Optimizing Generation Expansion Planning Through Carbon Pricing for Sustainable Energy Transition in Bangka Island

This study examines the role of carbon pricing mechanisms in optimizing Generation Expansion Planning (GEP) for Bangka Island, a key region within Indonesia's energy and climate framework, which houses 79 of the Bangka Belitung Province's population. Using a Mixed-Integer Linear Programming (MILP) approach, the GEP model evaluates economic and environmental impacts under three scenarios - Business-as-Usual (BAU), Emission Trading System (ETS), and Carbon Tax (CT) - spanning the period from 2023 to 2050. The BAU scenario projects a significant increase in CO2 emissions, rising from 362,160 tCO2 in 2023 to 1,746,459 tCO2 by 2050, with fossil fuels continuing to dominate the energy mix and renewable energy adoption remaining minimal. Total costs steadily increase to USD 116.8 million, underscoring the risks associated with inaction on climate policies. In contrast, the ETS scenario achieves a renewable energy share surpassing the 30.97 target for 2050, reducing emissions to 1,501,650 tCO2, with total costs reaching USD 139.1 million by 2050. The CT scenario demonstrates further emissions reductions, lowering emissions to 1,474,163 tCO2 by implementing progressively rising carbon prices, starting at USD 2/tCO2 in 2023 and reaching USD 90/tCO2 in 2048. However, this scenario incurs the highest total cost of USD 262.4 million by 2050, reflecting the financial challenges of transitioning to low-carbon technologies. These findings highlight the complementary strengths of ETS and CT in balancing economic efficiency and environmental sustainability. The study provides actionable insights for policymakers, supporting Indonesia's efforts to exceed its Paris Agreement commitments and achieve Net Zero Emission (NZE) targets by 2060 or earlier.