of energy production as the main factor in the emission of pollutants in Iran's electricity industry. Over the past years, environmental scientists have proposed carbon tax (CT) and carbon emission trading (CET) as policy tools to reduce pollutant emissions in developed and developing economies. Due to poor access to environmental data and the lack of effective pollution control laws and policies in Iran, efforts to realize the effectiveness of these policies in Iran have been inadequate. The present paper establishes a system dynamics model with feedback to fill these gaps in analyzing the effects of the CT and CET schemes. The following eight scenarios were considered and examined: a baseline scenario (BAU scenario), an emission tax scenario, an emission trading mechanism scenario, an energy supply scenario (to increase electricity generation), an emission tax scenario with investment in technology research and development (to increase energy efficiency), a tax scenario on emissions along with increasing energy supply, the scenario of emission trading mechanism with investment in technology research and development, and the scenario of emission trading mechanism with increasing energy supply. The results showed that while both CT and CET policy groups can be effective in reducing carbon emissions in thermal power plants, in the long run, using price tools to maintain energy security reduces the efficiency of policies greatly. Nevertheless, the effectiveness of CT policy in reducing emissions is higher. Also, despite the allocation of revenue from the application of scenarios to the development of renewable energy, the development of this sector cannot compensate for the reduction in the supply of thermal power plants following the implementation of these policies. As a result, other supportive policies are necessary for the further and faster development of the renewable sector and optimizing the energy structure with an emission reduction approach.

Cost assessment of alternative fuels for maritime transportation in Ireland

In this study, we investigated the cost-effectiveness of four alternatives: Liquified Natural Gas (LNG), methanol, green hydrogen, and green ammonia, for the case of top 20 most frequently calling ships to Irish ports in 2019, through the Net Present Value (NPV) methodology, incorporating the benefits incurred through saved external, carbon tax and conventional fuel costs. LNG had the highest NPV (€6,166 million), followed by methanol (€1,705 million) and green hydrogen (€319 million). Green ammonia utilisation (as a hydrogen carrier) looks inviable due to higher operational costs, resulting from its excessive consumption (i.e., losses) during the cracking and purifying processes and its lower net calorific value. Green hydrogen remains the best option to meet future decarbonisation targets, although, a further reduction in its current fuel price (by 60%) or a significant increment in the proposed carbon tax rate (by 275%) will be required to improve its cost-competitiveness over LNG and methanol.

Exploring a Design of Carbon Tax for Coal- and Lignite-Based Thermal Power Sector in India

According to India’s ‘Third Biennial Update Report to the United Nations Framework Convention on Climate Change’, electricity production contributes half of India’s total carbon dioxide (CO2) emission (without land use, land-use change and forestry [LULUCF]) and 40% of CO2e (CO2 equivalent) emission in 2016. Coal- and lignite-based thermal power sector is the predominant source of electricity generation in India, and it contributes 74% in 2019–2020. In the 26th Conference of the Parties (COP26), India has committed to achieve net zero (in CO2e emission) target by 2070. Therefore, any strategy to reduce the total CO2e emission in India cannot spare emission reductions from coal- and lignite-based thermal power plants (TPPs). To accelerate achieving India’s emission intensity reduction target to 45%, we explore a design of carbon tax for coal- and lignite-based TPPs. Given the constraints involved in designing carbon tax based on cost-benefit analysis as well as integrated assessment models, we estimate a revenue neutral rate of tax on CO2e emission by converting taxes on coal and lignite. Our carbon tax proposal sets the floor (minimum) rate, and it requires regular upward revisions to induce TPPs to take action. To reduce disruptions in tax administrations, we propose adjustments of input tax credits with carbon tax liability. JEL Classification: H23, Q54, Q4, P43

Canada's electricity system transition under alternative policy scenarios

To meet Canada's emissions reduction targets, governments at the federal and provincial levels have developed climate plans and implemented a series of policies and regulations. Canada's latest climate plan, entitled “A Healthy Environment and a Healthy Economy” aims to decarbonize various sectors of the economy including the electricity sector. In this paper, we explore the extent to which implementing announced policies and regulations could drive investment in the electricity sector needed to achieve Canada's climate objectives. To do so, we propose a multi-period, optimization-based capacity expansion model specifically designed for the Canadian context entitled COPPER for the “Canadian Opportunities for Planning and Production of Electricity Resources.” We employ COPPER to analyze Canada's electricity system transition under various carbon management policies. Results show that current and announced policies significantly increase renewable energy capacity, which in turn decrease the electricity system emissions by 40 percent in the mid-term. However, in the long-term, more ambitious actions will be required to achieve the emissions reduction targets. Natural gas-powered generation facilities persist at the proposed carbon tax levels, and thus supplementary regulations or policies will be needed to achieve deep decarbonization.

