Carbon Tax Research Articles

Pajak Karbon dan Dilema Pembangunan Ekonomi Indonesia: Pembelajaran dari Negara Lain

Indonesia issued a regulation on carbon tax through article 13 of Law No. 7 on the Harmonization of Tax Regulations (HPP) in 2021 following the number of countries that have implemented carbon pricing mechanisms in facing the challenge of climate change. In addition to the policy formulation process full of pros and cons, the policy was actually postponed until 2015. Learning from the experience of other countries, the implementation of carbon taxes does not always succeed in reducing emissions or household budgets. The facts show that economic development and environmental control often do not occur at the same time. Additional rules, government commitment and cooperation from every relevant stakeholder are needed as well as supervision from the community in the implementation of article 13 of the HPP Law.

Hero or Devil: A comparison of different carbon tax policies for China

A carbon tax is a promising environmental regulation. Given its heavy industrial base and substantial reliance on coal, China is under immense pressure to transition to greener energy systems. This paper enriches Annicchiarico and Di Dio’s (2015) dynamic general equilibrium model for environmental policy analysis by integrating a Schumpeterian innovation-driven clean energy transition that endogenizes the carbon intensity of energy inputs. We analyze the environmental, energy, economic, and social impacts of various hypothetical carbon taxes – including an energy excise tax on households, an emission tax on general producers, and an energy tax on energy suppliers – across different tax rates and subsidy strategies for both short-term and long-term effects. We show that: (i) by internalizing carbon intensity, a carbon tax can achieve a “quadruple dividend”, encompassing emission reduction, energy transition, economic growth, and welfare enhancement; (ii) the optimal carbon tax strategy, integrating both an emission tax and an energy tax, directs revenue towards supporting the clean energy transition; (iii) under a single environmental regime, a composite carbon tax exceeding 250 CNY/ton is optimal, while under multiple regimes, 25 CNY/ton suffices to reduce carbon emissions per unit of output by over 90%; (iv) despite their benefits, all carbon taxes compel firms to reorganize production, inevitably risking unemployment.

Optimal Pricing and Retailing Strategy for an Assembled Product Manufacturing–Remanufacturing Process under Carbon Emission Regulations and Autonomation

Online-to-offline (O2O) retailing offers unique opportunities for customizable assembled products with spare parts. Customers can browse and configure their desired product online, selecting from various components. Imperfect production, where a certain percentage of products have defects, can be amplified in the manufacturing system. Stricter carbon emission regulations put pressure on manufacturers to minimize waste. This creates a tension between discarding imperfect products, generating emissions, and potentially offering them at a discount through the O2O channel, which could raise quality concerns for consumers. In this study, an imperfect single-stage production process is examined, incorporating manufacturing–remanufacturing within a single stage for assembled products containing various spare parts. The study explores an investment scenario aimed at enhancing the environmental sustainability of the product. Additionally, two carbon emissions regulation strategies, specifically carbon cap-and-trade regulation and carbon taxation, are evaluated for their effectiveness in mitigating carbon footprints. The identification of waste, particularly in the form of defective items, is achieved through automated inspection techniques. The demand for spare parts associated with the assembled products is intricately linked to the selling prices set across diverse channels. Finally, the total profit of the manufacturing system is maximized with the optimized value of the selling prices, order quantity, backorder quantity, and investments in autonomated inspection, setup cost, and green technology. Numerical illustrations show that system profit was optimized when the defective rate followed a triangular distribution under carbon cap-and-trade regulation and when green technology investment helped to enhance retailer profit by 18.12%, whereas autonomated inspection increased retailer profit by 10.27%.

Beyond courts: Does strategic litigation affect climate change policy support?

Strategic climate change litigation is a rising phenomenon that has attracted considerable academic interest. Still, limited understanding exists of the effects of strategic litigation cases outside the courtroom – more specifically, on whether strategic litigation can influence public attitudes on climate change policy. Based on the concept of legal cueing, we conduct a pre-registered vignette experiment with a quota-representative sample of UK citizens to study the impact of information on strategic climate change litigation on stated and revealed preferences for climate policy measures. We furthermore perform an exploratory analysis of participants’ demographic characteristics and their expressed sentiment towards a carbon tax. Overall, the experiment returns null results, suggesting no direct link between strategic climate litigation and policy attitudes in our experimental setup. We discuss how legal cues may affect attitudes in a more indirect and cumulative manner.

Can carbon tax revenue recycling coordinate climate mitigation and energy poverty alleviation?

