Carbon Tax Rate Research Articles

Lifecycle economic analysis of biofuels: Accounting for economic substitution in policy assessment

This paper develops a lifecycle economic analysis (LCEA) model that integrates endogenous input substitution into the standard lifecycle analysis (LCA) of biofuel that typically assumes fixed-proportions production. We use the LCEA model to examine impacts of a pure carbon tax and a revenue-neutral tax-subsidy policy on lifecycle greenhouse gas emissions from cellulosic ethanol using forest residues as feedstock in Washington State. In a model allowing for input substitution in the cellulosic ethanol feedstock, conversion, and transportation process, we consider energy source substitution (woody biomass for coal in the cellulosic ethanol conversion plant and biodiesel for diesel in feedstock production and feedstock and ethanol transportation) as well as substitution of capital and labor for energy in all stages of the lifecycle. We find that ignoring endogenous input substitution by using standard LCA leads to substantial underestimation of the impact of carbon tax policies on carbon emissions. Both tax policies can substantially reduce carbon emissions by inducing substitution among inputs. The revenue-neutral tax-subsidy policy reduces emissions more effectively than the carbon tax policy for carbon tax rates currently in place throughout most of the world. It stimulates substitution of woody biomass for coal and biodiesel for diesel at much lower tax rates when accompanied by corresponding subsidies for reduced emissions from renewable sources.

The effects of carbon reduction on sectoral competitiveness in China: A case of Shanghai

The Chinese government has committed to reduce its carbon dioxide emissions per unit gross domestic product by 60–65% from 2005 levels by 2030. In order to achieve this commitment, various measures should be taken. Due to the complex relationship between carbon emission and economic development, it is critical to quantify the impacts of different measures. Under such a circumstance, this paper is to identify the effects of carbon tax on the sectoral competitiveness in Shanghai by 2030 under unequal imposition of carbon tax between Shanghai and the rest of China by using a two-region dynamic computable general equilibrium (CGE) model. Research results show that different carbon tax rates in different regions would affect GDP of Shanghai and the outcomes are different under different scenarios. In general, a lower carbon tax rate can lead to a higher output and these output changes could further influence the sectoral competitiveness. Under the tax44 scenario, sectors such as agriculture, textile, transport equipment, and electronics are the winners in Shanghai, with outputs increased by 2.02%, 1.47%, 1.08% and 3.05%, respectively; while food production, petrol oil, chemicals and non-metal are the losers, with outputs decreased by 2.02%, 0.87%, 0.03% and 2.39%, respectively. This study also reveals that price and scale effects are the key factors influencing the changes of sectoral outputs. Such findings provide useful insights to those policy makers to allocate appropriate carbon reduction targets to different regions.

Distributional Impact of a Carbon Tax: Indonesia Case

This paper runs a carbon tax simulation using Indonesia Household expenditure. Three scenarios with different tax rate are conducted together with two schemes: revenue cycling and no revenue cycling. The result shows a robust finding that the impact of carbon tax in Indonesia is progressive in all three simulations. The introduction of a revenue cycling scheme would even increase the rate of progressivity. This is in line with Yusuf and Resosudarmo (2007); higher carbon tax rates lowering income inequality. Comparing the three simulations conducted in this study, the carbon tax at IDR 280.000/tC02 gives the most significant effect on Gini Coefficient as it was expected. The Gini Coefficient decreases from ex ante condition 47.43 to 45.83 ex post condition; leave 1.60 decreasing of Gini Coefficient. This study supports a dissenting opinion towards the studies of distributional impact of carbon tax in developed countries in which a notorious regressive impact is generally found. Whether this finding can be generalized to other developing countries is still an open question due to the different expenditure pattern. This study only covers the equity issue of policy evaluation criteria, further investigation towards other criteria is undoubtedly important as a corner stone for the extension of this study.

Exergo economic analysis of solar-assisted hybrid power generation systems integrated with thermochemical fuel conversion

Solar-assisted hybrid power generation systems integrated with thermochemical fuel conversion are of increasing interest because they offer efficient use of lower temperature solar heat, with the important associated advantages of lower emissions, reduction of use of depletable fuels, production of easily storable fuel to alleviate the variability of solar heat, and relatively low cost of the use of lower temperature solar components. This paper examines economic performance of two previously proposed and analyzed thermochemical hybridized power generation systems: SOLRGT that incorporates reforming of methane, and SOLRMCC that incorporates methanol decomposition, both of which use low temperature solar heat (at ∼220°C) to help convert the methane or methanol input to syngas, which is then burned for power generation. The solar heat is used “indirectly” in the methane reforming process, to vaporize the needed water for it, while it is used directly in the methanol decomposition process since methanol decomposition requires lower temperatures than methane reforming. This analysis resulted in an equation for each power system for determining the conditions under which the hybrid systems will have a lower levelized electricity cost, and how it will change as a function of the fuel price, carbon tax rate, and the cost of the collection equipment needed for the additional heat source.

