Khóa luận tốt nghiệp: Impact of the carbon tax on the railway industry

This increases competition between therailway industry and low-cost airlines Dalla et al., 2017; Wang et al., 2017 Researchers around the world have been trying to find out the differenc

VIETNAM NATIONAL UNIVERSITY UNIVERSITY OF ECONOMICS AND BUSINESS

GRADUATION THESIS

IMPACT OF THE CARBON TAX ON THE RAILWAY INDUSTRY

Supervisor : MSc Luu Hanh Nguyen

Student : Phan Thi Diem Quynh

Class : QH-2019-E - TCNH - CLC4

ID code : 19050725

Ha Noi, March 2023

VIETNAM NATIONAL UNIVERSITY UNIVERSITY OF ECONOMICS AND BUSINESS

Faculty of Finance and Banking

IMPACT OF THE CARBON TAX ON THE RAILWAY INDUSTRY

SUPERVISOR : MSc Luu Hanh Nguyen

STUDENT : Phan Thi Diem Quynh - 19050725

CLASS : QH-2019-E - TCNH - CLC4

Ha Noi, May, 2023

CHAPTER I: INTRODUCTION -5scLHHHHHHHHH HH HH HH HH ghe ghiàu 9

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4.4 Additional AnaÌSÌS: «ch HH hư 40

I hereby declare that the graduation thesis: “Impact of the carbon tax on the railwayindustry” is my own research work The parts using references in the thesis have beenclearly stated in the references and cited according to the regulations of the faculty Thedata and results presented in the thesis are completely honest, if wrong, I will take fullresponsibility and bear all the discipline of the subject and the university

Supervisor’s Approval Student Hanoi, March 2023

Student

Phan Thi Diem Quynh

LIST OF ABBREVIATION

European Union

Fixed Effects Model

Gross domestic product

Renminbi

Statistical software for data science

a statistical database provided by theUnited Nations System

Variance Inflation Factor

World Development Indicators

Fixed Effects

LIST OF TABLES

Table 3.1: Description of variables

Table 4.1: Descriptive Statistics

Table 4.2: Matrix of Correlations

Table 4.3: Multicollinearity illustration from VIF coefficient

Table 4.4: Baseline analysis results from regression model

Table 4.5: Effect of carbon tax on fossil energy

The world entered the period ofindustrialization and modernization, making people's

lives more developed and convenient The means of transportation that are operated

every day allow people to move by machines at a speed many times faster than walking

on foot or rudimentary non-mechanical vehicles This realistically depicts modern lifewhen faced with the challenge of controlling carbon emissions into the environment on a

daily basis Efforts to reduce carbon emissions are chosen by countries around the world

by setting a carbon price The carbon tax policy is one of them Using the data table from

2010 to 2021, the following study analyzes the effect of carbon tax on the transportationindustry by FEM method in a regression model The results show that a carbon tax has thepotential to reduce goods transport in the rail industry This is an indirect expectation forreducing carbon emissions, creating incentives for environmental protection as well assustainable financial development

Keywords: Carbon tax, rail industry, goods transport, reduce carbon emissions

CHAPTER I: INTRODUCTION

1.1 The urgency of the topic

Increasing carbon emissions set off alarm bells for global warming This is a threat tothe living environment of humans and ecosystems from nature, leading to obstacles in thedevelopment of the economy (Parmesan and Yohe, 2003; Gleick et al.,, 2010) Carbonemission is created by burning energy such as coal, diesel, gas and gasoline, These types

of energy are the main fuels used in the transportation industry to serve the purpose

destination for passengers and goods According to a report by the International Energy

Agency (IEA) in March 2023, carbon dioxide emissions from coal increased by 1.6%, andfrom gasoline by 2.5% in 2022 Before that, in November 2022, at the COP27 ClimateSummit in Egypt, scientists said that carbon dioxide emissions from fossil fuels, the main

cause of climate change, are on the rise 1% in 2022 to hit an all-time high.

Carbon pricing is seen as a tool to reduce sustainable emissions and help the earth keep

average temperatures below 1.5 degrees Celsius Carbon tax - a form of carbon pricing

that operates on the basis of a taxing mechanism on the carbon content of fuels in theenergy and transportation industries Therefore, these industries can find the bestalternative fuel with low cost in the combustion process while helping to reduce carbonemissions to the environment (Anser et al.,2020) Implementing a carbon tax is a practicaland effective measure to reduce carbon emissions Currently in the world, there are manycountries that apply this tax such as France, Finland, Japan, Denmark, Norway, and thereality from other countries shows that there exists an important role of government

carbon tax policy in the process of reducing emissions (Zhoua et al.,2018; Pigou, 1920;

Al-Abdullah, 1999)

