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 Rosa
AU - Xylia, Maria
AU - Syri, Sanna
AU - Silveira, Semida
PY - 2018
Y1 - 2018
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 - Mexico
KW - Carbon pricing
KW - Electricity sensor
KW - Climate policy
KW - Energy systems analysis
KW - Political feasibility
U2 - 10.1016/j.enpol.2018.07.010
DO - 10.1016/j.enpol.2018.07.010
M3 - Journal article
SN - 0301-4215
VL - 122
SP - 287
EP - 299
JO - Energy Policy
JF - Energy Policy
ER -