On Carbon Taxes Effectiveness to Induce a Clean Technology Transition: An Evaluation Framework Based on Optimal Strategic Capacity Planning

TL;DR

This paper presents a new framework using mixed integer linear programming to evaluate how effectively carbon taxes promote a firm's transition to cleaner production, considering strategic capacity planning and various operational factors.

Contribution

It introduces a comprehensive MILP model that jointly considers machine replacement, workforce planning, and maintenance to assess carbon tax effectiveness.

Findings

Carbon taxes alone may not induce clean technology transition.

Effectiveness depends on technology relationships and demand levels.

The framework provides a detailed evaluation method for policy impact.

Abstract

This paper studies carbon taxes effectiveness to induce a transition to cleaner production when a firm faces different technologies and demands. To determine carbon taxes effectiveness, we propose a framework based on a strategic capacity planning under carbon taxes model, that consider proper perfomance measures. The model, which is formulated as a mixed integer linear problem (MILP), considers issues that previous work have not studied jointly, such as machine replacement, workforce planning, and maintenance. The effectiveness measures consider levels of clean production and periods to reach a technological transition. Our computational experiments, based on a real case, have shown that carbon taxes by themselves do not necessarily induce a transition to clean production, since their effectiveness depends on the available technology relationship and the demand magnitude.