A hybrid instrument for China's post-2020 mitigation commitments: A sectoral coverage perspective

Sectoral coverage is a chief challenge in the design of carbon mitigation policies, this paper addresses such a concern within a hybrid regulation setting in which a carbon tax is adopted for complementary regulation of emission sources outside the Emission Trading System (ETS) in China. With a focus on the efficiency of the hybrid system, the regulated sectors are identified by linkage analysis and the resulting price changes is captured by the input-output (I-O) price model. The simulation shows that, in terms of the price incentives, the proposed carbon tax is a necessary complement to the ETS, in respect of both magnitude and structure. As a result, a mixed policy setting can be expected to have an efficiency advantage over the ETS alone. Understanding of the joint determination of the sectoral coverage and the corresponding price incentive effect is a new contribution to the theoretical literature on designing market-based carbon policies, which has substantial policy implication for the future design of instruments targeted at achieving China’s post-2020 mitigation commitments.

The politics of climate policy innovation: the case of the Argentine carbon tax

ABSTRACT This contribution analyzes the policymaking process of the carbon tax in Argentina based on the multiple streams approach (MSA). The study shows how policy entrepreneurs took advantage of a general tax reform bill to promote the idea of a carbon tax. Mainly driven by international emulation and reputational gains concerns, the carbon tax proposal successfully advanced through the government´s internal drafting process of the Tax Reform Bill, however, it faced strong opposition during the legislative decision-making process, which resulted in the adoption of a weaker carbon tax. From a climate politics perspective, the Argentine carbon tax case suggests the political limitations of an over-reliance on international reputation arguments to advance climate policy innovation. In relation to the MSA, the study highlights how policy windows can shape processes of policy innovation and the analytical convenience of differentiating the coupling processes between the agenda-setting and decision-making stages.

Differential carbon tax policy in aviation: One stone that kills two birds?

In the aviation sector, environmental schemes such as carbon taxes have been proposed but not successfully implemented. Extant literature sufficiently examines various aviation networks for environmental-efficiency but is scarce with regard to ensuring their implementation. Based on this motivation, this study not only deliberates on “what” constitutes a sustainable aviation network but also addresses “how” it can be realized. This article proposes differential carbon tax policy in the form of an inverse optimization-based mechanism that governs the behavior of airline carriers such that they operate on routes that constitute a sustainable aviation network. This article also explores the positive externality of the proposed mechanism to enhance societal development by incentivizing airlines to render their services at remote locations. Therefore, unlike extant literature that explores the normative aspects of plausible sustainable aviation networks, this article proposes an implementation framework to realize the desired aviation network. It delineates policy directives in the form of differential carbon taxes to tweak the selection of routes by the airline carriers. The proposed carbon tax policy not only makes the airline carriers accountable for the carbon emissions but also steers them in the direction of constituting the desired aviation network defined as per the goals of policymakers. The differential carbon tax policy can be used to ensure the realization of an aviation network directed towards environmental efficiency (or) social development. The proposed aviation policy framework is multi-faceted and addresses the twin pillars of environmental and social sustainability.

