Impact of Carbon Tax Flexibility on the Chilean Power System Expansion Planning

In this work it is described a methodology to design a minimum carbon tax to reach a specific CO₂ emission goal. The problem is solved as a bi-level optimization problem of an expansion planning model of the Chilean Power System. The effects over economic dispatch, generation and transmission expansion of the system are quantified. Results point out the implications of the trajectory over time of carbon taxes by analyzing single and two-stage taxes in a period of 10 years. Conclusions show that for two-stage taxes a minimum tax would be required for the first stage unless compensation schemes for anticipated emission savings are implemented.