Implications of Electricity Market Integration and Renewable Electricity Development in the East Asia Region

Abstract

This thesis consists of four essays as follows. The first essay examines the socio-economic and environmental impacts of the integrated electricity market in the East Asia region on ASEAN countries. Using IRSAM analyses, the essay finds that if there is an increase in the electricity demand of China, an East Asian integrated electricity market may economically benefit several Southeast Asian countries but increase carbon emissions from the region. If the increase in electricity demand is in a country in Southeast Asia such as Indonesia and Vietnam, East Asian electricity market integration may not economically benefit most Southeast Asian countries. Furthermore, integration may not reduce carbon emissions from the region. The second essay investigates the impacts of renewable electricity development in the ASEAN countries by using IRSAM analyses. In particular, the essay compares the socio-economic and environmental impacts of increasing electricity generated from fossil fuels with electricity generated from renewable resources, namely wind, hydro and solar in the ASEAN countries. The findings show that developing renewable electricity can lead to higher GDP, higher positive spillover to non-energy sectors, and lower carbon emissions than developing electricity based on fossil fuels. However, the incidence of poverty in several ASEAN countries developing renewable electricity could be relatively higher than if they continue utilising fossil fuel electricity. The next essay explores the deployment of renewable electricity through the recycling mechanism of carbon tax revenue in three aspects: economic, distributive, and environmental impacts. The essay uses the IRSA-EA model and sets the carbon tax at one USD per tonne of carbon dioxide emissions. The findings show that recycling carbon tax revenue to indirect tax reduction for renewable electricity shrinks output in an economy. Further, this essay finds that the policy is progressive for Indonesia and the rest of ASEAN; regressive for China, India, Malaysia, Thailand, and Singapore; and relatively neutral for the Philippines and Vietnam. Recycling carbon tax revenue to subsidise renewable electricity consumption by households is only economically beneficial for India, and hence poverty incidence in India reduces. For Indonesia and the rest of ASEAN, poverty incidence rises mainly because of reduced government transfers to households. This essay finds that a household subsidy is regressive for Indonesia, Singapore, Thailand, and the rest of ASEAN; progressive for China, India, and Malaysia; and neutral for the Philippines and Vietnam. The last essay observes decarbonisation's economic, distributive, and environmental impacts using the closed-loop IRSA-EA model. The findings show that decarbonisation by subsidising renewable electricity development does not always reduce carbon emissions, mainly because of the change of industry structure in some East Asian countries. Also, providing subsidies for renewable electricity sectors implies that the government reduces their spending and, at the end, the country's gross domestic product declines. Poverty incidence reduces for most East Asian countries except for China and Malaysia. Providing new technology by retrofitting carbon capture and storage (CCS) technology into existing coal power plants reduces carbon emissions more effectively than subsidising development of renewable electricity and implementing carbon tax since coal is a high carbon intensity sector. However, most East Asian countries have a reduction in economic outputs, except for India. In terms of poverty, this essay finds a rise in poverty incidence for most East Asian countries. Finally, the last policy is carbon tax implementation. The policy leads to a reduction in carbon emissions. However, all economies shrink, and thus poverty incidence rises. Show more