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Tax credits implementation for low-carbon technologies

I have a question about implementing tax credits (as a policy intervention) to promote low-carbon technologies over the conventional emission-intensive technologies. Our case study includes ammonia production industry with the aim of achieving net-zero emission by 2050 through implementing several low-carbon technologies (steam reforming+CCUS, water electrolysis, ...). As a relevant policy intervention, we want to evaluate the role of legislated tax credits to be applied to low-carbon technologies: this policy says facilities/technologies with emissions lower than 0.7 ton-CO2/ton-ammonia can be eligible for tax credits of 100$/ton-ammonia up to 500$/ton-ammonia (depending on the level of their emissions). This tax credit can be applied only to facilities that begins construction before 2032 and it can be received for 10 years after the facility starts operation. To implement this tax credit in our model for low-carbon technologies, we have added the corresponding tax credits (defined in terms of $/t-ammonia) as variable operating costs but in the negative form (e.g., the tax credits of 100$/ton-ammonia is defined through considering the value of -100$/t for the VAROM entry of the target technology). In this way, the tax credits results in lower production cost for low-carbon technologies promoting their contribution compared to the case where not such a policy is implemented. However, we are not sure whether it is proper to define such tax credits as variable operating cost in the model. Does using this attribute sound reasonable for this purpose?
Besides, we have difficulty in defining the conditions required for this policy which we would be grateful to have you advise on: 
How we can specify that this tax credits can last only for 10 years from the start of the technology operations and then will be removed for the rest of the technology's lifetime?

Your advise on these points would be highly appreciated. Thanks.


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Tax credits implementation for low-carbon technologies - by jabarivelisdeh - 01-03-2023, 11:22 AM

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