The transportation industry plays an important role for the national economy becausethe development of the transportation industry increases entertainment activities,

develops tourism and services, and bridges activities trade between countries The

efficient transport of passengers and goods will make society more and more modern

(Almins., Aidas and Grazvydas., 2009) Along with the rapid development of the

transportation industry, natural resources are gradually being consumed excessively,leading to environmental pollution and carbon emissions With long trips with a travelrange of thousands of kilometers in densely populated areas, rail and air transport are

often chosen by passengers to move or travel This increases competition between the

railway industry and low-cost airlines (Dalla et al., 2017; Wang et al., 2017)

Researchers around the world have been trying to find out the difference in carbon

emissions between the railway industry and the rest of the transportation industry.According to research by Sinan et al., (2020), rail transport has the potential to reduce theimpact of carbon emissions Meanwhile, some other scholars consider that the

construction of infrastructure has a significant influence on the development of the

transportation industry (Lee and Yoo, 2016), the railway system is evaluated as one of themost important infrastructures worldwide (Martinez et al., 2019), the construction andperiodic repair of railway infrastructure must also consume a large amount of energy,creating emissions into the environment (Raymond, 1998; Yan, Zhou and Xun.,2021)Besides, in practice there is still the fact that ignoring actual energy consumption orseparate consumption only reports overall consumption (Pablo et al., 2019) The lack of

data from the real world and the increasing demand for rail transport provide research

impetus for emissions reductions in this sector

Summarizing the issues mentioned above, | clearly see the urgency and necessity toprotect the Earth from global warming The transportation industry and carbon emissionsare always hot topics of all time Moreover, the railway industry is also a popular means

of transportation for long distances and the needs of passengers are increasing A suitablecarbon pricing tool is needed to measure carbon emissions from this transport sector.Therefore, this paper explores how the carbon tax policy has affected the transportationindustry: the railway industry

1.2 Research objectives

The objective of this research is to find out the impact of the carbon tax on the railwayindustry Given the high passenger demand for rail transport and the rail industry's

competition with the aforementioned low-cost airlines, the expected research objective

of this study is to explore the impact of carbon tax policy on the transport of goods andpassengers in the railway industry This will have indirect implications for reducingcarbon emissions into the environment every day Researchers have shown that thereexists a positive relationship between human travel needs and changes in carbonemissions.(Lakshmanan and Han., 1997; R Hickman et al., 2010 ; Zhoua et al.,2018) Ina

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recent study by Alexander and Christian (2022), the economic point of view is addressed

with the carbon pricing tool - a carbon tax becomes a suitable tool to reducetransportation in the transport sector thereby reducing emissions to the environment

To accomplish that research goal, the study will collect data including carbontax,railways goods and passengers, then will look at controls such as GDP, population,urban, employment , renewable, fuel import, CO2 emission and using quantitative

methods I will measure the impact of the carbon tax, first on goods, then on passengers

and finally on rail total (including goods and passengers) From there, I found out the

impact of the carbon tax policy on rail transport and combined it with previous references

to increase the objectivity of this study

1.3 Research questions

The main research question in this paper comes from the discussion of the above topic.What is the impact of a carbon tax on the movement of goods and passengers in the railindustry?

Today, high-speed rail using electric energy is quite common in the rail transport

network, especially in developed and developing countries The development of

high-speed railway is meant to greatly improve the convenience of people and increase theinterrelationship between cities in the country, boosting the economy of countries (Pablo

et al., 2019) However, although using electric power is much friendlier than coal or diesel

fuel, high-speed rail faces the idea that with daily travel frequency, average travel speed

is fast and Frequent stops at train stations will damage the railway constructioninfrastructure This means increased energy consumption and daily carbon emissions,

especially in densely populated areas.(Yan, Zhou and Xun.,2021) Besides, in the world,

countries are still using train networks using coal and diesel fuel - fossil energy sourceswith high carbon emissions when burned, including: Vietnam, Germany, Norway, Finland,

England,Africa Rail transport is assessed for its emission approach based on direct and

indirect factors.(Marko et al.,2019) Consumption of energy from coal, diesel, andelectricity is considered a direct factor Indirect factors are considered by railwayconstruction infrastructure, infrastructure maintenance over time, vehicle production,etc In which, in this research paper, I find out on the transport factor - an indirect factor

to the emissions of the railway industry

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1.4 Research scopes

This study focuses on studying the impact of carbon tax on rail transport in 28 countriesaround the world in the period from 2010 to 2021 The first country to apply a carbon tax

in the world was Finland in 1990, followed by Norway and Sweden with the introduction

of this tax in 1991 The carbon tax first appeared at the end of the twentieth century - the1990s, undergoing policy reforms and policy experiments, the remaining countries also

began to apply this tax and the period 2010- 2021 is the development period of a carbon

tax more than before, countries also apply this tax more commonly These countries are

both developed and developing countries, 2010-2021 is also the latest period This shows

