Distributional impacts of carbon pricing: A general equilibrium approach with micro-data for households

Many policies to limit greenhouse gas emissions have at their core efforts to put a price on carbon emissions. Carbon pricing impacts households both by raising the cost of carbon intensive products and by changing factor prices. A complete analysis requires taking both effects into account. The impact of carbon pricing is determined by heterogeneity in household spending patterns across income groups as well as heterogeneity in factor income patterns across income groups. It is also affected by precise formulation of the policy (how is the revenue from carbon pricing distributed) as well as the treatment of other government policies (e.g. the treatment of transfer payments). What is often neglected in analyses of policy is the heterogeneity of impacts across households even within income or regional groups. In this paper, we incorporate 15,588 households from the U.S. Consumer and Expenditure Survey data as individual agents in a comparative-static general equilibrium framework. These households are represented within the MIT USREP model, a detailed general equilibrium model of the U.S. economy. In particular, we categorize households by full household income (factor income as well as transfer income) and apply various measures of lifetime income to distinguish households that are temporarily low-income (e.g., retired households drawing down their financial assets) from permanently low-income households. We also provide detailed within-group distributional measures of burden impacts from various policy scenarios.     

Electricity pricing under “carbon emissions trading”: A dominant firm with competitive fringe model

The aim of this paper is to analyze the impact of trading of CO₂ emissions allowances on electricity pricing in the short run. We mainly refer to the European Emissions Trading Scheme (ETS) and are interested in understanding the role of electricity market structures. We carry out a simple analytical model useful to verify whether (and under which conditions) the impact of the ETS under market power could be lower (or higher) than that under perfect competition. We analyze a context where generators compete in a uniform, first price auction. Market power in the form of a dominant firm facing a competitive fringe model is assumed. The paper highlights that the marginal CO₂ opportunity costs are fully included in energy prices when the electricity market is perfectly competitive. Under market power the impact of the ETS equals or exceeds that under the competitive scenario only when there is excess capacity and the share of most polluting plants in the market is low enough. Otherwise, the impact under market power is less than under perfect competition and significantly decreases in the degree of market concentration. This especially occurs when there is not high excess capacity and regardless of either the plant mix or the allowance price. In this case, moreover, the marginal pass-through rate is lower in the peak than in the off-peak hours and can be even nil if the degree of market concentration is high enough.     

An equilibrium pricing model for weather derivatives in a multi-commodity setting

Many industries are exposed to weather risk. Weather derivatives can play a key role in hedging and diversifying such risk because the uncertainty in a company's profit function can be correlated to weather condition which affects diverse industry sectors differently. Unfortunately the weather derivatives market is a classical example of an incomplete market that is not amenable to standard methodologies used for derivative pricing in complete markets. In this paper, we develop an equilibrium pricing model for weather derivatives in a multi-commodity setting. The model is constructed in the context of a stylized economy where agents optimize their hedging portfolios which include weather derivatives that are issued in a fixed quantity by a financial underwriter. The supply and demand resulting from hedging activities and the supply by the underwriter are combined in an equilibrium pricing model under the assumption that all agents maximize some risk averse utility function. We analyze the gains due to the inclusion of weather derivatives in hedging portfolios and examine the components of that gain attributable to hedging and to risk sharing.     

Designing an emissions trading scheme for China with a dynamic computable general equilibrium model

To fulfill its Copenhagen pledges to control carbon emissions and mitigate climate change, China plans to establish a nationwide emissions trading scheme (ETS) in 2016. This paper develops a multi-sector dynamic computable general equilibrium model with an ETS module to study the appropriate ETS policy design, including a carbon cap, permit allocation and supplementary policies (e.g., penalty policies and subsidy policies). The main results are as follows. (1) To achieve China's Copenhagen pledge, the equilibrium nationwide carbon price is observed to be between 36 and 40 RMB yuan per metric ton. (2) The ETS policy has a cost-effective mitigation effect by improving China's production and energy structures with relatively little economic harm. (3) Various ETS sub-policies should be carefully designed to balance economic growth and carbon mitigation. In particular, the carbon cap should be set according to China's Copenhagen pledge. A relatively large distribution ratio of free permits, the output-based grandfathering rule for free permits, a penalty price (on illegitimate emissions) slightly above the carbon price, and a sufficient subsidy (from ETS revenue) are strongly recommended in the early stages to avoid significant economic loss. These designs can be adjusted in later stages to enhance the mitigation effect.     