Energy poverty is a key dimension of multidimensional poverty and a major challenge for climate action. This study examines how climate policies affect energy poverty, especially the role of carbon tax revenue recycling in coordinating climate mitigation and energy poverty alleviation. Using an integrated Climate-Economy-Energy Poverty (RICE-EP) model that incorporates inequality aspects of energy poverty, the study analyzes the effects of climate policies on household energy consumption. The study simulates various scenarios of climate actions and carbon tax revenue recycling and finds that: i) Carbon tax revenue recycling can simultaneously advance climate change mitigation and energy poverty reduction goals, it can promote climate mitigation and enhance equity by lowering the abatement costs borne by low-income populations; ii) However, the interactions between stringent climate targets and energy affordability are complex. Modeling suggests that even optimal revenue recycling fails to prevent exacerbated energy poverty among disadvantaged groups under ambitious 2 °C climate targets; iii) Analysis indicates that an emissions reduction rate approaching 43 %, enabled by a carbon tax calibrated to incentivize an equitable transition, could maximize alleviation of energy poverty by directing subsidy support to low-income groups. The study methodology and findings offer valuable, actionable insights into coordinating equitable climate and economic policies.

Cumulative effects of energy and water economic policies: Framework development and a case study in China

Due to the existence of an energy–water nexus, energy–related economic policies (such as carbon taxes) can influence the consumption of water resources, and water–related policies (such as fees for water use) can influence the consumption of energy. Previous research focused on the direct effects of energy and water policies (i.e., an energy policy's effects on energy conservation, and a water policy's effects on water resource conservation) and on the indirect effects (i.e., an energy policy's effects on water resource conservation, and a water policy's effects on energy conservation). However, they neglected the cumulative effects (i.e., the effects under simultaneous implementation of the two policies, which differs from the sum of the effects under separate implementation of the two policies). This is an important omission given that both economic policies are implemented simultaneously, and exhibit interactions that produce cumulative effects. In the present study, we developed a framework to analyze the cumulative effects of water and energy policies. In this framework, we developed a computable general equilibrium model and a model to assess their cumulative effect. The cumulative effects were analyzed from both the environment and macroeconomy perspectives. China was adopted as a case study. We found that the cumulative effects on energy conservation, water conservation, and carbon emission reduction were greater than the effects of only one kind of policy, but that antagonistic effects also occurred, with their strength increasing with increasing intensity of the policy.

Cold chain distribution network design with heterogeneous fleet under carbon reduction policy application effect

ABSTRACT To integrate cold chain distribution network design problem with heterogeneous fleet, a multi-objective optimisation model is proposed to simultaneously optimise distribution routes, the quantity of internal combustion and electric refrigerated trucks (ERTs), and the number and location of distribution centres and charging stations with time window constraints, where the cold chain distribution operating cost and the customer dissatisfaction cost are minimised. A hybrid solution methodology, combining a multi-objective artificial fish swarm algorithm with a label-based optimisation algorithm, is presented to address this model. Extensive computational experiments verify the effectiveness of the proposed method. Moreover, a sensitivity analysis, focusing on the range of ERTs, the purchase subsidy for ERTs, the carbon tax and the carbon emission quota, informs the development of diverse carbon reduction policies. A comparative analysis of the implementation effect of carbon reduction policies can provide optimisation decision support for promoting sustainability in the electrification of cold chain distribution.

THE FINANCIAL IMPACT OF CARBON EMISSIONS ON POWER UTILITIES UNDER CLIMATE SCENARIOS

Power utilities, especially those that generate electricity by burning fossil fuels, produce significant amounts of carbon emissions. Mitigation of [Formula: see text]-equivalent ([Formula: see text]) emissions can be achieved by replacing power plants with renewable power installations and by adopting carbon-sequestration technologies. Physical upgrades are expensive, but carbon taxes, or the purchase of certificates and allowances on a voluntary carbon market, can be costly, too. Carbon costs may increasingly become a threatening liability for power utilities, eating into profits and undermining the financial viability of emission-intensive electricity generation. Thus, we consider an asset-and-liability, structural firm model to investigate the creditworthiness of a generic power utility. The utility’s assets dynamics are driven by the financial returns generated from the sold electricity for a set tariff which is modeled by a simple stochastic process. The liabilities not only depend on fuel, running, and depreciation costs, but also on the costs of [Formula: see text] emissions. As a case study, we consider Eskom, the South African power utility. We show the evolution of Eskom’s default probability under various fuel mix plans and technologies (as per SA’s Integrated Resources Plan (IRP) 2019), and under the Network for Greening the Financial System (NGFS) carbon price scenarios. The obtained results and insights present a trying path ahead, especially for carbon-intensive power utilities.