the feasibility for the study of the topic.During the research process, the analysis of theimpact of the carbon tax on the transport of passengers and goods in the railway industrywas focused on Besides, the energy consumption factor and other factors such as gdp,population, urban, renewable fuel import are also considered by the study to perform data

analysis to increase the significance of this topic Between countries, there will be

different distribution of factors of population, economy and resources, the habit oftraveling by which means of transport is the main one, etc small to the behavior of using

trains as a means of transportation, therefore, the scope of this article is limited to a few

countries and for a certain period of time

1.5 Research methodology

Secondary data in the study were collected manually on the World Bank and UNDATA

-a site th-at provides -a d-at-a series b-ased on -a st-atistic-al d-at-ab-ase provided by the United Nations System These are all reliable data sources and are used by many articles for

research Based on the theory of econometrics of Gujarati (2011), the study uses a paneldata regression model and chooses the FEM model as the research model VIFmulticollinearity test was also used in this study Besides, the method of comparison,contrast, method of analysis and synthesis are the methods used throughout this article

1.6 Contribution of research

This study has certain contributions to the railway industry and sustainable

development literature as follows: The study implements an analytical method, measures

the interaction between carbon tax and the railway industry with control variables.control to expand the document for comparison on multiple fronts The research process

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uses a regression model, gives the results of table analysis, from which the data source

from the collected table can be expanded to compare with traffic emission control Thiscontribution is more meaningful when there are not many references to railway trafficemissions in the archives In terms of emissions reasons, railway emissions are oftenbehind road transport As a result, the emissions literature of this industry also ranksbehind road transport

1.7 Structure of the study

The study is divided into 5 parts The next part of the study presents the theoretical basis

and systematizes in general the source material from the previous research papers,including the contents of the theoretical basis, hypotheses and conclusions on thepotential for a carbon tax Section 3 describes the research methods used in the article

and the experimental results are given in section 4 Finally, the study provides analysis

and evaluation and gives conclusions and implications for the research topic

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CHAPTER II: LITERATURE REVIEW

2.1 Conceptual Framework

Existing literature discusses the emergence of carbon emissions in the transport ofgoods and passengers in the transportation industry The documents also show that thecarbon pricing or specifically the carbon tax policy brings outstanding advantages to theprocess of reducing greenhouse gas emissions, contributing to preventing climate changeand global warming The study has collected documents from a distance to near (time)

and wide to narrow (content) in order to have a more objective view of the research topic.

The document is divided into 3 main parts: The first part deals with the effect of carbontax on reducing transport emissions The second part describes the impact of the railwayindustry on carbon emissions into the environment And finally, part three presents the

theoretical basis for the impact of carbon taxes on the railway industry For example,

Zhoua et al., (2018) suggest that the carbon tax should be increased on fuels such as coaland that the carbon tax could be set at approximately 60 RMB/ton CO2 for road transport,and for railway, urban passenger, air and water transport is approximately 50 RMB/ton

C02

2.1.1 Carbon tax and its impact on carbon reduction

A carbon tax is seen as an effective carbon pricing tool in reducing carbon emissions By

levying a direct tax on fuels, energy when burned produces carbon, a carbon tax helps to reduce the demand for this energy source while also reducing the carbon content of the atmosphere This is also the topic that research focuses on in the process of referencing

the literature

Since the 2015 Paris Agreement on climate change, countries around the world havecompletely agreed with the urgency of the issue and set out appropriate carbon pricingtools for each country (Andrés et al ,2019) There is a relative abundance of literature on

this subject in the trove of references, which shows the enhanced environmental

consciousness and effectiveness of the recognized carbon-tax pricing tool

Since the end of the 20th century, a carbon tax has emerged and researchers have

previously had discussions about its effectiveness from the government (Paola et al.,

1992; Elizabeth et al., 1994) However, at this stage, the carbon tax has not been accepted

by the public, and it is believed that policy design should take into account the economic

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and technological situation at that time in each country.(Elizabeth et al.,1994;M Botteon

et al.,1993; A.Bruvoll and Bodil,2004; Jagers & Hammar, 2009) Continuity of protests and

no votes for the policy occurred and led to the abolition of this carbon pricing instrument

in several countries such as Australia, Washington State, France (Crowley, 2017; Carattini,Kall bekken, & Orlov, 2019; Willsher, 2018; Andrés et al.,2019) Discussions about thefairness and acceptability of a carbon tax policy were then taken seriously High-levelCommission on Carbon Prices (2017) provides a carbon price statement that revenueswill be used to fund climate-responsive public investments and will offset instances of anyinequitable effects In a study examining the effectiveness of equity, Bolderdijk et al.,(2017) found that the context of traffic congestion and automobile emissions reduced

public skepticism about the effectiveness of carbon tax Overall, public equity increases

policy acceptability while improving policy support and setting the stage for futureresearch and development.(Andrés et al.,2019)

