Photovoltaic (PV) systems in Taiwan are affordable because of the country’s export oriented semi-conductor industry. Effectively promoting renewable energy to the public requires convincing policies and regulations, e.g., carbon taxation. If the marginal cost of reducing carbon dioxide emissions is lower than the carbon tax rate, the emission can be reduced effectively with increasing use of clean PV electricity. This research develops System Dynamics (SD) simulation models to evaluate the interrelationships of carbon taxation on PV system installations and the prices of fossil and green power supplies. SD models are built with scenarios to assess the results of different tax rates, emission reductions, electricity costs, and PV capacities. Data are collected from Taiwan Bureau of Energy (The statistics of carbon dioxide emissions from fuel combustion in Taiwan. Ministry of Economic Affairs, Taiwan, 2013, ) and international power and energy sectors to serve as a reference for policy makers to set green energy regulations.