A study on the design of a hybrid policy for carbon abatement

A necessary way to mitigate global warming is carbon reduction, which the international community is now actively promoting. China has committed a target goal for carbon reduction to the international society, and has devoted a great effort toward researching the impact of related policies. Carbon taxation and carbon trading are the two main mechanisms to advocate carbon abatement, which many countries have been using. Each of these two mechanisms possesses advantages and disadvantages, and an appropriate combination of them can make best use of their advantages while bypassing their disadvantages, creating a superior mechanism. In our opinion, the main differences between these two mechanisms are that carbon taxation has a lower institution cost (consisting of the related infrastructural investment and the regulation cost, etc), and is easier to operate, but lacks the flexibility in response to variations of market conditions. However, this flexibility is just the origin of risk, which increases the difficulty for firms in their decision of carbon abatement and is an indirect way to incentivize carbon abatement, compared to carbon trading, which has a more direct effect in carbon reduction. Based on the above observation, we present a hybrid mechanism of carbon abatement, which is an organized combination of carbon taxation and carbon trading. It consists of two parts: first, the carbon taxation, which has a progressive tax rate, second, the carbon trading. Small firms will only pay the carbon tax, while large firms, will first need to get the initial carbon emission quotas by some way, and then trade it in the carbon market if necessary. For firms with extra emissions, they will receive a punishment according to a high carbon tax rate. This hybrid policy considers the equity between different firms in carbon emission rights as well as the efficiency of the mechanism while decreasing the risk level for firms in the carbon emission decision, making it superior to the two previous policies. We also analyze the feasibility of this hybrid policy in China, address some important issues in the implementation of this hybrid policy in China and present the relevant suggestions. The discussion in this paper can serve as a reference to the government in the decision of carbon policies.

Low-carbonization game analysis and optimization in a two-echelon supply chain under the carbon-tax policy

Purpose The purpose of this study is to help governments make carbon-tax policy and help enterprises make decisions under that policy. Design/methodology/approach Based on the carbon-tax policy, with the consideration of consumers’ low-carbon preferences, this paper compares the pricing, emission reduction and advertising decisions in three different games (one centralized game and two decentralized Stackelberg games). Findings This paper concludes that, through centralized game, namely, cooperation game, manufacturers, retailers and consumers can reach their optimal situation. In the numerical simulation, this paper analyzes the impact of carbon-tax rate to the decisions of manufacturer and retailer, as well as their profit. Originality/value Using the Nash Bargaining Model, the introduction of the bargaining power and the degree of risk aversion of the parties, this study provides some solution for the distribution of the additional profit when they cooperate, in which way they can reach their Pareto optimality.

A CGE Analysis of the Impacts of a Carbon Tax on Provincial Economy in China

ABSTRACTThis article conducts a computable general equilibrium (CGE) model to investigate the impacts of a carbon tax on economy at province levels in China since China features significantly differentiated development modes across regions. Three representative provinces including Henan, Fujian, and Chongqing are selected as the sample. The empirical results indicate that carbon tax is an efficient policy to reduce carbon emissions accompanied with negative impact on provincial economy. To cushion the negative impacts of carbon tax, a moderate carbon tax rate and carbon tax recycling policy are recommended according to the simulation results.

The Research on the Economic Effect of Market-Based Environmental Policy Instruments

Market-based environmental policy has many forms, including carbon trade and carbon taxes. The choice of market-based environmental policy instruments needs careful consideration of the effect on economy growth and structure. In the analytical framework of Ramsey model, carbon emissions are added into the instantaneous utility function and the problem of maximization of enterprise profits. Based on this hypothesis, the balance growth path and dynamitic changes of consumption and investment could be compared under different market-based environmental policy instruments. The conclusion shows that market-based environmental policy instruments have a negative effect on economic growth in the short run. However, in the long run, these instruments can promote economic growth and optimize economic structure by giving enterprises motivation to improve emission reduction technology. The distinction of these two environmental policy instruments lies in the difference between the price of carbon emission permit and the rate of carbon taxes. Moreover, by derivation, it is obvious that saving rate is inversely linked to carbon tax rate (or the price of carbon emission permit). Therefore, according to the current situation in China’s economic development, in order to improve consumption’s contribution on economic growth, we can choose the instrument which has higher price to reduce saving rate. In this way, consumption can be promoted and the structure of economics can be optimized.

