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 :