Carbon Tax Rate Research Articles

A MILP model for integrated plan and evaluation of distributed energy systems

In the last decade, technological innovations and a changing economic and regulatory environment have resulted in a renewed interest for distributed energy resources (DER). However, because of the lack of a suitable design tool, the expected potential of DER penetration is not always exerted sufficiently. In this paper, a mixed-integer linear programming (MILP) model has been developed for the integrated plan and evaluation of DER systems. Given the site’s energy loads, local climate data, utility tariff structure, and information (both technical and financial) on candidate DER technologies, the model minimizes overall energy cost for a test year by selecting the units to install and determining their operating schedules. Furthermore, the economic, energetic and environmental effects of the DER system can be evaluated. As an illustrative example, an investigation has been conducted of economically optimal DER system for an eco-campus in Kitakyushu, Japan. The result illustrates that gas engine is currently the most popular DER technology from the economic point of view. Although holding reasonable economic merits, unless combined with heat recovery units, the introduction of DER technologies may result in marginal or even adverse environmental effects. Furthermore, according to the results of sensitivity analysis, the optimal system combination and corresponding economic and environmental performances are more or less sensitive to the scale of energy demand, energy prices (both electricity and city gas), as well as carbon tax rate.

Environmental and Economic Aspects of Charcoal Use in Steelmaking

The use of charcoal as a fuel and reductant in ironmaking and steelmaking in place of fossil fuel-based carbon sources has been assessed from both an environmental and economic point of view. Life cycle assessment methodology has been used to indicate potential reductions in greenhouse gas emissions resulting from charcoal substitution rates up to 100 % in the integrated, direct smelting and mini-mill routes for steelmaking. The results indicated that based on typical costs of charcoal and coal, charcoal is not competitive with coal in the steelmaking applications considered. However, the introduction of a carbon trading scheme or carbon taxes can be expected to improve the competitiveness of charcoal compared to coal. Based on a long-term price of $US90/t for metallurgical coal, a carbon tax in the order of US$30―35/t CO 2 would be required with the direct smelting and integrated routes for the overall charcoal and coal costs to be roughly equal, including a charcoal electricity co-product credit. However, if the recent increase in price of metallurgical coal is sustained for an extended period of time, the required carbon tax rate would fall to about US$18/t CO 2 .

Implications of capacity expansion under uncertainty and value of information: The near-term energy planning of Japan

In this paper, we present the near-term analysis of capacity expansion under various uncertainties from the viewpoints of the decision-making process on the optimal allocation of investment and the value of information. An optimization model based on two-stage stochastic programming was developed using real data to describe the Japanese energy system as a case study. Different uncertainty parameters were taken into consideration by a disaggregate analysis of a bottom-up energy modeling approach, including end-use energy demands, plant operating availability and carbon tax rate. Four policy regimes represented as energy planning or policy options were also studied, covering business as usual, renewable energy target, carbon taxation and nuclear phase-out regimes. In addition, we investigated the role of various energy technologies and the behavior of the value of information with respect to the probability function of the worst-case scenario. This value of information provides decision makers with a quantitative analysis for the cost to obtain perfect information about the future. The developed model could be regarded as an applicable tool for decision support to provide a better understanding in energy planning and policy analyses.

Market penetration analysis of fuel cell vehicles in Japan by using the energy system model MARKAL

The objective of the present work is to validate the hydrogen energy roadmap of Japan by analyzing the market penetration of fuel cell vehicles (FCVs) and the effects of a carbon tax using an energy system model of Japan based on MARKAL. The results of the analysis show that a hydrogen FCV would not be cost competitive until 2050 without a more severe carbon tax than the government's planned 2400 JPY/t-C carbon tax. However, as the carbon tax rate increases, instead of conventional vehicles including the gasoline hybrid electric vehicle, hydrogen FCVs gain market penetration earlier and more. By assuming a more severe carbon tax rate, such as 10 000 JPY/t-C, the market share of hydrogen FCVs approaches the governmental goal. This suggests that cheaper vehicle cost and hydrogen cost than those targeted in the roadmap should be attained or subsidies to hydrogen FCV and hydrogen refueling station will be necessary for achieving the goal of earlier market penetration.

