A novel framework for evaluating the impact of carbon subsidies and taxes on Africa’s energy industry using optimization modelling

Low-carbon development is a sustainable model characterized by low energy consumption, pollution, and low emissions. Although developed countries have provided many reference practices in low-carbon development, African countries encounter challenges in the implementation process due to poverty and a lack of appropriate decision models regarding low-carbon policy. This paper uses an optimization algorithm to confirm a better low-carbon development mechanism from carbon subsidies or taxes. This paper develops two optimization models for comparative analysis of the impact of carbon subsidies and carbon taxes under price caps for a low-carbon investment of firms and demand for energy products in Africa. The optimization model draws the following conclusions: (1) When the subsidy and carbon tax are low, the low carbon investment increases with the price cap; when the subsidy and carbon tax are high, the low carbon investment decreases. (2) A carbon subsidy is more suitable for higher-carbon abatement investment firms, and carbon taxes are more suitable for lower-carbon technology investment firms under a single policy environment. Policymakers can use these findings to develop and implement carbon pricing regimes that effectively encourage reduced carbon emissions.