Development of an end-use model for analyzing policy options to reduce greenhouse gas emissions

An end-use energy model is presented for assessing policy options to reduce greenhouse gas emissions. This model evaluates effects of imposing a carbon tax on various carbon-emitting technologies for reducing CO2 emissions. It also estimates effects of combining a carbon tax with subsidies. The problem can be formulated as two-level mathematical programming. An algorithm is proposed and applied to estimate Japanese CO2 emissions. The conditions under which the energy-saving technologies would be selected are analyzed with different carbon tax rates and subsidies. The reduction of CO2 emissions is calculated based on the introduction of energy-saving technologies. It is found that to stabilize CO2 emissions in the 1990 level in Japan, 30,000 yen per ton carbon (tC) is necessary and it is difficult to stabilize CO2 emissions with a low carbon tax, such as 3,000 yen/tC. The proposed algorithm shows that the Japanese total emission in 2000 can be stabilized at the 1990 level with 3,000 yen/tC if tax revenues are used to subsidize the introduction of energy-saving technologies.