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Carbon tax or emissions trading?: An analysis of economic and political feasibility of policy mechanisms for greenhouse gas emissions reduction in the Mexican power sector
KTH, School of Industrial Engineering and Management (ITM), Energy Technology, Energy and Climate Studies, ECS. Department of Mechanical Engineering, Aalto University, School of Engineering, Aalto, Finland.
KTH, School of Industrial Engineering and Management (ITM), Energy Technology, Energy and Climate Studies, ECS.ORCID iD: 0000-0003-2896-8841
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2018 (English)In: Energy Policy, ISSN 0301-4215, E-ISSN 1873-6777, Vol. 122, p. 287-299Article in journal (Refereed) Published
Abstract [en]

This study provides a comparative assessment of carbon-pricing instruments for the Mexican electricity sector, contrasting a carbon tax with an emissions trading scheme (ETS). The assessment is performed in terms of economic impacts and political feasibility. Model-based scenarios considering different price and quantity levels are analyzed on Balmorel-MX, a cost optimization bottom-up model of the Mexican electricity system. The political feasibility is evaluated using an online survey and interviews with representatives of relevant stakeholder groups. The assessment suggests that an ETS is the most appropriate instrument for the Mexican case. We recommend to set the cap as 31% abatement in relation to a baseline, which is suggested to be 102 MtCO2 by 2030, given the business-as-usual baseline used as reference by the Mexican government (202 MtCO2) is found to leave cost-effective abatement potential untapped. An emission trading system with such design has higher cost-efficiency and lower distributional effects than a carbon tax at equivalent ambition level (15 USD/tCO2). The political feasibility analysis confirms the assessment, as it is in line with the priorities of the stakeholder groups, allows earmarking carbon revenue and avoids exempting natural gas from carbon pricing.

Place, publisher, year, edition, pages
Elsevier Ltd , 2018. Vol. 122, p. 287-299
Keywords [en]
Carbon pricing, Climate policy, Electricity sector, Energy systems analysis, Mexico, Political feasibility, Carbon, Commerce, Cost effectiveness, Economic analysis, Electric industry, Emission control, Gas emissions, Greenhouse gases, Systems analysis, Me-xico, Costs, carbon emission, electricity industry, emissions trading, energy market, environmental policy, feasibility study, greenhouse gas, political economy, pollution tax, Mexico [North America]
National Category
Energy Systems
Identifiers
URN: urn:nbn:se:kth:diva-236612DOI: 10.1016/j.enpol.2018.07.010ISI: 000447576700027Scopus ID: 2-s2.0-85050804343OAI: oai:DiVA.org:kth-236612DiVA, id: diva2:1264103
Note

Export Date: 22 October 2018; Article; CODEN: ENPYA; Correspondence Address: Pizarro-Alonso, A.; Energy Systems Analysis, Department of Management Engineering, Technical University of DenmarkDenmark; email: aroal@dtu.dk; Funding text: This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors. Authors would like to thank the Partnership Program between Denmark and Mexico for Energy and Climate Change, the Danish Energy Agency and EA Energy Analyses for introducing the Balmorel model in Mexico. In addition, authors would also like to thank Hans Ravn for the comments regarding Balmorel, and Samuel Cross for his guidance in the initial phases of this research. The authors would like to thank the anonymous reviewers for the valuable feedback provided. Appendix A. QC 20181119

Available from: 2018-11-19 Created: 2018-11-19 Last updated: 2018-11-19Bibliographically approved

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