Abstract

Despite rapid growth in the past few decades, biomass power development in China continues to face several barriers, such as a lack of supporting policies and core technologies. This study proposes the introduction of an environmental tax to promote biomass power technology development in China. We construct a dynamic input-output model to evaluate the effects and economic feasibility of an environmental tax, considering the interrelationships among China’s economy, energy and environment. The GDP is maximized as the objective function subject to greenhouse gas (GHG) emissions constraints and a series of socio-economic constraints. The model uses 2007 as the base year and 2020 as the target year. The simulation results illustrate that a 10 Yuan/tCO2e carbon tax is sufficient to stimulate biomass technology development, in addition to economic development and GHG emissions mitigation. According to the simulation, the total biomass power generation from 2007 to 2020 with the environmental tax will be 2,334 TWh, the annual growth rate of GDP will be 9 percent and the GHG emissions intensity will be 0.15 kgCO2e/Yuan, a 46.5 percent reduction compared with 2005 GHG emission intensity levels. Electricity substitution and industrial structure adjustment are two key approaches to achieve the optimization of economic development and GHG emissions mitigation in the model. Furthermore, the introduction of an environmental tax is shown to be economically feasible by the cost-benefit analysis.

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