住宅太陽光発電システム経済最適化における炭素税及び逆潮流の影響に関する分析

Photovoltaic (PV) systems have been introduced around Japan for the energetic, economic and ambient benefits, and expected to be diffused more and more. The nation target for PV capacity in Japan is 4.82 GW in 2010. To achieve the target, several support programs, such as subsidization to capital cost, green credit and electricity buy-back, have been already introduced. Carbon tax is still under consideration, but there have been several researches about its feasibility and viability. Ministry of the Environment said in a statement that the tax should be 2.4 Yen/kg-C. In this paper, five scenarios with various carbon tax rates and electricity buy-back prices for the adoption of grid-connected PV system in residential buildings have been studied. A previously developed evaluation model MinSC has been employed for analysis. The effect of carbon tax and electricity buy-back price on economic benefits of PV system in residential buildings has been discussed. The result indicates that there is an optimal PV capacity for a certain scenario when considering the minimum annual energy cost. And both carbon tax and electricity buy-back stimulates the adoption of PV system. However, the carbon tax makes the PV system better off in a relative sense and results in absolute cost increase.

Multi-Gas Mitigation Analysis by IPAC

By recognizing the importance of non-CO2 gases mitigation for climate change abatement, modeling study for multi-gas scenarios was conducted by using IPAC model. This is also part of EMF-21 study for comparing the cost for CO2 mitigation and multi-gas mitigation. The main objective of this analysis is to evaluate the international potential and costs of non-CO2 greenhouse gas abatement. Three scenarios were defined by EMF-21 study including modeler reference, CO2 only mitigation scenario and multi-gas mitigation scenario. By comparing the results for the three scenarios, it is found that there is quite large potential for non-CO2 mitigation potential. Multi-gas mitigation policies could have lower cost compared with CO2 only mitigation policies. In order to reach same mitigation target level of GHG emission, there could be 30% lower carbon tax rate for multi-gas mitigation, and therefore GDP loss could be reduced by 23% in 2100. Multi-gas mitigation could give less pressure for energy system to transform.

How do market reforms affect China's responsiveness to environmental policy?

A large percentage of total investment in China is allocated by the central government at below-market interest rates in pursuit of non-economic objectives. This has resulted in low rates of return and a high number of non-performing loans, threatening the future health of the Chinese economy. As a result, reform of capital markets is a high priority of the Chinese government. At the same time, the country is implementing various environmental policies to deal with serious pollution issues. In this paper we ask how reforms of the capital market will affect the functioning of a carbon tax. This allows us to assess how China's willingness to join global efforts to reduce carbon emissions is influenced by China's current efforts to reduce investment subsidies. We compare the costs of a carbon tax in a reformed economy with the costs of a carbon tax in the current subsidized economy. We find that in the subsidized economy the tax-interaction effect dampens the effect of a carbon tax resulting in smaller reductions in emissions than what would result in a reformed economy. Importantly, we also find that the effect on economic welfare from a carbon tax is lower in the subsidized economy; in fact, for lower levels of reductions, the carbon tax is actually welfare improving. These results have important implications for an economy undergoing economic transition. The carbon tax rate required to achieve a certain level of emission reductions will be higher in an economy with capital subsidies. However, the welfare implications of the tax indicate that the current system with capital subsidies is highly distorting implying that there is a high efficiency cost for the non-economic objectives the government is pursuing by maintaining this system of subsidies.

Analysis of integrated co-generative schemes including MSF, RO and power generating systems (present value of expenses and “levelised” cost of water)

The proposed study provides an analysis of an integrated co-generative scheme including the following subsystems: (1) gas turbine and unfired heat recovery steam generator, (2) auxiliary boiler, (3) multistage flash (MSF) and (4) reverse osmosis (RO). It contains a comparison of the integrated system with the reference scheme. A comparison of alternatives was based on the present values (PV) of expenses over the economic life of capital and “levelized” cost of water. The analysis was based on the following assumptions: (1) depreciation period is equal to the period of bank credit; (2) zero year is the base year of the project; (3) the discount factor is dependent upon the nominal interest rate and retail price index, (4) cost of primary fuel ranges from 1 to 4 $/GJ, (5) assumed carbon tax varies from 0 to $50 per tonne of emitted carbon. Based upon calculated results, the study confirmed the statement that RO can successfully coexist with MSF. Hybridisation of thermally- and electrically-driven processes can provide the following advantages: (1) a decrease of PV of expenses, (2) decrease of specific capital and energy consumption; (3) decrease of the level of carbon tax (owing to a drop of allocated CO 2 emissions); (4) decrease of “levelized” cost of water. Incorporation of RO into existing co-generative systems decreases its sensitivity and, in turn, commercial risk of the system to fluctuation of the following factors: (1) nominal interest rate (2) cost of primary fuel and (3) rate of carbon tax. The array of calculated data and projections is attached.

