Abstract: Medium size developing countries like Chile that commit to decarbonization goals need to carefully assess the trade-offs associated to their intensity and timing, since most of the technologies required will be absorbed, not produced, by these countries. A rapid expansion of renewables in the Chilean energy matrix, mostly thanks to exceptional solar and wind resources, combined with a rapid decrease in the cost of renewable energy technologies, intensified current policy debates to reduce the role of coal, which is the largest source of CO2 emissions in the generation mix. Recently, the main generation companies in Chile made a voluntary commitment to not invest in new coal projects that do not include carbon capture and storage systems. In addition, the Chilean government announced its plans to phase out coal plants completely by 2040. In this context, the aim of this research is to study the economy-wide and emission reduction impacts of different decarbonization paths in the Chilean power sector. For this purpose, we consider dynamic simulations using a new energy-oriented version of the Computable General Equilibrium Model (CGE)- General Equilibrium Model for the Chilean Economy (ECOGEM)-Chile which is soft linked to the bottom-up engineering energy model. The results show the major impacts under both the business as usual (BAU) scenario and the coal phase-out scenario. Additionally, the study discusses to what extent the ambitious decarbonization goals of the Chilean government are coherent with the current technological limitations.

Abstract: Carbon taxes have been proposed as a major instrument to mitigate carbon emissions and promote an energy transition to low carbon sources. However, its adoption remains politically challenging, particularly amid rising inflation and energy prices. Despite the need for more aggressive action on carbon mitigation to reach the Paris Agreement goals, few countries in Latin America have adopted carbon taxes and the tax levels are relatively low. A key concern for these countries, is to adequately assess the tradeoffs between stricter emission goals and the potential negative economy wide as well as sectoral and distributive impacts. In this context, in this paper we first propose a step by step approach to enhance an existing dynamic Computable General Equilibrium (CGE) model for Chile based on OECD's Green model. The contribution of this research is twofold. Firstly, emission factors are estimated and the development of the electricity sector is aligned with the expectations of decision makers. As a result, credible emission and energy sector development forecasts are generated by the model, that are in line with what policymakers expect to happen based on other bottom-up engineering models. Secondly, this baseline is then used in the CGE model to examine the use of a carbon tax to reach Chile's first Nationally Determined Contribution. The required tax level is determined together with CO2 emissions and the econo-mywide, sectoral and distributive impacts. The results allow concluding about the applicability of carbon taxes and possible complementary measures.