Environmental and Resource Economics

, Volume 5, Issue 2, pp 165–189 | Cite as

Impacts of an EC carbon/energy tax and deregulating thermal power supply on CO2, SO2 and NOx emissions

  • Knut H. Alfsen
  • Hugo Birkelund
  • Morten Aaserud


Emission of CO2, SO2 and NOx are all closely linked to the burning of fossil fuels. Here we report on simulations done by linking a Sectoral European Energy Model (SEEM), covering energy demand in nine Western European countries, with the emission-transport-deposition model RAINS developed by IIASA. The study analyses emissions of CO2, SO2 and NOx, deposition of sulphur and nitrogen and the extent of areas where the critical load for sulphur is exceeded in year 2000 under four different energy scenarios. Two different sets of future behavioural patterns for the thermal electric power production sector are considered. In one regime, called the plan-efficient regime, the sector is assumed to follow official plans with regard to investment in new capacity. In the other regime, called the cost-efficient regime, the thermal power sector is assumed to behave in a cost minimizing manner. The effects of the proposed EC carbon/energy tax are studied under both regimes, giving rise to altogether four scenarios.

In both regimes the effect of the EC tax is to reduce emissions by between 6 and 10 per cent in year 2000 relative to the scenarios without the tax. A change of regime, from the regulated, plan-efficient regime to the market-based, cost-efficient regime, will, by itself, reduce emissions of CO2 and NOx by approximately 3 per cent, while SO2 emissions are reduced by 13 per cent. The EC tax will reduce sulphur deposition by more than 5 per cent in the nine model countries under the plan-efficient regime. A change of regime further reduces the total deposition by 9 per cent. The area where depositions exceed the critical load is reduced by approximately 6 per cent in year 2000 by the tax in both regimes. Changing from the plan-efficient to the cost-efficient regime has a similar impact.

Although the emission reductions due to the EC tax may seem modest, they are shown to have a sizeable effect on the technological abatement costs of reaching targets like those prescribed in the Sofia protocol on the stabilisation of NOx emissions, and the Helsinki protocol on SO2 emission reductions. This is part of what can be considered to be secondary benefits of the EC carbon/energy tax.

Key words

Carbon tax emissions to air power supply 


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Agostini, P., M. Botteon and C. Carraro (1992), ‘A Carbon Tax to Reduce CO2 Emissions in Europe’,Energy Economics 14(4), 279–290.Google Scholar
  2. Alcamo, J., R. Shaw and L. Hordijk (eds.) (1990),The RAINS Model of Acidification. Science and Strategies in Europe, Kluwer Academic publishers, Dordrecht.Google Scholar
  3. Alfsen, K. H., A. Brendemoen and S. Glomsrød (1992), ‘Benefits of Climate Policies: Some Tentative Calculations’, Discussion Paper no. 69, Statistics Norway, Oslo.Google Scholar
  4. Bartlett, S., J. Dagsvik, Ø. Olsen and S. Strøm (1987), ‘Fuel Choice and Demand for Natural Gas in Western European Households’, Discussion Paper no. 23, Statistics Norway, Oslo.Google Scholar
  5. Berniaux, J.-M., J. P. Martin, G. Nicoletti and J. Oliveira Martins (1991), ‘The Costs of Policies to Reduce Global Emissions of CO2: Initial Simulations with GREEN’, Working paper no. 103, OECD Department of Economics and Statistics, Paris.Google Scholar
  6. Birkelund, H. (1990), ‘Energietterspørsel i vest-europeiske industrisektorer’ (‘Energy Demand in Western European Manufacturing Sectors’), thesis for the graduate exam in economics, University of Oslo, Oslo.Google Scholar
  7. Birkelund, H., E. Gjelsvik and M. Aaserud (1993a), ‘Carbon/Energy Taxes and the Energy Market in Western Europe’, Discussion Paper no. 81, Statistics Norway, Oslo.Google Scholar
  8. Birkelund, H., E. Gjelsvik and M. Aaserud (1993b), ‘Effects of an EC Carbon/Energy Tax in a Distorted Energy Market’,Economic Survey 3/93, 20–27.Google Scholar
  9. Chern, W. S., A. Ketoff, L. Schipper and J. S. Rose (1983), ‘Residential Demand for Energy: A Time-Series and Cross-Sectional Analysis for Eight OECD Countries’, unpublished paper, Lawrence Berkeley Laboratory, Berkeley.Google Scholar
  10. Dahl, C. (1986), ‘Gasoline Demand Survey’,The Energy Journal 7(1), 67–82.Google Scholar
  11. Dargay, J. (1990), ‘An Econometric Analysis of the Demand for Oil Products’, in R. Bacon, M. Chadwick, J. Dargay, D. Long and R. Mabro (ed.),Demand, Prices and the Refining Industry, Oxford University Press, Oxford.Google Scholar
  12. DRI (Data Resources Institute) (1990a, 1991), ‘County Reports’, DRI/McGraw-Hill, Lexington.Google Scholar
  13. DRI (Data Resources Institute) (1990b),Green Europe: Economic Implications & Business Opportunities, DRI/McGraw-Hill, Lexington.Google Scholar
  14. Eidhammer, O. (1984), ‘Kostnadsstruktur ved lastebiltransport’ (‘Cost Structure in Freight Transport on Roads’), Project Report, Institute for Transport Economics, Oslo.Google Scholar
  15. Elkraft/Elsam (1990), ‘Vurdering af teknologi til el.-og kraftvarme produksjon’, bakgrunnsrapport nr. 3 til ENERGi 2000.Google Scholar
  16. ETSAP (Energy Technology Systems Analysis Program) (1991),Guidelines for Common Scenario Submissions, ETSAP, Petten.Google Scholar
  17. Europe Information Service (1992), ‘Strategy adopted on May 13, 1992 by the European Community to reduce the Carbon Dioxide Emissions in the European Community’, supplement toEuropean Report no. 1769, Brussels.Google Scholar
  18. Haug, A. K. (1992), ‘Nordiske husholdningers energietterspørsel’ (‘Energy Demand in Nordic Households’), thesis for the graduate exam in economics, University of Oslo, Oslo.Google Scholar
  19. IEA (International Energy Agency) (1988, 1990, 1991),Energy Policies And Programs of IEA Countries, IEA, Paris.Google Scholar
  20. IEA (International Energy Agency) (1992),Electric Supply in the OECD, Annex 9, IEA, Paris.Google Scholar
  21. Manne, A. and R. Richels (1991), ‘Global CO2 Emission Reductions — The Impacts of Rising Energy Costs’,The Energy Journal 12(1), 87–107.Google Scholar
  22. NOS — Norwegian Official Statistics (1980), ‘Eie og bruk av privatbil’ (‘Ownership and Use of Private Cars’), Statistics Norway, Oslo.Google Scholar
  23. NOU (1992), ‘Mot an mer kostnadseffektiv miljøpolitikk i 1990-årene’ (‘Towards a More Cost-Efficient Environmental Policy in the 1990s’, Norges Offentlige Utredninger 1992: 3, Statens forvaltningstjeneste, Oslo.Google Scholar
  24. Sandnes H. and Styve H. (1992), ‘Calculated Budgets for Airborne Acidifying Components in Europe’, Meteorological Synthesizing Centre — West, The Norwegian Meteorological Institute, Oslo.Google Scholar

Copyright information

© Kluwer Academic Publishers 1995

Authors and Affiliations

  • Knut H. Alfsen
    • 1
  • Hugo Birkelund
    • 1
  • Morten Aaserud
    • 1
  1. 1.Research DepartmentStatistics NorwayOsloNorway

Personalised recommendations