The implications of a carbon tax are found especially in the energy and transportationsectors Carbon content is released into the atmosphere when fossil fuels are burned Acarbon tax measures this leakage and levies an appropriate tax on the production,

distribution, and consumption of fossil energy resources (Poterba, 1991; Lin and Li, 2011;

Baranzin et al., 2002; Yu et al.,2020) measured this influence in the electric powerindustry in China and suggested that the average carbon tax scenario in the study (carbontax reaches 210 yuan/ton in 2020 and growth over time, eventually reaching 910yuan/ton by 2050) can meet the reduction of carbon emissions and cost savings in thepower sector by increasing production costs, preventing some factories electricityproduced blindly, controlled source of high energy consumption from the development oftechnology Andrew (2017) also argues that a carbon tax encourages the use of renewableenergy in saving costs of using solar power instead of conventional electrical energy Astudy by Miroslav et al in 2019 discussed the environmental effects of carbon taxes in 5

EU countries where carbon tax has been in place for a long time including Sweden,Finland, Denmark, Ireland and Slovenia The results from the study show a positive signalfrom this carbon pricing policy, the carbon tax when applied in the energy industry hasgood environmental effects, the increased tax rate leads to a reduction in greenhouse gas

production, especially when this policy is applied longer term, its effectiveness is more

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appreciated than the emission subsidy trading system, which EU environmental policy

offers to promote air protection and fight climate change

For the transport industry, the importance of a carbon tax is mentioned many times inthis industry literature The carbon tax has had certain impacts on the transportationindustry including the road transport, water transport, rail transport and air transport.With carbon emissions always at a high level, the transportation industry is often

concerned with environmental issues In the case of developing countries, the example is

taken in Vietnam - a country that has not yet applied a carbon tax policy, the World Bank's

transport sector analysis report in 2019 shows that emissions are growing rapidly in this

sector The report shows the increased impact of total greenhouse gas emissions by thecontribution of the transport sector in Vietnam at 18% of total carbon emissions in 2014.Around the world, countries applying carbon tax have made the following achievements

in reducing carbon emissions in the transportation industry: In China, researchers saythat with the world's leading emissions from the transportation industry, the carbon taxpolicy has a clear effect in reducing emissions to the environment (Zhoua et al.,2018; Yan,Zhou and Xun.,2021; Li & Zhang, 2020) Hensher (2008) used TRUSIS - a strategic

environmental impact simulation program to assess the impact on carbon emissions

including carbon taxes Specifically, the study describes the impact of a carbon tax on theemissions of cars - a vehicle commonly used in the road industry, the results show thatwith an additional increase of $ 1.20/L for fuel, carbon tax increases car operating costs

by 26.95% and reduces car transportation, which has environmental implications.Besides, the effectiveness of the carbon tax is also mentioned for the remaining transportsectors (Gabriela, Jon and Ian.,2021; Anser et al.,2020; Dwyer et al.,2012; Fu et al., 2014)

In summary, the carbon tax policy has the potential to effectively reduce carbonemissions by providing economic incentives for businesses and individuals to decreasetheir carbon footprint The researches show that higher carbon tax rates are generallyassociated with greater emissions reductions, indicating a positive relationship betweenthe tax and carbon reduction efforts Studies suggest that higher carbon tax rates are morelikely to lead to significant emission reductions, especially when combined withsupportive policies such as renewable energy subsidies, energy efficiency programs, andresearch and development investments in low-carbon technologies Some industries,such as energy-intensive sectors, may experience a more significant reduction in

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emissions due to the higher cost of carbon-intensive activities Furthermore, the literature

emphasizes the importance of revenue allocation from carbon taxes By using therevenues generated from carbon taxation to fund climate-friendly initiatives, such as

renewable energy projects or public transportation infrastructure, the overall impact on

carbon reduction can be enhanced This approach not only provides financial support forlow-carbon solutions but also helps to mitigate any potential regressive effects of the tax

on lower-income households

2.1.2 Rail transportation and emissions problems

Direct carbon emissions from rail transport are less than in the rest of the industry.Even so, according to the United Nations Paris Climate Agreement from 2015 (UN, 2015),the EU's overall goal is to reduce greenhouse gas emissions from transport by 2050 to

60% lower than with the year 1990 (EEA, 2017) For the rail sector, the targets set by UIC

