Two-level Mathematical Programming for Analyzing Subsidy Options to Reduce Greenhouse-Gas Emissions

Hibino, G., Kainuma, M., Matsuoka, Y., & Morita, T. (1996). Two-level Mathematical Programming for Analyzing Subsidy Options to Reduce Greenhouse-Gas Emissions. IIASA Working Paper. IIASA, Laxenburg, Austria: WP-96-129

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Abstract

In this paper we develop the end-use energy model for assessing policy options to reduce greenhouse-gas emissions. This model evaluates the effects of imposing a carbon tax on various carbon-emitting technologies for reducing CO2 emissions. It also estimates the effect of combining a carbon tax with other countermeasure policies, such as the introduction of subsidies. The problem can be formulated as two-level mathematical programming. Solution methods for the problem are discussed, and an algorithm to solve the subsidy problem is presented. The conditions under which the conservation technologies would be selected are analyzed with the different carbon tax rates and subsidies. The reduction of CO2 emissions is calculated based on the introduction of these conservation technologies. Finally, we evaluate the effects of combining a carbon tax with subsidies using the recycled revenues from such a tax.

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