Efficiency and economic benefit of dark-fermentative biohydrogen production in Asian circular economies: Evaluation using soft-link methodology with data envelopment analysis (DEA) and computable general equilibrium model (CGE)

This study combines a data envelopment analysis, a dynamic computable general equilibrium model with estimated secondary material flows for circular economy, based on economist Joseph Schumpeter's macroeconomic theory, to develop a novel soft-link model to determine the efficiency of forty-three dark-fermentative technology of biohydrogen, and technology improvement impacts on biohydrogen output and supply price for six major emerging Asian countries. The integrated model is found to be feasible.This study finds that efficiency of continuous technology significantly exceeds that of batch technology. Biomass substrate concentration is the most important input in the generation of biohydrogen statistically; pH influences the efficiency of the batch technology, and the efficiency of continuous production technologies significantly exceeds that of batch technologies, but still have a gap to improve to full production efficiency for most of continuous technologies. India and China generate highest output growth of biohydrogen in baseline scenario. Japan and India can most benefit from improvements in batch and continuous biohydrogen production technology. The models and results of this study provides guidelines and references for decision-makers in industry and government who are responsible for reforming future energy policy.     

Transition towards a low carbon economy: A computable general equilibrium analysis for Poland

In the transition to sustainable economic structures the European Union assumes a leading role with its climate and energy package which sets ambitious greenhouse gas emission reduction targets by 2020. Among EU Member States, Poland with its heavy energy system reliance on coal is particularly worried on the pending trade-offs between emission regulation and economic growth. In our computable general equilibrium analysis of the EU climate and energy package we show that economic adjustment cost for Poland hinge crucially on restrictions to where-flexibility of emission abatement, revenue recycling, and technological options in the power system. We conclude that more comprehensive flexibility provisions at the EU level and a diligent policy implementation at the national level could achieve the transition towards a low carbon economy at little cost thereby broadening societal support.     

Competition between biomass and food production in the presence of energy policies: a partial equilibrium analysis

Bioenergy has several advantages over fossil fuels. For example, it delivers energy at low net CO₂ emission levels and contributes to sustaining future energy supplies. The concern, however, is that an increase in biomass plantations will reduce the land available for agricultural production. The aim of this study is to investigate the effect of taxing conventional electricity production or carbon use in combination with subsidizing biomass or bioelectricity production on the production of biomass and agricultural commodities and on the share of bioelectricity in total electricity production. We develop a partial equilibrium model to illustrate some of the potential impacts of these policies on greenhouse gas emissions, land reallocation and food and electricity prices. As a case study, we use data for Poland, which has a large potential for biomass production. Results show that combining a conventional electricity tax of 10% with a 25% subsidy on bioelectricity production increases the share of bioelectricity to 7.5%. Under this policy regime, biomass as well as agricultural production increase. A carbon tax that gives equal net tax yields, has better environmental results, however, at higher welfare costs and resulting in 1% to 4% reduction of agricultural production.     

Impact of a carbon tax on the Chilean economy: A computable general equilibrium analysis

In 2009, the government of Chile announced their official commitment to reduce national greenhouse gas emissions by 20% below a business-as-usual projection by 2020. Due to the fact that an effective way to reduce emissions is to implement a national carbon tax, the goal of this article is to quantify the value of a carbon tax that will allow the achievement of the emission reduction target and to assess its impact on the economy.The approach used in this work is to compare the economy before and after the implementation of the carbon tax by creating a static computable general equilibrium model of the Chilean economy. The model developed here disaggregates the economy in 23 industries and 23 commodities, and it uses four consumer agents (households, government, investment, and the rest of the world). By setting specific production and consumptions functions, the model can assess the variation in commodity prices, industrial production, and agent consumption, allowing a cross-sectoral analysis of the impact of the carbon tax. The benchmark of the economy, upon which the analysis is based, came from a social accounting matrix specially constructed for this model, based on the year 2010.The carbon tax was modeled as an ad valorem tax under two scenarios: tax on emissions from fossil fuels burned only by producers and tax on emissions from fossil fuels burned by producers and households. The abatement cost curve has shown that it is more cost-effective to tax only producers, rather than to tax both producers and households. This is due to the fact that when compared to the emission level observed in 2010, a 20% emission reduction will cause a loss in GDP of 2% and 2.3% respectively. Under the two scenarios, the tax value that could lead to that emission reduction is around 26 US dollars per ton of CO₂-equivalent. The most affected productive sectors are oil refinery, transport, and electricity — having a contraction between 7% and 9%. Analyzing the electricity sector by energy source, the production of electricity from fossil fuels will decrease by 11%, but electricity from renewables will increase by 43%. Electricity producers will pass the cost of the carbon tax to the consumer by increasing the price of electricity by 8%.The findings of this paper will allow policy makers to take better and more informed decisions, by providing a cross-sectoral analysis of the impact on the economy of reducing emissions by 20% by implementing a national carbon tax.     