(International Union of Railways) and CER (Community of European Railways andInfrastructure Companies) with a target of a 50% reduction by 2030 (UIC, 2012) A report

by the European Commission in 2017 said that, of the total energy used by the transportindustry, 17% for goods transport and 8% for passenger transport are transported by therailways Therefore, the outstanding feature from this direct factor helps railwaytransport to be seen as an optimal long-distance vehicle Some studies suggest thatencouraging the transfer of vehicles from road to rail has a factor in reducing carbonemissions (Zhoua et al.,2018; Lombardi et al.,2017; Pablo et al., 2019) This also explainsthe fact that previous researchers have promoted the positive relationship of the railwayindustry and there is relatively little literature describing carbon emissions in thisindustry (Zhoua et al.,2018; Lombardi et al.,2017; Pablo et al., 2019)

However, this conclusion can not be decisive because every year the rail transportindustry still shows carbon emissions into the environment and the amount of carbonemissions from this industry is not the same between countries around the world.Furthermore, the study of Pablo et al., (2019) also found a research gap with the lack of

accurate data because of the actual energy consumption because only the overall consumption is known The policy of restructuring means should be carefully considered

with indirect effects instead of just paying attention to direct factors As emissions fromrail transport are relatively low, the relationship between railways and carbon emissions

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is demonstrated through fuel and indirect factors such as railway infrastructure

construction and maintenance regular infrastructure maintenance

Common fuels used in rail transport include coal, diesel and electric Coal and a host of

studies from the past show a negative impact on reducing carbon emissions acrossindustries.(Philipp et al.,2010; Andrew et al.,2012; V.R.G Chandran & Chor, 2013; Zhoua

et al,2018; Umer, Nicolas & Mehdi, 2021) Specifically, research by Umer, Nicolas and

Mehdi (2021) shows that increased coal demand means increased emissions By

calculating coal reserves, research from Philipp et al., (2010) determined that high-ash

coal ability to absorb carbon is relatively high This shows that when burning coal will

release a large amount of carbon emissions into the air In addition, a two-way causalrelationship in the short and long term was also found between coal consumption andcarbon emissions in the study of V.R.G Chandran and Chor (20130 in China and India

The consequences of carbon emissions from coal and environmental policies havecreated an innovation in the choice of fuel for the railway industry, in which diesel andelectricity are the two most popular fuels at the moment Diesel oil is evaluated as a fuelwith high performance, durability, reliability and low operating costs, attractingindividuals or businesses to put into use for production and transportation activities Atthis time, diesel oil has become one of the biggest contributors to environmental pollutionand affects human health.(Resitoglu, Altinisik & Keskin, 2015) In a study on the use ofdiesel in Murmansk - the world's largest city above the Arctic Circle by M.Evans et al.,(2015) showed a particularly pronounced impact as a climate agent of the Arctic by cloudformation and snow albedo Therefore, initiatives on changing fuels in the production anduse of engines from diesel to biodiesel encourage the use of energy sources that are moreenvironmentally friendly than the original fuel.(Homa et al,2019; MS Gad, Bahaa &Irfan.,2021; Liu et al.,2023) In general, diesel fuel has a negative impact on reducingcarbon emissions and adversely affects the living environment of people and the earth

Today's electric energy is often used mainly in high-speed railways, subways, etc A

study by Yu et al., (2020) found that the development of the economy and society increases the annual demand for electricity This makes the energy industry will still have

to depend on fossil energy sources to produce and use large-capacity engines It is apressure on the economy and the environment Power sources used by renewable energy

sources such as solar power, wind power, etc will be environmentally friendly and have

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a positive impact on reducing carbon emissions In contrast, with electricity produced

from fossil fuels, such as coal, and increased demand, it will cause an increase inemissions, causing an alarming situation of environmental pollution.(Timilsina and

Shrestha, 2009; Pablo et al., 2019)

In addition, the railway construction infrastructure system is also assessed for itsimpact on carbon emissions during construction, use and maintenance after a certain

period of time.(Chang and Kendall,2011; Pablo et al., 2019; Marko et al.,2019; Lee, Lee &

Chun,2020) The findings of Chan and Kendall (2011) indicate that the production of the

material comprises 80% of the total greenhouse gas emissions (2.4 million tons of carbon)

from the construction of high-speed rail infrastructure for the distance from SanFrancisco to Anaheim in California Marko et al., (2019) also built a module that coversthe railway construction infrastructure system: railway tracks, passenger terminals,energy transmission systems, telecommunications and operations civil engineering forestimating emissions with evidence in Korea The results from the study show that theconstruction of high-speed rail infrastructure emits greenhouse gases with a total

emission of 3.7 (metric tons of carbon), of which materials account for 92% of the total emissions This is one of the indirect factors that are often overlooked when measuring

carbon emissions in the railway industry

In summary, rail transportation faces significant challenges when it comes to emissionsproblems The use of fossil fuels, such as coal and electric energy, contributes toenvironmental pollution and climate change The studies highlight the importance ofconsidering various factors in assessing the emissions profile of rail transport Thesefactors include the type of energy used for electrification, operational efficiency,infrastructure development, and modal switching from more carbon-intensive modes oftransport Integrated approaches that combine electrification with efficiencyimprovement, renewable energy integration and modal integration can further enhancethe environmental performance of rail transport