The Ends and Means of Decarbonization: The Green New Deal in Context

Disputes about climate policy involve much more than whether or not to reduce greenhouse gas emissions. There is general agreement among proponents of climate policy that strategies should be cost effective, should address distributional impacts, and should incentivize investments in low-carbon technologies. Yet disagreements abound regarding additional goals of climate policy design. Decarbonizing the economy means changing the sources of energy we use, how we transport people and products, how we produce food, and which resources we consume. Yet even among proponents of federal climate legislation there is strong disagreement regarding policy instruments. Recent proposals for a revenue-neutral carbon tax and a Green New Deal (GND) frame the opposite ends of the debate. On one end, the GND framework treats climate policy as an opportunity to steer the trajectory of the U.S. economy while also correcting social and environmental injustices. Proponents of the most expansive iterations of a GND argue that it is not possible to separate justice and economic considerations from environmental policy. At the other end of the spectrum, revenue-neutral carbon tax proposals reject the creation of new government programs and focus on controlling greenhouse gas emissions rather than the economic and social impacts of the policy. This Essay identifies core disputes about the non-emission goals in state and federal climate policy debates that create barriers to legislative consensus. The Essay begins with a comparison of recent proposals to mitigate climate change, including pricing carbon via a carbon market or carbon tax, regulatory measures such as the Obama-era Clean Power Plan, state-based policies, and the GND. It then identifies three conflicts, the resolution of which will shape future climate policy developments: the role of decarbonization as technology policy, social justice policy, and fiscal policy. Deploying low carbon technologies is a critical piece of the climate mitigation puzzle, but stakeholders disagree whether decarbonization strategies should prioritize renewable energy or include technologies such as nuclear or carbon capture. Each policy discussed in this Essay considers some range of social impacts (at minimum, cost increases), but differ significantly about which social impacts to address and the how to address them. The policies also adopt different approaches to the link between fiscal policy and climate policy, with some generating revenue to fund new government programs, some returning revenue to U.S. citizens, and some not addressing the issue. The Essay concludes with comments about the early impacts of the GND on the domestic policy debate and opportunities to resolve.

A New Green Efficiency-Based Carbon Taxing Policy and Its Effects on a Production-Inventory System with Random Carbon Emissions and Green Investment

In this study, the author proposes a new carbon taxing policy. This proposed carbon tax has two tax components. The first component is constant, and the second component depends on the green efficiency of production. The green efficiency of production is measured by the average amount of emissions per unit production in an assessment year. The green efficiency-based tax component can be reset every year. Lesser average emission rate indicates better green efficiency. The second component of this proposed carbon tax forces the firm to improve the green efficiency of production, which results in cleaner production. The author incorporates this new carbon tax policy in a production-inventory system with a price-sensitive demand rate. A rule is provided for the implementation of this new tax. Emissions during setup, production, and storage are considered as independent random variables. The firm has the opportunity of investing in green technologies to improve green efficiency. A profit maximization policy is adopted to solve the developed model. A solution algorithm is also provided. The model is illustrated by numerical examples with randomly generated model parameters. The results of numerical examples show the environmental benefits of the proposed carbon tax.

Is it worth generating energy with garbage? Defining a carbon tax to encourage waste-to-energy cycles

The rising of municipal solid waste generation is a serious current problem, whose incorrect disposal leads to major impacts to human health and the environment. Waste-to-Energy systems have been some of the adopted solutions but they carry the burden of the emission of pollutant gases. To control such emissions, international agreements have introduced the concept of the carbon tax, i.e. a levy on carbon dioxide emissions imposed on energy systems. Considering the specificity of municipal solid wastes for their inclusion in the energy mix of the countries, this study aims to apply a carbon tax model in Waste-to-Energy plants to encourage the utilization of this particular waste. The proposed carbon tax utilizes the concept of exergy destruction from the second law of thermodynamics and is based on the cycle’s efficiency and the type of fuel to be burned. Hybrid-cycles associating gas turbines burning natural gas and an incinerator burning municipal solid wastes were compared to the conventional incineration steam cycle. One finding of this study is that the incineration cycle is less penalized in terms of CO2 emissions compared to the rates applied to hybrid-cycles in the same exergetic base, considering its attribution to the environmental liability destruction represented by the municipal solid waste. The sensitivity revealed that the municipal solid waste price significantly affects the incineration cycle and hybrid-cycles with the lowest gas turbine capacities and natural gas price variations influence large capacity hybrid-cycles.

Does a carbon tax affect the feasibility of Arctic shipping?

The Arctic route has huge potential for shipping between Europe and Northeast Asia with significant savings in transit time and distance. However, GHG emissions from shipping would harm the environment of Arctic area. Potential Market Based Measures of GHG emission reduction (such as carbon tax) are under consideration but they may affect the economic viability of Northern Sea Route (NSR) for containerships. This paper investigates the economic viability of NSR against Suez Canal Route (SCR) under 2 proposed carbon tax schemes (fixed vs. progressive). Three different fuel oil types (Heavy Fuel Oil, Light Fuel Oil, Liquified Natural Gas) are used as main bunker fuel for the calculation of economic feasibility. Our result reveals that when there is no carbon tax on NSR nor SCR, or both routes are under a carbon tax scheme, no matter fixed or progressive, NSR is more economically viable, regardless of fuel type choice. When only NSR is under a carbon tax scheme, the viability depends on specific carbon tax scheme and fuel choice, but for the majority of containership sizes, NSR has lower unit cost. The result also suggests that for a given route, a progressive scheme in preferable than a fixed one and LNG would be an appealing fuel with lower unit cost.