Integrated Evaluation of Optimal Carbon Tax Policy by Means of Environmental Value-added in China

On the basis of available data, we have built an eco-conscious socioeconomic framework model including 36 sectors by means of environmental value-added theory and developed energy and carbon dioxide (CO2) emission related scenarios in order to evaluate comprehensively the effect of carbon tax on CO2 emission curtailment and introduction of suitable alternative energy in China. An optimal carbon tax rate is derived endogenously.

Emissions and Taxation: Is Chaotic CO2 Concentration Controllable?

This paper demonstrates that an adjustment process of the global carbon tax rate can be chaotic. To this end, a discrete-time dynamic game is constructed in which the environmental regulator updates the tax rate for given observation of the regulated industry's CO2 emissions. It is shown that if the regulator considers the marginal benefit of increasing the tax rate is high, the adjustment process becomes chaotic. It is also demonstrated that the atmospheric CO2 concentration level with chaotic emission is higher than the level with a stationary state of “high tax and low emissions.” Given that the regulator wishes to control the concentration level with low emission, an adaptive adjustment of the tax rate is investigated.

A study of the buying price of photovoltaic electricity under a carbon tax regime

AbstractAssuming that photovoltaic (PV) systems are adopted in residential houses under a carbon tax regime, the economic performance of PV systems is investigated from the standpoint of an electric utility. The economic performance is estimated by using the buying price of PV electricity and the PV economic index, which is defined as the ratio of the buying price to the generation cost of the electric utility. Because these values depend on electric power development and operation, the best mix and the operation of power plants are obtained by linear programming subject to restrictions on power generation. Then, the buying price of PV electricity is calculated from the total cost of the electric utility. The buying price means the upper limit at which the electric utility never suffers a loss. The buying price is also compared with the power generation cost. The parameters are the prevalence attainment ratio of PV systems (0 to 100%), the upper limit of newly developed nuclear power plants (0 to 4 GW/10 y), and the generated energy ratio of coal‐fired thermal plants (0 to 15%). Chubu Electric Power Company, Inc. is used as the electric utility. The calculation results show that the buying price of PV electricity increases linearly with increasing carbon tax rate, and its values are 9 and 11.5 yen/kWh when the carbon tax rate is 0 and 25 thousand yen/t‐C, respectively, which does not depend on the prevalence attainment ratio of PV systems and the upper limit of newly developed nuclear power plants. It is not the carbon tax rate but the newly developed nuclear power plant that influences the PV economic index. The values of the PV economic index are 1.35 to 1.45 and 1.50 to 1.60 when the newly developed nuclear power plant capacity is 0 and 4 GW/10 y, respectively. These results show that the economic performance of PV systems is increased by developing nuclear power plants at a certain rate and introducing a carbon tax. © 2003 Wiley Periodicals, Inc. Electr Eng Jpn, 143(2): 38–49, 2003; Published online in Wiley InterScience (www.interscience.wiley.com). DOI 10.1002/eej.10067

Investigation of greenhouse gas reduction potential and change in technological selection in Indian power sector

Due to the growing energy needs along with increasing concerns towards control of greenhouse gas emissions, most developing countries are under pressure to find alternative methods for energy conversion and policies to make these technologies economically viable. One of the instruments that have been adopted by many industrial countries is that of the carbon tax. The rate of introducing carbon taxes however, depends upon the local economic conditions and market forces. The case of Indian power sector has been examined by using MARKAL model for introduction of carbon taxes at four different trajectories. Their implications on the power generation choices have been investigated for a time span of 25 years from the year 2000. In general large hydropower plants have emerged as the first choice followed by wind energy systems. However, cheaper availability of coal in India keeps scope of use of coal based technologies for which pressurised fluidised bed combustion technology has been found to be the balanced choice among fossil technologies. There exists a potential of reduction of greenhouse gas emissions by about 25% as compared to the ‘business-as-usual’ case in presence of high carbon tax rates.

General equilibrium analysis of economic and environmental effects of carbon tax in a developing country: case of Thailand

The study analyzed the economic and environmental consequences of a carbon tax in Thailand using a static general equilibrium model. Various carbon tax rates ranging from US$10/tC to US$40/tC were considered with two alternative revenue recycling schemes: (1) recycling of tax revenue to households through a lump-sum transfer, and (2) using the revenue to finance cuts in the existing income tax. A key finding of the study was that the economic impact of the carbon tax (e.g., reductions in welfare, gross domestic product, gross output) are affected by revenue recycling schemes, but the environmental impact (i.e., reduction in CO2, SO2, and NOx emissions) are almost unaffected. Moreover, at each tax level the cost of the carbon tax (i.e., welfare loss) was less when the tax revenue was used to finance cuts in existing income tax rates than when the revenue is recycled to households through a lump-sum transfer. In addition, the study found that a carbon tax would reduce SO2 emissions in higher proportions than the CO2 emissions in Thailand.