Carbon pricing policies and renewable energy development: Analysis based on cross-country panel data

While studies have theoretically discussed the impact of carbon pricing on renewable energy, the practical implementation and effectiveness of these policies remain uncertain. This study empirically examines the role of carbon emissions trading and carbon tax in global renewable energy development using panel data from 196 countries and regions and employing the staggered difference-in-differences (DID) model and Bacon decomposition method. The results suggest that: (1) From the perspective of policy shocks, carbon trading has increased non-hydro renewable electricity generation by 73.32%, while carbon tax has increased it by 31.79%. This indicates that the overall impact of carbon trading on renewable energy is greater than that of carbon tax. However, the elasticity coefficients of renewable energy to carbon trading prices and carbon tax rates are 0.1801 and 0.1845, respectively, suggesting a slightly greater marginal effect of carbon tax on renewable energy compared to carbon trading. (2) Both carbon tax and carbon trading have mitigated the growth of fossil electricity and encouraged public investment in renewable energy, thereby fostering its development. (3) The influence of carbon pricing on renewable energy varies by income level; notably, the implementation of these policies in high-income countries has diminished their promotional effect on renewable energy. (4) The contribution of technological innovation to renewable energy development is smaller than that of policies including carbon trading and carbon tax, indicating that renewable energy development during the sample period was predominantly driven by policy measures. The findings indicate that the application of carbon pricing policies should be further promoted to accelerate the energy mix transition.

Machine learning-based uncertainty analysis in power system planning: Insights and pathways for decarbonization

This study performs an extensive uncertainty analysis of decarbonization pathways for the Canadian power system. By leveraging machine learning (ML) techniques, we represent complexities and nonlinear behaviors of the power system, which are challenging to observe using traditional modeling methods due to computational limitations. We further utilize K-means clustering and statistical methods to identify correlations, investigate the effects of uncertainty in key parameters (capital costs, demand, and carbon tax), and identify opportunities for diversification of the power generation mix. Key findings include the increased flexibility of gas combined cycle (generation mean 4.8 TWh, installed capacity mean 4.8 GW) over gas simple cycle (generation mean 22.3 GWh, 0 installed capacity) in response to carbon tax, highlighting its role in a low-carbon future. Variations in solar and wind deployment rates, influenced by capacity factors and location-specific costs, underscore the necessity of a flexible grid system. This analysis reveals important correlations between renewable deployment, and transmission expansion and gas combined cycle reliance. The results also highlight minimal sensitivity of hydroelectric power generation (∼ 43 % of scenarios) to changes in input parameters. The novelty of our work lies in proposing a comprehensive approach which uses ML techniques to go beyond the capabilities of existing models, specifically by performing extensive uncertainty analysis and provides key insights into system behavior, causative factors, and an expanded breadth of potential pathways. Taken together, this proposed approach lays a foundation for strategic planning and policy formulation.

Optimizing sustainability and profitability: A multi-step approach to the synthesis of X-zeolite from blast furnace slag

To further unlock the circular economy potential of iron and steel industry and achieve peak carbon and carbon neutrality targets, this study provides a comprehensive analysis of the high value-added use of blast furnace slag (BFS) for the synthesis of X-type zeolite. The thermodynamic and dissolution behaviors during acid leaching are investigated through theoretical analysis, identifying the optimal pH is 0–1.63 and Eh is −1.01–2.00 V. Experiments determine that there are obvious improvement in silica gel leaching ratio at 353 K, 4 mol·L−1 HCl and V(HCl):m(slag) ratio of 12:1. Obtained silica gel has 91.56 % whiteness and 86.86 % SiO2. The optimal conditions for X-type zeolite synthesis are crystallization at 363 K for 6 h, with n(SiO2):n(Al2O3), n(Na2O):n(SiO2) and n(H2O):n(Na2O) establishes as 2.8, 2.8 and 45 respectively and resulting material has high crystallinity, purity of crystals and excellent performance. Furthermore, the mechanism is elucidated from the perspective of microstructural and molecular level. Economic evaluation along with carbon tax assessment indicated that it is economically beneficial both in direct profit and potential CO2 capture. These findings emphasize the feasibility, efficacy and economy of X-type zeolite synthesis from BFS, which contributes to turning waste into treasure and promoting the concept of “Green steel”.