Would an increasing block carbon tax be better? A comparative study within the Stackelberg Game framework

Carbon tax is a policy for controlling carbon emissions, and is widely used worldwide. However, a non-differentiated carbon tax increases financial burden on manufacturers and inhibits their willingness to produce. Herein, a novel carbon tax policy involving an increasing block carbon tax is proposed, and the policy's possible implementation effects are analyzed. First, based on the Stackelberg game, the study constructs a social welfare model considering carbon emissions. Then, the study discusses the theoretical characteristics of the proposed carbon tax policy. After that, the differences and similarities between a flat carbon tax and an increasing block carbon tax are analyzed using a numerical simulation. The results indicate that: (1) compared to flat carbon tax, an increasing block carbon tax has the same controlling effect on carbon emissions. Both forms of taxes can restrict total carbon emissions within the desired range. (2) An increasing block carbon tax policy can significantly reduce tax burdens for manufacturers, and encourages low-carbon production. (3) An increasing block carbon tax can flexibly adjust the relationship between government's carbon tax revenue and manufacturer's tax burden. Finally, some policy implications for the proposed strategy are revealed.

Collective action in an asymmetric world

A central authority possessing tax and expenditure responsibilities can readily provide an efficient level of a public good. Absent a central authority, voluntary arrangements must replace coercive ones, and significant under-provision must be expected. International public goods are particularly challenging due to the substantial asymmetries among nations. Small-interest nations have strong incentives to ride cheaply. Our empirical results reveal cheap riding intentions in providing for climate change mitigation, a critical international public good. The evidence is provided by individual nations' Intended Nationally Determined Contributions voluntarily pledged for the Paris Climate Change Conference. We find that larger nations made much larger pledges in proportion to both their Gross National Incomes and their historical emissions. Implications for the Nordhaus Climate Club and carbon-tax proposals are discussed. To achieve Pareto optimality despite disparate cheap-riding incentives, we propose the Cheap-Riding Efficient equilibrium. That solution takes the Nash equilibrium as a base point, and then applies the principles of either the Nash Bargaining solution or the Lindahl equilibrium to proceed to the Pareto frontier.

The Carbon Tax Vote You've Never Heard of and What It Portends

Author(s): Dotson, Greg | Abstract: Many aspects of carbon taxes have been studied in the academic literature. This paper focuses on an area that has received insufficient attention by examining some of the specific institutional challenges a carbon tax proposal would face in Congress. A relatively unknown recent debate in the House of Representatives over a resolution to denounce the concept of carbon taxes provides a window into these challenges, demonstrating the arguments and tactics that can impede solution-oriented action to address climate change. Developing a policy that responds to these arguments is likely to add complexity to a carbon tax proposal, to increase the number of congressional committees involved in consideration of the proposal, and to create additional demand for the revenue that a proposed carbon tax would generate. Moreover, opponents of a policy can exploit these complicating factors and the lengthy time needed in Congress to consider legislation, so they can preemptively attack emerging concepts and proposals. The paper concludes by arguing that enacting a carbon tax at the federal level, with the policy elements that are often contemplated, will require a great deal of agreement or complaisance among lawmakers. Understanding this challenge well in advance of the opportunity for congressional consideration of a carbon tax will best prepare carbon tax advocates for a successful outcome.

Modeling the energy future

AbstractA bare‐bones dynamic model of an island economy is constructed for the purpose of discovering “socially optimal” fossil fuel depletion schedules. An entire family of candidates is identified, all members being significantly more gradual than the one currently in force. The active ingredient in the model is a real‐valued function of two real variables―the current extraction rate and the quantity extracted to date―which quantifies the need to expend energy in the course of delivering it to end users. The main conclusions are that fossil fuels are currently being extracted far too fast for the common good, while a wide variety of socially preferable schedules are overlooked.Summary for ManagersConsider conservation! Several methods have proven successful in the past. Before World War I, Standard Oil did it by monopolizing the industry. During the 1930s, the Texas Railroad Commission invoked martial law. OPEC has achieved intermittent success by forming a cartel. The proposed carbon tax may be the fairest alternative. Any method of slowing the extraction of fossil fuels will encounter resistance, as the public has long been addicted to cheap energy. Yet conservation will slow global warming, even as it economizes an increasingly scarce resource. Expect no painless alternative―there is none!

