Using system dynamics approach to analyze the impact of carbon tax on photovoltaic systems installation and electricity costs

In promoting the renewable and sustainable energy installation, carbon taxation is one of the commonly applied policies in controlling the fossil fuel energy consumption and production, particularly in the type of fossil fueled energy. Carbon tax is levied based on the quantity of carbon dioxide generated during energy production and consumption. Therefore, how to decide a reasonable tax rate is a critical issue for governments when setting an executable tax bill. This research uses System Dynamics (SD) approach to evaluate the influence of carbon tax on the installation of PV systems and the effects on electricity costs. Meanwhile, the decision analysis of the taxation allocation on supporting renewable energy (in our case study, the photovoltaic) system is conducted. The SD qualitative and quantitative models are built based on several realistic scenarios using Taiwan´s national data to evaluate the achievement and benefit of the carbon tax policy. These results are valuable references for government energy policy makers globally with respect to developing country-specific carbon tax framework and subsequently promoting photovoltaic systems as effective renewable energy solution.