The Effects Of Different Types Of Carbon Taxes On The Market Share Of Different Electricity Generation Technologies

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This paper examines the effects of different types of carbon taxes on the market share of different electricity generation technologies, particularly between renewable and fossil fuel generators. The Global Change Assessment Model (GCAM) was used for this analysis because it includes detailed representations of the technologies in the electricity sector. Given a constraint on emissions or a certain carbon tax, GCAM will determine the least cost methods of supplying energy in different sectors. We found that the share of low-carbon generation will increase as the carbon tax increases and the share of renewables generally increases with the implementation of a carbon tax. Additionally, the timing of renewable market share
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GCAM is a dynamic-recursive model that utilizes a solution algorithm that is based on a market equilibrium. It consists of three core modules: a) Energy, b) Agriculture and land-use, and c) Model for Assessment of Greenhouse-gas Induced Climate Change (MAGICC). “Regional population and labor productivity growth assumptions drive the energy and land-use systems employing numerous technology options” (JGCRI, n.d.). The “GDP is a simple labor-productivity model with an energy-GDP feedback elasticity” (JGCRI, 2014). Technology change is modeled using an autonomous energy efficiency index (AEEI) parameter.

The choice of generation mix of technologies in GCAM is based on a logit model, which includes the relative cost, logit exponents, and share weights of each technology. The logit approach controls the distribution of market share between technologies or fuels in response to price changes as represented by equation (1).
(1) Share(i) =swi .Ci-iswi .Ci- where Ciis the cost of the ith technology, swiis the share-weight of ith technology and is the logit exponent. A high valued logit exponent means that technology’s market shares are more responsive to changes in costs. The share weights are calibrated parameters based on the base
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