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

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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. / Barragán-Beaud, Camila; Pizarro-Alonso, Amalia; Xylia, Maria; Syri, Sanna; Silveira, Semida.

In: Energy Policy, Vol. 122, 01.11.2018, p. 287-299.

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@article{2973a51cb8f245049aeffe696b2e787a,
title = "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",
abstract = "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.",
keywords = "Carbon pricing, Climate policy, Electricity sector, Energy systems analysis, Mexico, Political feasibility",
author = "Camila Barrag{\'a}n-Beaud and Amalia Pizarro-Alonso and Maria Xylia and Sanna Syri and Semida Silveira",
year = "2018",
month = "11",
day = "1",
doi = "10.1016/j.enpol.2018.07.010",
language = "English",
volume = "122",
pages = "287--299",
journal = "Energy Policy",
issn = "0301-4215",

}

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TY - JOUR

T1 - 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

AU - Barragán-Beaud, Camila

AU - Pizarro-Alonso, Amalia

AU - Xylia, Maria

AU - Syri, Sanna

AU - Silveira, Semida

PY - 2018/11/1

Y1 - 2018/11/1

N2 - 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.

AB - 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.

KW - Carbon pricing

KW - Climate policy

KW - Electricity sector

KW - Energy systems analysis

KW - Mexico

KW - Political feasibility

UR - http://www.scopus.com/inward/record.url?scp=85050804343&partnerID=8YFLogxK

U2 - 10.1016/j.enpol.2018.07.010

DO - 10.1016/j.enpol.2018.07.010

M3 - Article

VL - 122

SP - 287

EP - 299

JO - Energy Policy

JF - Energy Policy

SN - 0301-4215

ER -

ID: 27086086