A techno-economic assessment of conventional and modified Solvay processes for CO2 capture and reject brine desalination

The ongoing discharge of desalination reject brine and emission of carbon dioxide (CO2) into the environment pose a major threat to the ecosystem. In this context, the Solvay process presents a potential mitigation scheme for reducing reject brine salinity while simultaneously sequestering CO2. This work reports for the first time a systematic techno-economic assessment of the conventional (ammonia-based) and modified (calcium hydroxide-based and Potassium hydroxide-based) Solvay processes. The model evaluates the effect of reactor conversion, inlet CO2 weight%, inlet CO2 temperature, gas/liquid ratio, and brine flow rate on the CO2 and Sodium ions removal. In addition, the process cost associated with each parameter was analyzed, and the impact of implementing carbon tax on process profitability was investigated. Furthermore, the Solvay processes were evaluated using economic metrics including Net Present Value (NPV), economy of scale, and Levelized cost of water. The results suggest that the calcium hydroxide-based modified Solvay process outperforms other processes in terms of CO2 and Sodium ions removal. Moreover, for the studied parameters, the calcium hydroxide-based modified Solvay process demonstrated economic viability, yielding a decent annual profit. However, the conventional Solvay process requires a remarkable amount of expenses, yet after the implementation of 40 dollars per metric tons of CO2 as a carbon tax, the conventional Solvay reaches the break-even point. These findings underscore the importance of implementing environmentally friendly practices in the industry, as the modified Solvay process proves to be a promising solution for mitigating environmental threats and promoting sustainable operations.

The Effect of a Carbon Tax on the Economy, Welfare and Emissions in Morocco: A Computable General Equilibrium Approach

The Effect of a Carbon Tax on the Economy, Welfare and Emissions in Morocco: A Computable General Equilibrium Approach

THE ROLE OF GOVERNMENT SUPPORT IN THE DEVELOPMENT OF THE CCS MARKET: EXPERIENCE OF COUNTRIES WITH A DEVELOPED OIL AND GAS INDUSTRY

The article examines the role of government support in the development of the Carbon Capture and Storage (CCS) Technology market in countries with a developed oil and gas industry. It is shown that the implementation of CCS in the oil and gas sector has significant economic and environmental importance, as it allows not only to reduce the large-scale greenhouse gas emissions of this industry but also to increase the oil recovery factor through the injection of captured CO2 into depleted reservoirs. An analysis of the cost chain of various stages of the CO2 capture, transportation, and storage process is carried out, and the most costly elements are identified. The economic aspects of using Carbon Capture, Use, and Storage (CCUS) Technology for enhanced oil recovery are considered, and the need for government subsidies to ensure the commercial attractiveness of such projects under low CO2 emission prices is justified. The global experience of using economic instruments (carbon taxation, tax incentives, grants) to stimulate CCS projects in various industrial sectors is investigated. Significant differences in the approaches of leading countries compared to Russia are revealed. Pilot initiatives of the largest Russian oil and gas companies for the implementation of CCS technologies are analyzed. Recommendations are formulated for the creation of favorable regulatory conditions and effective mechanisms of government stimulation for the widespread adoption of CCS in Russia, taking into account its specifics as a major hydrocarbon producer.

INVITED PAPER — INTER-GENERATIONAL IMPACTS OF SINGAPORE’S BUDGETARY RESPONSES TO COVID-19: GENERATIONAL ACCOUNTING FRAMEWORK

Singapore’s rapidly aging population poses significant challenges to the government’s long-term fiscal sustainability as it structurally affects government revenue and expenditure. Amidst the demographic trends, total government spending has skyrocketed to unprecedented amounts in 2020 in response to the COVID-19 pandemic. This paper evaluates Singapore’s fiscal sustainability and intergenerational fiscal impacts through the lens of generational accounting and actuarial analyses, before and after COVID-19. Our model predicts a pre-COVID absolute intergenerational gap of S$512 thousand between future generations and current newborns, implying that there is considerable intergenerational inequity. This gap increases by a further S$67 thousand after factoring in COVID-19’s impact on government net spending and short-term fertility rates. Fiscal balance can be restored in the short term and intergenerational equity in the long term, after incorporating key policy changes such as Goods and Services Tax (GST) hike and carbon tax increases.