Analysis of US renewable fuels policies using a modified MARKAL model

In this research we have modified the standard US MARKAL model to include a land resource base, corn stover and miscanthus feedstocks, and new cost information for biochemical and thermochemical conversion technologies. We then used this revised MARKAL model to estimate the impacts of four different policy and technology choice scenarios; 1) no government interventions in biofuel markets (no RFS or subsidies), 2) biofuels RFS targets are implemented, 3) no government intervention but technology that combines coal and biomass feedstocks is enabled, and 4) biofuels RFS targets are implemented and combined coal-biomass feedstocks are enabled. Some of the major conclusions are as follows:

• •By 2030, with no government intervention, corn ethanol reaches about 15 bil. gal.(57 bil. liters), and thermochemical biofuel reaches 13 bil. gal.(49 bil. liters) for a combined 28 bil. gal.(106 bil. liters) by 2030.
• •When the RFS is added to the reference case, there is a substantial increase in both corn ethanol and thermochemical biofuel (about 6 bil. gal.(23 bil. liters) total) in the early years when the RFS is binding.
• •When combined coal-biomass technology is enabled for the reference (market) case, there is a huge increase in thermochemical biofuel after 2020.
• •When the RFS is added to the case with combined coal-biomass technology, the main impact is in the early years when the RFS is binding.
• •The average cost of the binding RFS compared with the reference case is 33 ¢/gal.(9 ¢/liter) in 2015 and 12 to 14 ¢/gal. after that. For the coal-biomass cases, the cost is 24 ¢/gal.(6 ¢/liter) in 2015 and zero after that.
• •Corn stover is generally less expensive, and it is used exclusively in the early years. As production ratchets up substantially in 2025 or 2030, more dedicated energy crops are used.

We have demonstrated that the standard MARKAL results can be considerably enhanced by combining richer information on the land supply data from GTAP into MARKAL. Indeed, without use of this land supply data, MARKAL and other energy models cannot reliably be used for biofuels economic and policy analysis.     

Hydrogen production from biomass coupled with carbon dioxide capture: The implications of thermodynamic equilibrium

In this work we report on the consequences of thermodynamic equilibrium for hydrogen (_H2)$({\mathrm{H}}_2)$ generation via steam gasification of biomass, coupled with in situ carbon dioxide (_CO2)$({\mathrm{CO}}_2)$ capture. Calcium oxide (CaO) is identified as a suitable sorbent for CO₂ capture, capable of absorbing CO₂ to very low concentrations, at temperatures and pressures conducive to the gasification of biomass. The proposed process exploits the reversible nature of the CO₂ capture reaction and leads to the production of a concentrated stream of CO₂, upon regeneration of the sorbent. We develop a thermodynamic equilibrium model to investigate fundamental reaction parameters influencing the output of H₂-rich gas. These are: (i) reaction temperature, (ii) reaction pressure, (iii) steam-to-biomass ratio, and (iv) sorbent-to-biomass ratio. Based on the model, we predict a maximum H₂ concentration of 83%-mol, with a steam-to-biomass ratio of 1.5 and a Ca-to-C ratio of 0.9. Contrary to previous experimental studies, this maximum H₂ output is reported at atmospheric pressure. Model predictions are compared with an experimental investigation of the pyrolysis of pure cellulose and the reactivity of CaO through multiple CO₂ capture and release cycles using a thermogravimetric analyser, coupled with a mass spectrometer (TGA–MS). On this basis, we demonstrate the applicability of thermodynamic equilibrium theory for the identification of optimal operating conditions for maximising H₂ output and CO₂ capture.     