Analysis of the Environmental and Socio-economic Benefits of Introducing Cleaner Vehicles in China: Policy Implications

Along with its impressive economic growth China has experienced not only serious environmental pollution but also a very rapid increase in Green House Gas emissions and is now the largest emitter of CO2. Together with the power and steel sectors the transportation sector is the main contributor to CO2 emissions. In addition the transportation sector is also associated with air pollution and health damage. In order to address these challenges, at the COP15, the Chinese government set the target to decrease its CO2 emission per GDP by 40%-45% by 2020 compared with 2005 levels and increase non-fossil fuels rate at primary energy sector of 15%. The government has also put especial efforts to reduce air pollution through the Five Year Plans by introducing targets to reduce SO2, NOx, PM, among others. In order to determine the feasibility to reduce GHG emissions this research evaluates the potential of environmentally friendly motorized road vehicles (Hybrid Vehicle and Electric Vehicle). The research proposed 4 scenarios and designed social-economic model & environment model & automotive model based on Input-Out analysis. The results show that HV could be the most suitable option for promoting both GHG reduction and GDP increase with 1% GDP per GHG Emission (GpE) increase under 0.23 ton /Yuan carbon tax rate in China in the short term. The results of the study also show that these options should be followed by a transition to introduce EV in the long term.

Modeling the development and utilization of bioenergy and exploring the environmental economic benefits

This paper outlines a complete bioenergy flow incorporating bioresource procurement, feedstock supply, conversion technologies and energy consumption to industrialize the development and utilization of bioenergy. An input–output optimization simulation model is developed to introduce bioenergy industries into the regional socioeconomy and energy production and consumption system and dynamically explore the economic, energy and environmental benefits. 16-term simulation from 2010 to 2025 is performed in scenarios preset based on bioenergy industries, carbon tax-subsidization policy and distinct levels of greenhouse gas emission constraints. An empirical study is conducted to validate and apply the model. In the optimal scenario, both industrial development and energy supply and demand are optimized contributing to a 8.41% average gross regional product growth rate and a 39.9% reduction in accumulative greenhouse gas emission compared with the base scenario. By 2025 the consumption ratio of bioenergy in total primary energy could be increased from 0.5% to 8.2%. Energy self-sufficiency rate could be increased from 57.7% to 77.9%. A dynamic carbon tax rate and the extent to which bioenergy industrial development could be promoted are also elaborated. Regional economic development and greenhouse gas mitigation can be potentially promoted simultaneously by bioenergy utilization and a proper greenhouse gas emission constraint. The methodology presented is capable of introducing new industries or policies related to energy planning and detecting the best tradeoffs of economy–energy–environment.

Measuring the CO 2 shadow price for wastewater treatment: A directional distance function approach

Abstract The estimation of the value of carbon emissions has become a major research and policy topic since the establishment of the Kyoto Protocol. The shadow price of CO2 provides information about the marginal abatement cost of this pollutant. It is an essential element in guiding environmental policy issues, since the CO2 shadow price can be used when fixing carbon tax rates, in environmental cost-benefit analysis and in ascertaining an initial market price for a trading system. The water industry could play an important role in the reduction of greenhouse gas (GHG) emissions. This paper estimates the shadow price of CO2 for a sample of wastewater treatment plants (WWTPs), using a parametric quadratic directional distance function. Following this, in a sensitivity analysis, the paper evaluates the impact of different settings of directional vectors on the shadow prices. Applying the Mann–Whitney and Kruskal–Wallis non-parametric tests, factors affecting CO2 prices are investigated. The variation of CO2 shadow prices across the WWTPs evaluated argues in favour of a market-based approach to CO2 mitigation as opposed to command-and-control regulation. The paper argues that the estimation of the shadow price of CO2 for non-power enterprises can provide incentives for reducing GHG emissions.