2.1.3 Impact of carbon tax on railway industry

The railway industry plays a crucial role in transportation, contributing to economicgrowth and societal development However, it also faces significant challenges related toenvironmental sustainability, particularly in terms of carbon emissions The analysis of

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case studies, empirical studies and policy reviews from different countries to assess the

impact of carbon taxes on the railway industry The findings suggest that a carbon tax caneffectively reduce the use of fossil fuels, such as coal and diesel, by making them more

expensive and encouraging the adoption of energy alternatives cleaners, such as

electricity or renewable fuels

In practical terms, the carbon tax implements a direct tax on the use of fossil fuels such

as coal, oil and natural gas, which are the main source of carbon dioxide emissions The

goal of a carbon tax is to incentivize the use of cleaner energy sources and to reduce

greenhouse gas emissions Considered as the transport industry with low carbon

emissions and the most energy-efficient compared to the remaining transport industries,the railway industry is often mentioned by researchers with the transformation oftransport structure Therefore, there is not much literature discussing the direct impact

of the carbon tax on the railway industry, instead, indirect factors are mentioned by the

researchers and widen this research gap.

The impact of a carbon tax on the railway industry is likely to be less severe than onother industries that rely heavily on fossil fuels The report of the European CommissionJoint Research Centre (2019) examines the potential impact of a carbon tax on the railwayindustry in the EU This report suggests that the impact of a carbon tax on the railwayindustry is likely to be limited, given the sector's low emissions intensity However, thereport also highlights the potential for a carbon tax to incentivize railways to invest inelectrification and other low-carbon technologies This is explained by a carbon tax thatmay increase the cost of energy for the railway industry, but it may also incentivizecompanies to invest in cleaner, more energy-efficient technologies For example, railwaysmay consider electrification of their fleet, which would significantly reduce their carbon

Frederick and Cees (2012) and their research show that the best solution to limit carbon

emissions is to sharply increase the cost of a carbon tax on coal, in addition to increasingthe introduction of renewable energy by a carbon tax was also detected in this study In

a recent study by Jia, Wen and Sun (2022) described the effect of a carbon tax on reducing

coal consumption in China The energy consumption in China's major heavy industriestoday is still coal, and in any case, the source of carbon emissions is still coal consumption,the researchers say Appropriate policy research projects are launched and carbon tax isnot only found to have a positive relationship with the reduction of coal consumption, butcan also optimize the economic structure The literature suggests that a carbon tax couldhave a significant impact on the coal industry, leading to reduced coal consumption and

carbon emissions.

Diesel fuel is commonly used in rail transportation to power locomotives The impact of

a carbon tax on diesel fuel in the rail transport sector would depend on a range of factors,including the level of taxation, the availability of alternative fuels and technologies, andthe elasticity of demand for rail transport The effect of a carbon tax is mentioned in

studies on reducing emissions from diesel fuel (Govinda, Stefan & Simon, 2011; De, Kellyand Aykut, 2019; Jean and Maral, 2019) While Jean and Maral (2019) describe that a

carbon tax has the effect of reducing diesel consumption in a short time because peoplewill quickly adapt to price increases, Govinda, Stefan and Simon (2011) study ) suggeststhat a carbon tax has a negative impact on heavy industries, that is, a carbon tax reduces

the demand for fossil fuels The study also shows that a carbon tax makes more sense

when a part of the revenue from the carbon tax is used to subsidize biofuels, which is apositive sign for the application of renewable energy in life In summary, the impact of acarbon tax on diesel fuel in the rail transport sector would depend on a range of factors,including the level of taxation, the availability of alternative fuels and technologies, andthe elasticity of demand for rail transport The adoption of more energy-efficientlocomotives, the use of alternative fuels, and the optimization of train operations could allcontribute to reducing energy consumption and carbon emissions in the rail sector.Revenue generated from a carbon tax could be used to support the transition to cleanerenergy sources and to fund infrastructure improvements in the rail sector

The electricity industry has undergone changes after carbon tax policies from countriesaround the world encourage this industry when electricity production should be taken

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from renewable energy such as wind, solar, instead of using coal - Fossil fuels cause

heavy emissions to the environment The study by Yu et al., (2020) provides scenarios forthe increase of the carbon tax to investigate its impact on the electricity sector The results

show that the share of fossil energy consumption in total consumption will decrease,

while renewable energy has grown at different rates With a gradual increase in thecarbon tax, carbon dioxide emissions in 2050 will decrease to varying degrees according

to the scenarios presented in the study Chen and Tseng (2011) also agree that a carbon

tax can effectively trigger the adoption of clean technologies in the power sector It can beseen that the application of a carbon tax in the electricity industry has indirect positiveeffects on the railway industry A carbon tax might incentivize electricity producers to

shift towards cleaner and renewable energy sources Increased deployment of renewable

energy could result in a lower-carbon electricity grid, further reducing the carbonfootprint of electric rail systems

