Achieving CO2 reductions in Colombia: Effects of carbon taxes and abatement targets

Abstract

Available online xxxx JEL classification: H23 Q40 Q54 C61 C68 O57In this paper we investigate CO 2 emission scenarios for Colombia and the effects of implementing carbon taxes and abatement targets on the energy system. By comparing baseline and policy scenario results from two integrated assessment partial equilibrium models TIAM-ECN and GCAM and two general equilibrium models Phoenix and MEG4C, we provide an indication of future developments and dynamics in the Colombian energy system. Currently, the carbon intensity of the energy system in Colombia is low compared to other countries in Latin America. However, this trend may change given the projected rapid growth of the economy and the potential increase in the use of carbon-based technologies. Climate policy in Colombia is under development and has yet to consider economic instruments such as taxes and abatement targets. This paper shows how taxes or abatement targets can achieve significant CO 2 reductions in Colombia. Though abatement may be achieved through different pathways, taxes and targets promote the entry of cleaner energy sources into the market and reduce final energy demand through energy efficiency improvements and other demand-side responses. The electric power sector plays an important role in achieving CO 2 emission reductions in Colombia, through the increase of hydropower, the introduction of wind technologies, and the deployment of biomass, coal and natural gas with CO 2 capture and storage (CCS). Uncertainty over the prevailing mitigation pathway reinforces the importance of climate policy to guide sectors toward low-carbon technologies. This paper also assesses the economy-wide implications of mitigation policies such as potential losses in GDP and consumption. An assessment of the legal, institutional, social and environmental barriers to economy-wide mitigation policies is critical yet beyond the scope of this paper.

The Impact of Carbon Tax Application on the Economy and Environment of Indonesia

“…This study is equivalent to research conducted by Zhou et al (2011) using GTAP 6 indicating that the use of carbon tax in China will reduce the value of GDP. Similar results are also obtained by Calderón et al (2016) arguing that CO2 mitigation policy will reduce GDP and the domestic consumption. The decline of GDP is due to the amount of tax paid by producers that will increase the price of commodities.…”

“…The most attractive mechanism is the price-based mechanism, i.e. taxes such as the carbon tax where the payments are made per unit of CO2 emissions produced (Wei, 2014;Calderón et al, 2016;Lin & Li, 2011;Wesseh et al, 2017). A carbon tax means that controlling carbon price can directly decrease the level of emissions.…”

Energy technology roll-out for climate change mitigation: A multi-model study for Latin America

“…This uncertainty in the energy system transformation process yields important implications for the public sector: except when local circumstances so dictate, for instance because of a lack of certain energy resources at the national level or because of policies driven by local priorities, policy makers may not necessarily want to pick winners today, since we do not (yet) know in all countries what the optimal or most cost-effective GHG emissions abatement technology is (see e.g. the studies in this special issue on the specific cases of Argentina, Brazil, Colombia and Mexico, by Di Sbroiavacca et al, 2016;Lucena et al, 2016;Calderon et al, 2016;respectively Veysey et al, 2016). Important though is to implement stringent policies that can stimulate the market to decide which emission reduction and technology deployment path to optimally take given locally pertaining circumstances.…”

“…the type of energy technologies deployed; we find that a comparison between the two yields little additional insight for the ways in which climate change mitigation can be implemented, so that we only show results for the former in one instance and restrict ourselves to inspecting the High CO 2 price scenario in all other cases. The Low CO 2 price scenario yields a CO 2 emission pathway that is only somewhat (typically around 10%) below the one we find for the Core baseline scenario (while the technology mix and diffusion trends remain largely unaltered), which constitutes another reason for leaving a more detailed inspection of the Low CO 2 price scenario to several of the country-specific papers in this special issue (that includes studies on Argentina (Di Sbroiavacca et al, 2016), Brazil (Lucena et al, 2016), Colombia (Calderon et al, 2016) and Mexico (Veysey et al, 2016) The characteristics of the models we use determine to significant extent the nature of their outcome. In Table 1 we therefore summarize the main features, representations and assumptions of the six models employed in our cross-model comparison study, in an attempt to clarify some of our findings.…”

Towards Sustainable Production: The Case of the Manufacturing Industry in Colombia and México

“…Uncertainty in final energy prices once renewable energies are in place, high investment prices, long periods of capital recovery, and low competition for trade are alienating the private sector, and only the government or public enterprises can take the risk of these investments. Regarding the contribution to sustainability, Colombia is a country with low greenhouse gas (GHG) emissions compared to other countries in the region, due to its low energy consumption and its high clean electricity production (hydropower represents 76% of the total of energy generation); but sustained economic growth, high incomes and the stability of the country are expected to lead to increased demand for fossil fuels (Calderón, Alvarez, Loboguerrero, Arango, Calvin, Kober & Fisher-Vanden, 2016). According to interviews carried out by Bendiciones and Mendoza (2010) to 17 players in the value chain of palm oil, the government has implemented strategies for the development of specific subsectors of biomass in order to attract international investment, which in turn contribute to stable income and employment in vulnerable communities in the country that benefit from their production.…”