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 the effects of imposing a carbon tax on various carbon-emitting technologies in order to reduce CO₂ emissions. It also estimates the effects of a carbon tax in combination with subsidies. The problem can be formulated in terms of two-level mathematical programming. An algorithm is proposed and applied to estimate Japanese CO₂ emissions. The conditions under which energy-saving technologies would be selected are analyzed using various carbon tax rates and subsidies, and the reduction of CO₂ emissions is calculated based on the introduction of such technologies. It is found that a low carbon tax such as 3000 yen per metric ton of carbon (tC) is insufficient to stabilize CO₂ emissions at the 1990 level in Japan, and that a tax of 30000 yen/tC would be necessary. However, the proposed algorithm shows that total emissions in Japan in the year 2000 can be stabilized at the 1990 level with a tax of 3000 yen/tC if the tax revenues are used to subsidize the introduction of energy-saving technologies