Climate change policy: quantifying uncertainties for damages and optimal carbon taxes

Controversy surrounds climate change policy analyses because of uncertainties in climatic effects, impacts, mitigation costs and their distributions. Here we address uncertainties in impacts, and provide a method for quantitative estimation of the policy implications of such uncertainties. To calculate an “optimal” control rate or carbon tax a climate-economy model can be used on estimates of climate damages resulting from warming scenarios and several other key assumptions. The dynamic integrated climate-economy (DICE) model, in its original specification, suggested that an efficient policy for slowing global warming would incorporate only a relatively modest amount of abatement of greenhouse gas emissions, via the mechanism of a small (about $5 per ton initially) carbon tax. Here, the DICE model is reformulated to reflect several alternate published estimates and opinions of the possible damages from climatic change. Our analyses show that incorporating most of these alternate damage estimates into DICE results in a significantly more aggressive optimal policy than that suggested by the original model using a single damage function. In addition, statistical distributions of these damage estimates are constructed and used in a probabilistic analysis of optimal carbon tax rates, resulting in mostly much larger (but occasionally smaller) carbon taxes than those of DICE using point values of damage estimates. In view of the large uncertainties in estimates of climate damages, a probabilistic formulation that links many of the structural and data uncertainties and thus acknowledges the wide range of “optimal” policies is essential to policy analysis, since point values or “best guesses” deny policy makers the opportunity to consider low probability, but policy-relevant, outliers. Our presentation is offered as a prototypical example of a method to represent such uncertainties explicitly in an integrated assessment.

Development of an end-use model for analyzing policy options to reduce greenhouse gas emissions

An end-use energy model is presented for assessing policy options to reduce greenhouse gas emissions. This model evaluates the effects of imposing a carbon tax on various carbon-emitting technologies in order to reduce CO/sub 2/ emissions. It also estimates the effects of a carbon tax in combination with subsidies. The problem can be formulated in terms of two-level mathematical programming. An algorithm is proposed and applied to estimate Japanese CO/sub 2/ emissions. The conditions under which energy-saving technologies would be selected are analyzed using various carbon tax rates and subsidies, and the reduction of CO/sub 2/ emissions is calculated based on the introduction of such technologies. It is found that a low carbon tax such as 3000 yen per metric ton of carbon (tC) is insufficient to stabilize CO/sub 2/ emissions at the 1990 level in Japan, and that a tax of 30000 yen/tC would be necessary. However, the proposed algorithm shows that total emissions in Japan in the year 2000 can be stabilized at the 1990 level with a tax of 3000 yen/tC if the tax revenues are used to subsidize the introduction of energy-saving technologies.

建築設備の省エネルギーと炭素税との関係性に関する研究

This paper examines the general relationship between energy saving in building facilities and the carbon tax that is taken interest as the economical measure of C0_2 reduction. It presents a mathematical model of energy-saving economics in building facilities as a probability density of initial cost and the energy-saving effect. On the basis of this model, approximate values and a carbon-tax rate obtaind from economic studies are used to analyze how introducing the carbon tax influences the energy-saving effect and increase in initial cost.

Optimal pricing of environmental and natural resource use with stock externalities

Underlying some of the most pressing environmental problems are the interlinked resource and environmental stock externalities with threshold effects. Using a simple dynamic model, it is shown how in the face of such externalities the static market-based policy instruments such as Pigouvian taxes should be modified. It is shown that even if for an initial period there is going to be no pollution stock damage, the optimal policy still requires that abatement begins immediately and at increasing rates. Simulation of the model for the case of fossil fuel burning and the consequent global warming shows that the optimal carbon tax, and therefore the optimal control strategy, is particularly sensitive to changes in the marginal abatement cost and the level of fossil fuel demand. Policy simulations contrast the optimal control policy with, and estimate the welfare losses from, alternative policies deriving from arbitrary tax paths. The latter include: (i) a no-tax policy, (ii) a constant carbon tax rate, (iii) the European Community's proposed carbon tax path, and (iv) a delayed optimal tax path.