Cost of Abating Greenhouse Gas Emissions with Cellulosic Ethanol

We develop an integrated framework to determine and compare greenhouse gas (GHG) intensities and production costs of cellulosic ethanol derived from corn stover, switchgrass, and miscanthus grown on high and low quality soils for three representative counties in the Eastern United States. This information is critical for assessing the cost-effectiveness of utilizing cellulosic ethanol for mitigating GHG emissions and designing appropriate policy incentives to support cellulosic ethanol production nationwide. We find considerable variations in the GHG intensities and production costs of ethanol across feedstocks and locations mostly due to differences in yields and soil characteristics. As compared to gasoline, the GHG savings from miscanthus-based ethanol ranged between 130% and 156% whereas that from switchgrass ranged between 97% and 135%. The corresponding range for GHG savings with corn stover was 57% to 95% and marginally below the threshold of at least 60% for biofuels classified as cellulosic biofuels under the Renewable Fuels Standard. Estimates of the costs of producing ethanol relative to gasoline imply an abatement cost of at least $48 Mg(-1) of GHG emissions (carbon dioxide equivalent) abated and can be used to infer the minimum carbon tax rate needed to induce consumption of cellulosic ethanol.

Investigating the impact of carbon tax on socially responsible corporate governance: The case of South African motor vehicle manufacturers

Socially responsible corporate governance is an essential aspect of the contemporary corporate environment, and then especially in ensuring continuous sustainable development within a South African context. As such, it also encompasses broad environmentally focused aspects. The motor vehicle manufacturing industry in South Africa was among the first to be faced with the implementation of carbon taxes. This paper explores the policy decision to implement the carbon tax within the context of socially responsible governance in the motor vehicle manufacturing industry. The research methodology applied incorporates both review of supporting literature and an exploratory empirical case study. The research suggests that the industry is cognizant of the importance of environmental damage costs and their responsibility therein, while also indicating that corporate social investment in this industry was non-responsive to the implementation to carbon tax. The results also suggest that the current carbon tax rate may be adequately priced and is an effective instrument in lowering greenhouse gas emissions

An Economic and Environmental Impact Analysis of Carbon Tax Policies: A Case from Inner Mongolia

On the basis of the standard CGE model, the paper built and extended the regional energy environment of the dynamic CGE model, which can be applied to calculate carbon emissions not only from energy consumption but also from production process. It set seven scenarios of carbon policies by adopting the fixed tax rate, progressive tax rate, independent carbon tax rate, and balanced carbon tax respectively. The results show that the progressive tax rate has less impact on regional economy, but plays a constant role of energy conservation and emissions reduction in the long term. Although independent carbon tax can reduce CO2emissions effectively, it has strong negative impact on the domestic economy. The balanced carbon tax rate policy realizes the “double dividend” of carbon tax by reducing the intensity of CO2emissions and increasing the welfare and income of the residents.

Assessment of geothermal assisted coal-fired power generation using an Australian case study

A systematic techno-economic analysis of geothermal assisted power generation (GAPG) was performed for a 500MW unit of a typical coal-fired power plant located at the upper Hunter region of New South Wales, Australia. Specifically, the GAPG viability and performance was examined by investigating the impacts of reservoir temperature, resource distance, hybridisation scheme, and economic conditions including carbon tax and Renewable Energy Certificates (REC). The process simulation package, Aspen HYSYS, was employed for all simulation purposes. Thermodynamically, GAPG system was found to increase the power output of the plant by up to 19% under the booster mode whilst in fuel saving mode the coal consumption reduced by up to 0.3 million tonne/year decreasing the Green House Gas (GHG) emission by up to 15% (0.6 million tonne/year). Economic analyses showed that for a typical HDR resource with a reservoir temperature about 150°C located within a 5km radius from the power plant, the GAPG system becomes economically competitive to the stand-alone fossil fuel based plant when minimum carbon tax and RECs rates of 40 $/tonne and 60 cents/kWh are introduced. The figure of merit analyses comparing GAPG system with both stand-alone fossil fuel and stand-alone geothermal plants showed that an economically feasible GAPG system requires the use of HDR resources located no further than 20km from the plants. Reference maps were also developed to predict suitable conditions for which the hybrid plant outperforms the stand-alone plants.

