Potential Effects of Emission Taxes on CO2 Emissions in OECD and LDC Countries

Messner, S. & Strubegger, M. (1990). Potential Effects of Emission Taxes on CO2 Emissions in OECD and LDC Countries. IIASA Working Paper. IIASA, Laxenburg, Austria: WP-90-077

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Abstract

A set of existing optimization models representing the energy systems of the OECD and LDC countries with a time horizon up to 2020 was applied to derive first-order estimates of the techno-economic potential for emission reduction. The driving force for the introduction of reduction measures was a scheme of taxes levied on the emissions of 6 relevant pollutants -- including the greenhouse gases CO2 and methane. The tax levels introduced are based on the taxes discussed by the Swedish government administration; they are the break-even point to test which measures are cost-effective and which emission levels can be reached at these costs.

The regional models offer the choice between the following alternatives as response to increases in expenditures caused by emission taxes: (1) Reduction of final energy demand by supplying the requested services by other means (i .e., conservation). (2) Substitution of "dirty" fuels by fuels entailing less pollution. (3) Introduction of "clean" technologies for the same purposes (e.g., a combined cycle based on coal gasification is a much cleaner process for electricity generation from coal than conventional coal power plants). (4) For SO2 and NOx emissions pollution reduction technologies (i.e., scrubbers and catalysts) can be added to existing technologies in order to reduce emissions.

Alternative scenarios with emission taxes are compared to a Base Scenario without taxes related to pollutant emissions.

The results indicate that an increase in CO2 emissions in the OECD and LDC regions of 47% over the next 30 years in the Base Scenario would be changed into stabilization up to 2010 by measures induced by the tax levels introduced. Thereafter, however, energy consumption growth in the LDC area, in conjunction with the exhaustion of economically viable emission reduction measures, reverse this trend: CO2 emissions start to increase again after 2010.

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