Evolution of Tax Exemption Policy and Pricing Strategy Selection in a Competitive Market

The evolution of tax exemption policies and consumer preferences for low-carbon products affect firms’ optimal pricing strategy selection in a competitive duopoly market. In our study, we build a two-period pricing model to examine the pricing strategy choices between low-carbon and traditional firms. Low-carbon firms offer consumers greater value, improving their overall experience and satisfaction. Given the evolution of government policies from tax exemption to taxation for low-carbon products, we divide the changes in carbon tax into two periods. Since each firm can choose either the uniform pricing strategy (setting the same price in both periods) or the tiered pricing strategy (setting different prices for two periods), four scenarios may occur. Conventional wisdom suggests that a firm’s pricing increases should result in a reduction in consumer demand. Interestingly, our results show that as traditional firm raises prices, consumer demand for traditional products could increase simultaneously in the second period. In such a case, the low-carbon firm selects the uniform pricing strategy and the traditional firm chooses the tiered pricing strategy. Moreover, as tax exemption policies evolve in duopoly markets, the cancellation of the tax exemption policy may intensify competition between traditional and low-carbon firms under certain conditions. Furthermore, given one firm’s pricing strategy, our results show that the other firm could adopt either a uniform pricing strategy or a tiered pricing strategy, which depends on the low-carbon advantage and tax rate.

Cost Allocation for Inventory Problem with Transportation Discount under Carbon Tax Policy

Cost Allocation for Inventory Problem with Transportation Discount under Carbon Tax Policy

Research on the influence of consumer Perceived Value on the purchase of new energy vehicles

In recent years, low carbon economy has gradually become a hot issue of global concern. At present, Chinese consumers are still in the initial stages of understanding and research on carbon tax. By analysing various carbon tax regimes domestically and abroad, this article employs a quantitative research methodology to explore the influence of consumer perceptions on customers' purchase of new energy vehicles. This paper concentrates on the operational models of several major carbon tax systems at home and abroad and provides a thorough overview of the setting of carbon tax schemes, risk management, and the economics of carbon trading in each country. Drawing on the experiences of foreign countries and regions in implementing carbon tax schemes, this paper offers suggestions on how China can design carbon tax policies to promote green consumption behavior among contemporary Chinese consumers.

Corporate debt value under transition scenario uncertainty

AbstractWe develop a structural model for pricing a defaultable bond issued by a company subject to climate transition risk. We assume that the magnitude of the transition risk impacts depends on a transition scenario, which is initially unknown but is progressively revealed through the observation of the carbon tax trajectory. The bond price, credit spread, and optimal default/restructuring thresholds are then expressed as function of the firm's revenue level and the carbon tax. Numerical implementation of the resulting formulas is discussed and illustrated using real data. Our results show that under transition scenario uncertainty, carbon tax adjustments are more likely to trigger a default than when the true scenario is known because after each adjustment, the more environmentally stringent scenario becomes more likely. We also find that faster discovery of scenario information leads to higher credit spreads since better information allows the shareholders to optimize the timing of default, increasing the value of default option and decreasing the bond price. As an extension, we consider the situation where the company may invest into abatement technology, increasing the value of both the share price and the bond price.

Carbon taxation on high utility transport fuels: An implementation of enviro-economic analysis for the sustainable environment”

The humongous increase in carbon emissions in the past few decades presents an environmental challenge to the scientific community. The current study proposes a method of taxation on high-carbon emission fuels. For this purpose, a comparative enviro-economic analysis is carried out on the three most commonly used fuels (gasoline, Liquefied Petroleum Gas (LPG), and Compressed Natural Gas (CNG)). The speed of the test engine varied from 1800 to 4200 Revolution per Minute (RPM) in increments of 400 RPM. Performance parameters (Brake Power (BP), Brake Thermal Efficiency (BTHE), and Brake Specific Fuel Consumption (BSFC)) were measured using a hydro dynamometer. Emission analysis, including Carbon Dioxide (CO2), Carbon Monoxide (CO), Unburned Hydrocarbons (HC), and Nitrogen Oxide (NOx), was conducted using the TESTO 350 analyzer. The application of Weibull distribution with a 95 % confidence interval, on emission data, explained the adequacy of the data. Among test fuels, CNG emerged as an environment-friendly fuel with an emission reduction of 16, 42, and 43 percent for CO2, CO, and HC in comparison to gasoline. Also, BTHE and BSFC of CNG were better than other alternatives. Moreover, the carbon penalty for CNG fuel showed a price reduction of 32 and 20.8 percent in comparison to gasoline and LPG respectively. The study provides a novel approach to assess the environmental impact of fuels by economic analysis based on emitted carbon quantity. In addition, this very idea is novel in promoting the Sustainable Development Goals (SDG) of the United Nations (UN) through carbon taxation.