Author:George J. Y. Hsu, King-Min Wang and Ting-Wei Kuo

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ABSTRACT There is growing concern that increasing accumulation of certain gases in the atmosphere is leading to undesirable changes in the global climate, such as the greenhouse effect. This has resulted in proposals to set physical targets for reducing emissions of gases which cause the global warming. CO2, CH4, CFC11, CFC12, and N2O are the major greenhouse gases. In June 1992, the Framework Convention on Climate Change was signed in Rio de Janeiro by more than 150 countries in order to promote international cooperation for achieving such reductions International trade plays a critical part in Taiwan’s economic growth. Therefore, Taiwan must pay close attention to the issue of global environmental change. The Taiwan government may initiate in the foreseeable future relevant policy actions to fulfill its global responsibility to reduce the production of those gases which contribute to the greenhouse effect. With this background in mind, it is important to understand the simulated impact of domestic measures to reduce greenhouse gas emission on Taiwan’s economy. The main purpose of this paper is to establish an integrated model simulating the environmental, energy, and economic systems of Taiwan and to formulate strategies for mitigating greenhouse gas emissions. In order to achieve this objective, a modified MACRO model is constructed to evaluate feasible policies for mitigating greenhouse gas emissions for Taiwan. According to the simulation of this study, there are 6 scenarios for modeling strategies such as carbon tax, CO2 direct control, increasing domestic consumption of LNG and improving energy efficiency. The empirical results show that CO2 emission direct control is the most effective strategy in terms of mitigating CO2 emission, followed by improving energy efficiency, carbon tax policies and increasing domestic consumption of LNG, respectively. Also, multiple policies such as improving energy efficiency plus carbon tax are more effective than improving energy efficiency combined with increasing LNG consumption or any single policy alone. It should be noted that the influential consequences of the above-mentioned CO2 mitigation policies are subject to the parameters used in the model. For those values beyond or under the predetermined parameters, the effectiveness of various CO2 mitigation regulatory policies may change. The reduction costs of scenarios show that the cost of increasing LNG consumption is higher than that of any other mitigation measures. On the other hand, improving energy efficiency plus carbon tax will be the most cost-effective. The policy implication from the simulation results indicates that the Taiwan government can not rely on any single regulatory measure to achieve the CO2 mitigation target. Only adapting compound polices can reduce the impact of mitigating CO2 emission on Taiwan’s economy. Finally, this paper presents some policy recommendations for the consideration of government’s relevant decision-making. Keywords: Greenhouse gases, CO2 emissions, global warming, carbon tax, energy efficiency