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Dear all
I have been wondering if others have attempted modelling the grandfathering concept e.g. ETS were industries and power plants do receive free quotes.
I am asking as I are currently working with a taxation system on CO2 emissions were I intend to apply a tax system for the bottom 50 % of emission e.g. the industrial sector will have a general CO2 tax of 100 EUR/t, but to allow flexibility and potential short term benefits the bottom 50 % of emissions is excluded from paying a CO2 tax, this should in terms move some industries from coal to gas. The idea is then to reduce the 50 % share to 0 % linear towards 2050, that is more straight forward.
I have though of different structures, but all come to the same conclusion that it is not working or creates massive fuel tables.
1) One thing would be to have a VDA_FLOP attribute that measures on the relation between input/output flows e.g. a MAT commodity production based on the fuel input i.e. for each ton of coal a certain CO2 material is released
2) A FLO_EMIS attribute that as it works produces a ENV commodity e.g. CO2, but here I am not capable of applying different levels of tax levels based on the level of emissions (I tried creating a MICS process in the believe that this could be used for ENV commodities)
3) A fuel structure were the consumption of coal, gas and oils also produces a MAT commodity were I can introduce different levels of tax. But since I have 13 subsectors using industrial fuels, this would be significant change of the model structure and introduction of 13 individual fuel structures.
My question is properly if others have good experience with modelling this or know of any methodology/attributes, that either allows for case 1 or 2?
It could be that the question is more related to the ETSAP forum?
Best Regards
Mikkel
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I am not able to see the full picture here. You refer to ETS and say: "ETS where industries and power plants do receive free quotes.". But if they are allowed to trade with the allowances, then I think those industries and power plants are exposed to the same ETS prices, regardless of the quotas being free or not. In that case the only impact of the free quotas would be a much reduced total cost impact, but the optimal results would be the same, as the marginal cost would be the same. Such kind of free quotas would be easy to model.
However, I guess I must be missing something here. If it is indeed an emission trading system, can you explain the trading mechanism here? Maybe you mean that the free quotas should be allocated endogenously, such that individual firms might have an incentive to maintain emissions, in order to keep receiving free quotas also in the future?
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(27-05-2021, 07:58 PM)Antti-L Wrote: I am not able to see the full picture here. You refer to ETS and say: "ETS where industries and power plants do receive free quotes.". But if they are allowed to trade with the allowances, then I think those industries and power plants are exposed to the same ETS prices, regardless of the quotas being free or not. In that case the only impact of the free quotas would be a much reduced total cost impact, but the optimal results would be the same, as the marginal cost would be the same. Such kind of free quotas would be easy to model.
However, I guess I must be missing something here. If it is indeed an emission trading system, can you explain the trading mechanism here? Maybe you mean that the free quotas should be allocated endogenously, such that individual firms might have an incentive to maintain emissions, in order to keep receiving free quotas also in the future?
Hi Antti
Thanks for your reply.
I should have added that it is a kind of ETS system in which the existing plants would not be allowed to be trading their free quotas.
I am trying to implement a tax structure were a CO2 tax is applied for all emissions, but a company would be given freely half of their historical emissions. The idea is that the tax is not to be implemented until a certain level of emissions as been emitted, and thereby just impact the marginal emissions. if a company or subsector is capable reducing its emissions to 60 % of its historical emissions it only be taxed by the last 10 %. I hope to capture a bit better how industries might move to natural gas, as this could be replaced by a renewable gas.
My initial though were to create an emission that could go through one of two processes with different tax levels (with the free tax level just having an upper bound equal to half the historical emissions), till I realized it would not work like this, or is there a process set definition working with environmental commodities?.
That kind of tax structure is currently being debated in Denmark, and it could be interesting to see how it would influence the modelling results.
Best
Mikkel
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27-05-2021, 11:05 PM
(This post was last modified: 27-05-2021, 11:15 PM by Antti-L.)
Ok, thanks for clarifying my confusion.
> is there a process set definition working with environmental commodities?
I am not sure what you mean by "a process set definition working with environmental commodities", but processes can operate on environmental commodities like on other types of commodities, except for some certain special cases such as CHP process flows. In general, commodity types do not impose much any restrictions in TIMES. And sure, you could easily define a cost curve (or a tax curve) for emissions, with a number of steps, if that's what you mean...
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(27-05-2021, 11:05 PM)Antti-L Wrote: Ok, thanks for clarifying my confusion.
> is there a process set definition working with environmental commodities?
I am not sure what you mean by "a process set definition working with environmental commodities", but processes can operate on environmental commodities like on other types of commodities, except for some certain special cases such as CHP process flows. In general, commodity types do not impose much any restrictions in TIMES. And sure, you could easily define a cost curve (or a tax curve) for emissions, with a number of steps, if that's what you mean...
Aha Thanks Antti
Yes it sounds like what I am looking for.
Is the right approach to define the emission CO2 and then have different export processes, with different tax levels and bounds, having CO2 as an input?
Best
Mikkel
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(28-05-2021, 01:35 AM)MikkelBosack Wrote: (27-05-2021, 11:05 PM)Antti-L Wrote: Ok, thanks for clarifying my confusion.
> is there a process set definition working with environmental commodities?
I am not sure what you mean by "a process set definition working with environmental commodities", but processes can operate on environmental commodities like on other types of commodities, except for some certain special cases such as CHP process flows. In general, commodity types do not impose much any restrictions in TIMES. And sure, you could easily define a cost curve (or a tax curve) for emissions, with a number of steps, if that's what you mean...
Aha Thanks Antti
Yes it sounds like what I am looking for.
Is the right approach to define the emission CO2 and then have different export processes, with different tax levels and bounds, having CO2 as an input?
Best
Mikkel Thanks Antti
You pointed me in the right direction. I had managed to make a stupid mistake as misspelling OtherIndexes in the FLO_EMIS table I had made.
Best
Mikkel
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28-05-2021, 06:52 PM
(This post was last modified: 29-05-2021, 01:49 AM by Antti-L.)
> Is the right approach to define the emission CO2 and then have different export processes, with different tax levels and bounds, having CO2 as an input?
Well, if you need only two steps (zero and 100) such that the industrial sector will have a general CO2 tax of 100 EUR/t, but the bottom part of emissions is excluded from paying a CO2 tax, I think I would probably choose to use "soft" user constraints for each sub-sector having a free quota, as follows:
• Add a single process producing dummy commodities, one flow for each sub-sector and with a FLO_TAX
• Define a user constraint for each sub-sector and period, bounding the emissions to the free quota (reducing over time) plus the taxed dummy flow for that sector.
In that way the emission constraints for each sub-sector would be soft constraints, which would apply the 100 EUR/t tax only to emissions exceeding the free quota allocated for each sub-sector.
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(28-05-2021, 06:52 PM)Antti-L Wrote: > Is the right approach to define the emission CO2 and then have different export processes, with different tax levels and bounds, having CO2 as an input?
Well, if you need only two steps (zero and 100) such that the industrial sector will have a general CO2 tax of 100 EUR/t, but the bottom part of emissions is excluded from paying a CO2 tax, I think I would probably choose to use "soft" user constraints for each sub-sector having a free quota, as follows:
• Add a single process producing dummy commodities, one flow for each sub-sector and with a FLO_TAX
• Define a user constraint for each sub-sector and period, bounding the emissions to the free quota (reducing over time) plus the taxed dummy flow for that sector.
In that way the emission constraints for each sub-sector would be soft constraints, which would apply the 100 EUR/t tax only to emissions exceeding the free quota allocated for each sub-sector. Thanks Antti
I will follow your advice : 
Best
Mikkel
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