Economic Growth Assumptions in Climate and Energy Policy

The assumption that the economic growth seen in recent decades will continue has dominated the discussion of future greenhouse gas emissions and the mitigation of and adaptation to climate change. Given that long-term economic growth is uncertain, the impacts of a wide range of growth trajectories should be considered. In particular, slower economic growth would imply that future generations will be relatively less able to invest in emissions controls or adapt to the detrimental impacts of climate change. Taking into consideration the possibility of economic slowdown therefore heightens the urgency of reducing greenhouse gas emissions now by moving to renewable energy sources, even if this incurs short-term economic cost. I quantify this counterintuitive impact of economic growth assumptions on present-day policy decisions in a simple global economy-climate model (Dynamic Integrated model of Climate and the Economy (DICE)). In DICE, slow future growth increases the economically optimal present-day carbon tax rate and the utility of taxing carbon emissions, although the magnitude of the increase is sensitive to model parameters, including the rate of social time preference and the elasticity of the marginal utility of consumption. Future scenario development should specifically include low-growth scenarios, and the possibility of low-growth economic trajectories should be taken into account in climate policy analyses.

An economic and environmental assessment of future electricity generation mixes in Japan – an assessment using the E3MG macro-econometric model

In this paper we consider future options for Japanese energy and climate policy. We assess the economic and environmental impacts of changing the share of electricity generated by nuclear power and varying the mid-term GHG targets. The quantitative approach we use is based on the global macro-econometric E3MG model.Our analysis reveals that the cost of denuclearisation to Japanese GDP is close to zero, and for employment the impact is slightly positive. Our results also show a double-dividend effect if (revenue-neutral) carbon taxes are levied in order to meet the GHG reduction targets, and this double-dividend effect is largest in the scenarios without nuclear power. However, our analysis suggests that a very high carbon tax rate would have to be imposed in order to achieve a 25% reduction in GHG emissions in 2020 (compared to 1990 levels) while simultaneously phasing out nuclear power.

Long-Term Impacts of Carbon Tax and Feed-in Tariff Policies on China's Generating Portfolio and Carbon Emissions: A Multi-Agent-Based Analysis

Using agent-based modelling, this paper established an adaptive simulation model of China's wholesale electricity market with endogenous investment decisions and technical progress. The model took into account the heterogeneities of power generators, including emission reduction attitudes and risk appetites. Using this model, we simulated how carbon tax and feed-in tariff (FIT) policies will affect each single generator in terms of market behaviours (price bidding and investment) to explore the evolution of power generating portfolio and emissions differently in the time horizon 2010–2050. The validity of the model was tested according to China's electricity market data. We found that FIT for wind power and solar power will crowd out the investment in gas power and nuclear power, rather than replacing coal power. Compared to FIT, carbon tax is a more effective tool for emission abatement and incentivize multiple low carbon generating technologies. And optimal rate of carbon tax should be no more than 250 CNY/t CO2.

The Study of Company's Carbon Abatement Investment under Carbon Tax

Emission tax is one of the most efficient economic mechanisms to reduce carbon emissions. Under the situation that government imposes tax , we develop a two-stage dynamic game model. First, Government achieves total carbon emissions targets by imposing carbon tax. Second, two companies constitute a Cournot duopoly market. Companies adjust their output and the proportion of carbon emissions to maximize profits. And through numerical analysis, we find that: When the Government set up the target emission, it will encourage companies to invest carbon emissions abatement, and enable companies to reduce carbon emissions. And then the Government may reduce the rate of carbon tax. Finally, Government and companies can get win-win situation. In the Cournot duopoly market , Abatement Company has more advantage in the competition of the market and more sustainable under the constraint of carbon tax. Otherwise, Non-abatement company is more sensetive to the changes of carbon tax.

The possibilities for global inequality and poverty reduction using revenues from global carbon pricing

Global carbon pricing can yield revenues which are large enough to create significant global pro-poor redistributive opportunities. We analyze alternative multidecade growth trajectories from 2015 to 2105 for major global economies with carbon tax rates designed to stabilize emissions in the presence of both continued country growth and autonomous energy use efficiency improvement. In our central case analysis, revenues from globally internalizing carbon pricing rise to 8 % and then fall to 6 % of gross world product. High growth in India and China reduces global inequality and poverty strongly over time, but important incremental redistributive effects can be achieved using global carbon pricing revenues. Taking into account both between-country effects and previous literature estimates of within-country effects, a global carbon tax alone tends to be regressive in its global incidence. However, if its revenues are redistributed globally via equal per capita transfers, in our central case the Gini coefficient for world income falls by about 3 % and the share of the bottom decile rises by 81 % on average from 2015 to 2105. The population living in poverty falls by 16 % in 2015. Going further, global poverty could be eliminated entirely by 2015 according to our calculations if one third of global carbon tax revenues were redistributed directly to the poorest individuals.