Optimization of district heating system considering carbon taxes and subsidies based on energy policy stage goals

Climate change is one of the main issues that humanity will face in the upcoming decades. Low-carbon district heating is an important alternative for decarbonizing the heating sector against unsustainable higher carbon emission heating methods. Most available studies have concentrated on fixed or predetermined policies instead of attempting a numerical optimization of carbon taxes and subsidies in district heating. This study proposes the optimization of a district heating system in Northeast China considering carbon taxes and subsidies based on energy policy stage goals. Research shows that carbon taxes and subsidies have a certain impact on the change in district heating sources. With the increase in carbon taxes, heating from non-fossil energy sources is increasing, an area that can also be promoted with subsidies for non-fossil energy. Considering the total cost of heating enterprises, it is appropriate to set the carbon tax for district heating at $86. Similarly, considering government expenditure, it is suggested that construction subsidies be set at 10.5$/m², 3.5$/m², and36.5 $/m² for air source heat pumps, biomass boilers, and ground source heat pumps. In addition, the obtained results can be used as guidelines for the heating industry to design more efficient district heating and focus research and development efforts on the most promising non-fossil energy heating technologies.