Addressing concerns about climate policies: the possibilities and perils of responsive accommodation

ABSTRACTResponsive accommodation is a political strategy that addresses concerns about a policy proposal by incorporating amendments that address those concerns. This approach can broaden the policy’s appeal, but is strategically risky, as it can alienate the policy’s base of support. We examine this strategy and its application in the politics of climate change. Using a novel survey experiment, relative public support is evaluated for two amendments to a carbon tax proposal – revenue neutrality assurances and a carbon tariff – designed to ease concerns about taxes and global competitiveness. Analysis shows that support for a carbon tax increases when coupled with a carbon tariff, but decreases among some of the policy’s supporters when described as revenue-neutral. These results suggest that policymakers using a responsive accommodation strategy must carefully weigh its possible risks and rewards in their particular context.

A new carbon tax in Portugal: A missed opportunity to achieve the triple dividend?

In 2014, the Portuguese government appointed a Commission for Environmental Tax Reform that formulated a carbon-tax proposal designed to achieve three dividends: to help Portugal meet the European Union's target for emissions reductions by 2030, to boost long-term employment and GDP above their pre-carbon-tax levels, and to strengthen public finances by lowering public indebtedness. A key feature of this proposal was a judicious set of mixed strategies to recycle all carbon-tax revenues back into the economy. In this note, we show how the carbon tax that the Portuguese Parliament eventually approved deviated from such guidelines, and ultimately failed to achieve the triple dividend. We argue that authorities need to quickly amend the existing legislation to avoid this misguided attempt turning into a missed opportunity to improve environmental, macroeconomic, and fiscal outcomes.

Oppose, Support, or Hedge? Distributional Effects, Regulatory Pressure, and Business Strategy in Environmental Politics

What explains the choice of corporate political strategy in environmental politics? Drawing on recent models of actor strategy formation in political economy, this article argues that basic material interests of firms are translated into strategies in the context of institutional environments. I advance a typological model that posits how distributional effects—positive versus negative—and perceived regulatory pressure—low versus high—interact in leading firms to adopt one of four ideal-type strategies: opposition, hedging, support, and non-participation. This article examines the model through the case of corporate strategies in the making of the European Union’s Emission Trading Scheme. The article contributes to theory-building on business strategy in environmental politics by offering a probabilistic explanatory model, and it flags hedging strategies as an increasingly prevalent form of business behavior.

Environmental and Economic Assessment of Leak and Loss Audits at Natural Gas Compressor and Storage Facilities

AbstractAccording to the United States (US) Energy Information Administration (EIA), the annual US natural gas consumption is forecast to grow from 25.6 trillion cubic feet (TCF) in 2012 to 31.6 TCF in 2040 (1 CF≈28.3 L). The main component of natural gas is methane, a potent greenhouse gas (GHG). As the natural gas supply chain grows, there is increased scrutiny over leaks and losses that occur during the multiple stages from development to end users. West Virginia University′s (WVU) Center for Alternative Fuels, Engines, and Emissions conducted leak and loss audits at five natural gas compressor and storage facilities in the Barnett Shale region of Texas. We have reported elsewhere on the site‐specific total leak and loss rates.11–13 This article provides an environmental and economic assessment of the total methane (natural gas) losses at these facilities. Other studies report the methane emissions in terms of tons per year, whereas this paper examines the environmental impact of these emissions through an equivalent CO2 emissions rate using multiple global warming potentials. This paper also examines the lost revenue from these leaks and the overall social cost of carbon (SCC) that could be assessed to these facilities under a proposed carbon tax. The methane leaks and losses from these sites result in CO2 equivalent emissions of over 70 000 and 24 000 metric tons annually, using a 20‐year and 100‐year global warming potentials (GWPs), respectively. Using a SCC of $ 37 per metric ton, this would result in annual costs of $ 2.6 million and $ 915 000 for these sites based on the respective GWPs.