The Potential Role of Carbon Tax in Achieving the Paris Agreement Targets for a Developing Country: A Case Study of Sri Lanka

Abstract

This study assess the effect of carbon taxes on energy and emissions of the Sri Lankan energy sector during 2015-2050. Along with a Business As Usual (BAU) scenario, three alternative carbon price trajectories were considered. These scenarios have been proposed based on fifth Shared Socioeconomic Pathway (SSP5) to achieve the 2°C Paris target for Asia. The Carbon Price trajectories proposed by AIM/CGA, REMIND-MAgPIE and GCAM were considered. The energy-economic-environmental system was modelled using the AIM/Enduse model. It considered both energy supply and demand sectors. The results show that in the BAU scenario the GHG emissions are expected to increase from 19.8MtCO 2e in 2015to 106.2MtCO 2e in 2050. Out of three carbon tax scenarios the prices proposed by AIM/CGA has been the most efficient for reduction of GHG emissions as it could reduce final energy consumption by 26% and GHG emissions by 24% in 2050 as compared to BAU scenario.