Analysis on the energy pricing strategy with CO2 tax and its effect on mitigation of CO2 emission in total energy systems

Analysis of the effect of energy pricing strategy including CO₂ tax in an urban area, where total energy supply system is introduced, was performed. CO₂ tax has attracted much attention as a simple and effective measure to mitigate CO₂ emission, but the implementation of CO₂ tax may cause too much economic damage to energy consumers. In this paper, an energy pricing strategy, which includes implementation of CO₂ tax is considered to mitigate CO₂ emission more effectively with least economic damage. The effect of the strategy is evaluated by indexes of, (1) mitigation of CO₂ emission, and (2) economic profit or loss. Bottom-up energy models of consumers and suppliers were developed to calculate the energy supply and demand in the area. Both substitution elasticity and self-elasticity are considered in the models