Z factors and other issues

1. Z factors and other issues Andrew Marquard

21. Regulatory and other issues • How does the tax get passed through? • Electricity – should be passed through 100% (with possible exceptions of the system operator); key problem is exemption for downstream EITE electricity users – not obvious that they would benefit now? • Liquid fuels – tax on carbon content of fuels can be added to current system. But current regulatory system does NOT accommodate passing the the tax incurred by manufacturers on, and should not unless the price is deregulated. • New vs existing infrastructure – no distinction at the moment. Should be a focus on a transition – reducing implementation impacts while encouraging investment in lower-carbon capital stock. • Electricity sector – current levy (per kWh) will not incentivize natural gas. • “Double taxation” – e.g. electricity: • Sectoral policy / regulation, etc – IRP is NOT an emissions regulation instrument – carbon budget issue – rigorous budget approach would give rise to real alternatives • Other factors also involved in choice of power mix, so not a straightforward comparison / conclusion • Different goals – long-term vs technology measures etc • Reporting – requirements for the tax will be significantly different from requirements for the national inventory, unless the tax has a very simple design (which it does and probably will not)