In summary, the literature through the analysis of effects with fuels used in the railwayindustry suggests that a carbon tax could have a mixed impact on the railway industry,

with both positive and negative effects In the context of the railway industry, which is already considered a relatively low-emission mode of transport, the impact of a carbon

tax may be relatively moderate compared to other sectors However, it can still influencethe industry by encouraging further emission reduction efforts, promoting energyefficiency measures, and potentially influencing investment decisions in cleaner

technologies Indirectly, the impact of a carbon tax on the railway industry is intertwined

with broader economic and policy considerations Furthermore, the impact of a carbontax on the railway industry can be influenced by interactions with other policyinstruments and measures aimed at promoting sustainable transport, such asinfrastructure investments, modal shift initiatives, and technological advancements.These interactions need to be carefully evaluated to ensure a coherent and effective policyframework

2.2 Empirical research

The documents referenced by the study mainly include topics related to the impact ofthe carbon tax on the railway industry, the emission factors in the railway industry andthe impact of the carbon tax on those factors at the same time the potential of a carbon

tax on the environment in the long run The study of Pablo et al., (2019) is the main

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research used in this study The study describes the optimization methods used to achieve

the efficiency of train traffic in the railway network The impetus from this study is thatthe calculation of carbon emissions in the railway industry has gaps in the actual datawhen measured from surveyors

Zhoua et al., (2018) studied the impact of carbon tax on the transportation industry inChina, the appropriate carbon tax rate proposed by the researchers for the railway

industry in this study is 50 RMB/ton of carbon Meanwhile, the study of Marko et al.,

(2019) has made findings on the sustainability of railway passenger services through

examining the aspects, problems, contributions and challenges of the railway sector life

cycle emissions of railways The researchers said that the analysis of emission factors inthe railway industry should be viewed from a direct and indirect perspective In addition,the indirect factor is also proven through the following 2 studies The study by Yan, Zhouand Xun.,(2021) analyzes the life cycle energy consumption and carbon emission patternsfor high-speed rail transport in China Through the study, the study makesrecommendations on the use of clean energy sources to realize the goal of reducingcarbon emissions in this country More specifically, Lee, Lee & Chun (2020) showed thedependence between greenhouse gas emissions and civil engineering works, especiallythe emission factor from the construction of railway infrastructure

By using coal, diesel and electricity as fuel, the railway industry has had certain negativeimpacts on the environment Philipp et al., (2010) commented that the use of coal willcause a large amount of carbon emissions to the environment because the high carboncontent is absorbed by high-ash coal and when burned creates emissions After coal, theinnovation of diesel fuel and electricity was also replaced, but the railway industry stillbrought a carbon footprint for these two fuels M.Evans et al., (2015) and their studydescribes the impact of diesel use on climate change in the Arctic According to research

by Yu et al., (2020), the fuel-chemical conversion process for example with the powerindustry will cause the formation of carbon dioxide content, a carbon tax is applied toaffect the primary energy source, helping limit this source of energy consumption andencourage the use of renewable energy in the electricity production process

In general, the literature assesses the effectiveness of the carbon tax in reducing thedemand for fossil energy sources and makes recommendations on the use of clean energy,

promoting sustainability, and contributing to environmental and climate objectives The

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carbon tax and its relationship to the rail industry are not only directly related to

operating fuel, but also indirectly from infrastructure

2.3 Research gap

Previous studies often describe the railway industry with its efficiency and energy

savings This is undeniable because carbon dioxide emissions from this industry accountfor a small amount of the total carbon emissions from other transport sectors However,factors directly or indirectly from the railway industry need to be identified in order to

expand and have an objective view, thereby promoting policies to reduce carbon

emissions or bring carbon emissions from the railway industry to zero

Zhoua et al., (2018) when studying the impact of a carbon tax on the transportationindustry, ignored the indirect effects when speaking about the railway industry Pablo etal., (2019) clarified a research gap when measuring carbon emissions in the railwayindustry often overlooked the actual source of energy consumption through a literaturereview process and designed a new research direction by implementing the railwayenergy efficiency optimization model However, the energy optimization process in themodel has not been described in terms of the impact on the environment, especiallycarbon dioxide emissions

