Carbon tax

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Description: A tax on carbon leads to higher prices for carbon intensive fuels (such as fossil fuels), making low-carbon alternatives more attractive.
Is implemented in: Energy conversion, Energy demand, Climate policy

Associated policy response component

Component: Air pollution and energy policies
Page: Air pollution and energy policies/Policy issues

Effects of this policy intervention on components

Component: Energy conversion
Effect : A carbon tax will induce a transition from carbon intensive fuel to carbon low fuels. Since hydrogen and electricity are well suited for carrying carbon low energy, the production of hydrogen and electricity could increase.

Component: Energy demand
Effect : The higher fossil fuel prices result in a shift towards less carbon-intensive energy carriers and (assuming a higher overall energy price) more energy efficiency. There can also be changes in end-use technologies ( e.g. electric cars in the transport sector, blast furnaces with CCS to produce iron and steel).

Component: Energy supply
Effect : The energy supply will change from the use of carbon intensive energy carriers to the use of low/zero carbon energy carriers.

Component: Climate policy
Effect : In the climate policy component, the carbon tax leads to emission reductions via Marginal Abatement Cost (MAC) curves derived from the TIMER model.

Component: Emissions
Effect :

Component: Human development
Effect : Induces a transition from carbon intensive fuels to carbon low fuels, thereby also lowering outdoor air pollution. Lower air pollution reduces mortality rates through reduced incidence of lung cancer, cardiopulmonary diseases and acute respiratory infections