INTRODUCTION

Carbon tax is one of the effective carbon pricing mechanisms for emission reduction in large-scale systems. It has been used in almost 40 countries & states. However, designing the carbon tax properly remains the challenge where the government or any decision-makers have to choose at least 3 key factors namely Tax Rate, Escalation Rate, and Revenue Recycling.

Main challenges are 1) It will influence the energy system as a whole including the uncertainties. 2) It has a significant impact on sustainability. The objective of this study is to provide a systemic framework for designing a sustainable carbon tax policy optimally under conflicting sustainability performance.