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The Impact of a Carbon Tax on the CO2 Emissions Reduction of Wind

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  • Chi Kong Chyong
  • Bowei Guo
  • David Newbery

Abstract

Energy policy aims to reduce emissions at least long-run cost while ensuring reliability. Its effecacy depends on the cost of emissions reduced. Britain introduced an additional carbon tax (the Carbon Price Support, CPS) for fuels used to generate electricity that by 2015 added ꌘ/t CO2, dramatically reducing the coal share from 41% in 2013 to 6% in 2018. Policies have both short and long-run impacts. Both need to be estimated to measure carbon savings. The paper shows how to measure the Marginal Displacement Factor (MDF, tonnes CO2/MWh) for wind. The short-run (SR) MDF is estimated econometrically while the long-run (LR) MDF is calculated from a unit commitment model of the GB system in 2015. We examine counter-factual fuel and carbon price scenarios. The CPS lowered the SR-MDF by 7% in 2015 but raised the LR-MDF (for a 25% increase in wind capacity) by 18%. We discuss reasons for the modest differences in the SR- and LR-MDFs.

Suggested Citation

  • Chi Kong Chyong & Bowei Guo & David Newbery, 2020. "The Impact of a Carbon Tax on the CO2 Emissions Reduction of Wind," The Energy Journal, , vol. 41(1), pages 1-32, January.
    • Handle: RePEc:sae:enejou:v:41:y:2020:i:1:p:1-32
    DOI: 10.5547/01956574.41.1.cchy
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    References listed on IDEAS

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    1. Harrison Fell & Daniel T. Kaffine, 2018. "The Fall of Coal: Joint Impacts of Fuel Prices and Renewables on Generation and Emissions," American Economic Journal: Economic Policy, American Economic Association, vol. 10(2), pages 90-116, May.
    2. Richard Green & Nicholas Vasilakos, 2012. "Storing Wind for a Rainy Day: What Kind of Electricity Does Denmark Export?," The Energy Journal, , vol. 33(3), pages 1-22, July.
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