In the case of carbon dioxide emissions into the environment, indirect factors are

mentioned in the study of Marko et al., (2019) with attention to the railway life cycle and construction infrastructure railway in the study of Lee, Lee & Chun (2020) Although the

reduction in rail transport that helps reduce energy consumption is an indirect factor inemissions, it is not found in any literature Zhoua et al., (2018) also stated that reducing

energy consumption is important for the railway industry, but reducing the transport

factor in this industry is not mentioned in the article

Building on the highlighted research gap, this study explores the impact of a carbon tax

on railways transport The study focuses on analyzing this impact of the carbon tax and

the railway industry in terms of railways using coal, diesel and electricity While myprimary expectation is on carbon emissions reduction, this study will expand the analysis

to include other environmental benefits resulting from the implementation of a carbontax It will explore the potential impact on air quality, reduction of particulate matter, andthe overall improvement in the environmental sustainability of the railway industry By

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addressing these additional dimensions, this extended study aims to provide a

comprehensive understanding of the impact of a carbon tax on the railway industry,enabling policymakers, stakeholders, and researchers to make informed decisions and

develop effective strategies for sustainable and low-carbon rail transportation.

2.4 Hypothesis development:

The Carbon Tax Theory Proposes that implementing a tax on carbon emissions can helpaddress the negative externalities associated with greenhouse gas emissions and climatechange The theory is rooted in the economic principle that when an activity generatesnegative externalities (such as environmental pollution), the imposition of a tax canincentivize a reduction in that activity The main idea behind the Carbon TaxTheoryHypothesis is to internalize the cost of carbon emissions into the price of fossilfuels By taxing carbon emissions, the goal is to encourage individuals, businesses, andindustries to reduce their carbon footprint and transition towards cleaner and moresustainable alternatives

Research by Bohringer and Rutherford (2013) suggests that a carbon tax can encouragethe replacement of fossil energy with renewable energy sources The effectiveness of thecarbon tax is suggested by the authors that this depends on the policy design, especiallythe level of the tax and the way the policy is implemented This is also true for Zhoua etal.,(2018) when designing a carbon tax policy, with a tax rate of 20-40 RMB/ton of carbon,there is little difference in the reduction in total output across transport sectors differentloads However, when the tax rate is 60 RMB/ton of carbon, the total output will decreasesignificantly Another study by Dechezleprétre et al (2019) also confirms the positiverelationship of carbon tax to the use of renewable energy sources by encouragingbusinesses to use renewable energy in production and encouraging businesses to userenewable energy and encourage households to use in daily life

The effectiveness of the Carbon Tax TheoryHypothesis depends on various factors,

including the tax rate, the breadth of its coverage, the flexibility for companies to adapt,and the presence of complementary policies and regulations As with any policy approach,the hypothesis has both proponents and critics, and its success and impact may varyacross different jurisdictions and contexts Overall, the Carbon Tax Hypothesis provides aframework for using market mechanisms to internalize the costs of carbon emissions,

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drive emission reductions, and promote the transition to a more sustainable and

low-carbon economy

Accordingly, this study hypothesizes for topic H1: Carbon tax policy reduces

transportation for railways using fossil fuels

2.5 Conclusion:

There is much literature describing the effects of a carbon tax on the transportation

industry, but that prevalence is not found in the railway industry in particular Theliterature regarding the carbon tax and rail transport both describe its direct impact with

a positive relationship However, the literature review shows that there are gaps in themeasurement of railway emissions and the relationship between the carbon tax and therailway industry needs to take into account different indirect aspects This study builds

on statements from previous studies to investigate the indirect effect of a carbon tax onthe rail industry through transportation

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CHAPTER III: RESEARCH METHODOLOGY

3.1 Research Methods:

3.1.1 Research methods:

The paper explores the impact of a carbon tax on the railway industry Collecting data

on carbon tax implementation and its impact typically involves a combination of primary

and secondary data collection methods The secondary data in this article were collected

on the World Bank and UNDATA datasets The study collects data from 28 countriesaround the world and selects the analysis for the period 2010-2021

3.1.2 Data collection methods:

The study uses a regression model with carbon tax as the independent variable, the dependent variable is railways total ( ), the control variable includes GDP, population,

employment, renewable, fuel import and urban In which, data of other control variablesare also collected to support the model testing process The World Bank and UNDATAdatabases are reputable websites that are rigorously checked before data are made

public, and where other researchers collect data for their research papers , so the data

are collected here to ensure the effectiveness and accuracy of the study results

When considering the carbon tax variable as an independent variable in a regressionmodel analysis with railway as the dependent variable, the study examines therelationship between the carbon tax and various aspects of the railway industry The goal

of developing the model is associated with the hypothesis put forth in the study This hasimplications for the results of the study For a simple example, in less developed countriesand developing countries, the need to use railway vehicles or use fossil fueled rail vehicles

is completely different

GDP and population can influence the performance and investment decisions within therailway industry The carbon tax can negatively or positively affect the economies of

countries through the analysis of GDP The relationship between independent, dependent

and control variables is linked together, helping research to discover new factors,broadening the topic Therefore, it is important to collect data that is accurate andrelevant to the study, influencing the results and validity

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