Energy from sugarcane bagasse under electricity rationing in Brazil: a computable general equilibrium model

In the midst of the institutional reforms of the Brazilian electric sectors initiated in the 1990s, a serious electricity shortage crisis developed in 2001. As an alternative to blackout, the government instituted an emergency plan aimed at reducing electricity consumption. From June 2001 to February 2002, Brazilians were compelled to curtail electricity use by 20%. Since the late 1990s, but especially after the electricity crisis, energy policy in Brazil has been directed towards increasing thermoelectricity supply and promoting further gains in energy conservation. Two main issues are addressed here. Firstly, we estimate the economic impacts of constraining the supply of electric energy in Brazil. Secondly, we investigate the possible penetration of electricity generated from sugarcane bagasse. A computable general equilibrium (CGE) model is used. The traditional sector of electricity and the remainder of the economy are characterized by a stylized top-down representation as nested CES (constant elasticity of substitution) production functions. The electricity production from sugarcane bagasse is described through a bottom-up activity analysis, with a detailed representation of the required inputs based on engineering studies. The model constructed is used to study the effects of the electricity shortage in the preexisting sector through prices, production and income changes. It is shown that installing capacity to generate electricity surpluses by the sugarcane agroindustrial system could ease the economic impacts of an electric energy shortage crisis on the gross domestic product (GDP).     

Energy taxation and the double dividend effect in Taiwan's energy conservation policy—an empirical study using a computable general equilibrium model

Faced with pressure from greenhouse gas reductions and energy price hikes, the Taiwan government is in the process of developing an energy tax regime to reflect environmental external costs and effectively curb energy consumption, as well as mitigate CO₂ emissions through an adequate pricing system. This study utilizes a CGE model to simulate and analyze the economic impacts of the draft Energy Tax Bill and its complementary fiscal measures. Under the assumption of tax revenue neutrality, the use of energy tax revenue generated for the purpose of reducing income tax is the best choice with double dividend effects since it will effectively stimulate domestic consumption and investment, and, consequently, mitigate the negative impacts of the distortionary tax regime. The double dividend effect is less significant, however, when the supplementary measures being used are for government expenditure. Nevertheless, all supplementary measures have effectively reduced energy consumption, which means they have delivered at least the first dividend—in the sense of CO₂ emissions control. It has been verified in this study that having adequate public-finance policy measures is the key to realizing the double dividend effect.     

Predicting the syngas hydrogen composition by using a dual stage equilibrium model

This paper presents an analysis of hydrogen syngas composition obtained by biomass gasification when simulated by a dual stage equilibrium model. The numerical model takes advantage of the carbon boundary point (CBP) concept to study the hydrogen production at maximum energetic and exergetic efficiencies. The numerical simulation was carried out using three large biomass residues available in Portugal: coffee husks, pine residues and vine pruning wastes. It was concluded that the three biomass substrates showed similar trends at different operating conditions and the vine pruning wastes showed the best hydrogen outputs. The computed results were also compared with pilot scale experimental data obtained for coffee husk residues. The numerical results differ from experimental data, but in both cases the hydrogen composition has similar changes taking into consideration the effect of different operating conditions. It was concluded that the hydrogen molar composition increases steeply with a steam to biomass ratio (SBR) below the CBP and with a slow rate above the CBP, up to an asymptotic value. Similar behavior was found considering the temperature effect on hydrogen production. It was also found that energy efficiency first increases with the SBR up to a maximum value and then decreases.     

Towards a low carbon growth in Mexico: Is a double dividend possible? A dynamic general equilibrium assessment

This paper simulates the medium- and long-term impact of proposed and expected energy policy on the environment and on the Mexican economy. The analysis has been conducted with a Multi-sector Macroeconomic Model for the Evaluation of Environmental and Energy policy (Three-ME). This model is well suited for policy assessment purposes in the context of developing economies as it indicates the transitional effects of policy intervention. Three-ME estimates the carbon tax required to meet emissions reduction targets within the Mexican “Climate Change Law”, and assesses alternative policy scenarios, each reflecting a different strategy for the recycling of tax revenues. With no compensation, the taxation policy would reduce CO₂ emissions by more than 75% by 2050 with respect to Business as Usual (BAU), but at high economic costs. Under full redistribution of carbon tax revenues, a double dividend arises: the policy appears beneficial both in terms of GDP and CO₂ emissions reduction.     

