Long-term energy development strategies in Taiwan: Perspectives of a newly industrialized economy

Policy makers in so called newly industrialized economies (NIEs) are facing a difficult task in designing a long-range energy development plan. According to a recently released report by World Energy Council global energy demand will rise to 130% to 200% of 1990 consumption by the year 2020, despite enormous efforts to improve energy efficiency. On the other hand, the objective of Framework Convention on Climate Change (FCCC) is to stabilize greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. It is ambiguous whether the above two statements can enjoy harmonious co-existence. Taiwan, to be one of the NIEs, its long-term energy strategy is to achieve that dual goals of protecting the global environment while fueling a healthy economic growth. A government-supported research program places emphasis on the development of analytic tools for the assessment of technological options to build an efficient, cost-effective energy system. A dynamic, multi-period optimization model was constructed to evaluate various energy system development paths. Both currently utilized technologies and advanced technologies that may become available are considered. The model meets externally specified final energy sectoral demands while keeping the objective function minimal. For devising a practical program to control greenhouse gases emissions, relative advantages of the conventional regulation approach with incentive-based approaches are compared. The comparison is made by running the model using different objective functions. If the objective function is set to be the total system cost, emission caps are imposed as constraints to the control of greenhouse gases emissions in searching for the optimal solution. Alternatively, a composite objective function without constraints can be formed by combining the total system cost and a penalty function levied on greenhouse gases emissions. The former approach is to model the effects and costs of rigid emission regulations, and the latter is to simulate:economic instruments like carbon taxes. The differences in the total system costs obtained by these runs give an indication of the relative cost effectiveness, which is needed for the decision makers, in policy-making process.