Electricity tax subsidizing the R&D of emission-reducing technology: The double dividend effect under FIT regime

• The climate changes and sustainable development are critical problems in the world.
• We study the double dividend effect under the neutrality of tax revenue.
• According to our estimation, the double dividend effect exists.
• The appropriate scale of the electricity tax rate is NT$5.3105 per kW h.

The increasing attention paid to the problem of climate changes and the issue of sustainable development have led some studies to concentrate on the mitigation of energy depletion and environmental pollution through a tax policy. This paper employs the Stackelberg game model and numerical analysis to examine the double dividend effect in Taiwan’s electricity market by taking into account the neutrality of electricity tax revenue. According to our estimation, the appropriate scale of the electricity tax rate is NT$5.3105 per kW h. At this tax rate, the double dividend effect does exist and social welfare hits the maximum. The double dividend effect does not exist as long as the electricity tax rate is over the appropriate scale of the electricity tax rate.