Methanol production by gasification using a geographically explicit model

Methanol mixed with 15% gasoline appears to be a viable alternative energy source for the transportation sector. Produced from gasification of certified wood coming from well-managed forests, its production could be considered as sustainable and the well-to-wheel emissions can be reduced significantly. The physical flows of the entire bio-energy chain consisting of harvesting, biomass transportation, methanol production by gasification, methanol transportation, and methanol distribution to the consumers are assessed and costs are estimated for each part of the chain. A transportation model has been constructed to estimate the logistic demands of biomass supply to the processing plant and to the supply of gas station. The analysis was carried out on a case study for the geography of Baden-Württemberg, Germany. It has been found that a typical optimal size for methanol production of some 130,000 m³, supplies about 100 gas stations, and the biomass supply requires on average 22,000 ha of short-rotational poplar, with an average transportation distance of biomass of some 50 km to the methanol processing plant. The methanol production costs appear to be most sensitive with respect to methanol plant efficiency, wood cost, and operating hours of the plant. In an area where biomass is spread heterogeneously, apart from the demand, the geographical position of the plant would appear to have a major impact on the final biofuel cost.     

Optimal real time pricing in an agent-based retail market using a comprehensive demand response model

In this paper, a weighted combination of different demand vs. price functions referred to as Composite Demand Function (CDF) is introduced in order to represent the demand model of consuming sectors which comprise different clusters of customers with divergent load profiles and energy use habitudes. Derived from the mathematical representations of demand, dynamic price elasticities are proposed to demonstrate the customers’ demand sensitivity with respect to the hourly price. Based on the proposed CDF and dynamic elasticities, a comprehensive demand response (CDR) model is developed in this paper for the purpose of representing customer response to time-based and incentive-based demand response (DR) programs. The above model helps a Retail Energy Provider (REP) agent in an agent-based retail environment to offer day-ahead real time prices to its customers. The most beneficial real time prices are determined through an economically optimized manner represented by REP agent’s learning capability based on the principles of Q-learning method incorporating different aspects of the problem such as price caps and customer response to real time pricing as a time-based demand response program represented by the CDR model. Numerical studies are conducted based on New England day-ahead market’s data to investigate the performance of the proposed model.     

基于CGE模型的东北亚能源互联网经济效益量化分析

东北亚地区的能源基础设施合作引起了很多学者的关注.大多数研究专注于该地区电网互联、可再生能源开发的技术可行性,而忽略了能源基础设施合作带来的社会和经济效益的定量分析.本研究使用可计算一般均衡模型来评估构建东北亚能源互联网的经济社会效益.主要模型工作包括 1)构建新的嵌套结构,2)通过计量模型估计化石和非化石能源发电替代...     

Analyzing slow drying in a porous medium placed adjacent to laminar airflow using a pore-network model

ABSTRACT

A novel unified implicit computational framework and a unique pore-to-cell meshing method is used to predict, by coupling the inside-drying outside-flow processes, the slow drying of a pore-network-represented porous medium placed adjacent to a laminar flow of air in a slit. The effects of numerical algorithms, spatial and temporal discretization schemes, and meshing methods in minimizing computational effort are studied. The numerical solutions of the outer and inner processes are tested against several benchmark studies. The external air velocity affects drying during the initial stages. The microstructure of the pore network (P-N is found to have a strong influence on drying.     

Hydrogen production and carbon dioxide enrichment using a catalytic membrane reactor with Ni metal catalyst and Pd-based membrane

We prepared a catalytic membrane reactor (CMR) by adopting a high-performance metal catalyst and Pd–Au membrane to investigate the possibility of hydrogen production concurrently with carbon dioxide enrichment (up to >80%) in a single-stage reactor from a simulated syngas of a coal gasification, via simultaneous WGS reaction and hydrogen separation process. The CO conversion was above 99% and the H₂ recovery was above 94% at del-P = 30 bar in a CMR. The best result for the concentration of the enriched CO₂ in the retentate side was 85.3% under the conditions of 350 °C, del-P = 30 bar and steam to carbon ratio of 2.0. These results show promise for a feasible simplified process able to achieve CO removal from a high-concentration CO mixture gas coming out of coal gasification via a water-gas shift reaction (WGS), to separate hydrogen and also to enrich CO₂ for pre-combustion capture and storage of CO₂ (CCS) in substitution for the conventional WGS and CO₂ separation stages in integrated gasification and combined cycle process integrated with CCS.