Carbon policies

Do they deliver in the long run?

Book chapter (2010)
Department
Infrastructures, Systems and Services (TPM) (TU Delft)
Copyright: © 2010 The Author(s); Elsevier
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Published Date

01-01-2010

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Source:

Generating Electricity in a Carbon-Constrained World, F.P. Sioshansi (ed.)

Faculty

Technology, Policy and Management

Department

Infrastructures, Systems and Services

Abstract

Carbon taxation and emission trading are policy instruments for achieving significant CO2 emission reduction by inducing a shift in technology and fuel choice. Simulations with a quantitative agent-based model of a competitive electricity generation sector show that under both policies CO2 emissions increase for 10-15 years due to the long life cycle of power plants. Dramatic reductions materialize after 20-40 years when a tight cap or sufficient tax level is maintained. When taxes are set equivalent to trading prices, taxation induces earlier investment in CO2 abatement, a better balance between capital and operating costs and lower long-run electricity prices.

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