Understanding the Price Dynamics in the Jiangsu SO2 Emissions Trading Program in China: A Multiple Periods Analysis

Because emissions permits can be considered to be a pseudo-commodity, the permit price in the emissions trading markets has already attracted great interest from the economic literature. This research took the Jiangsu sulfur dioxide (SO₂) emissions trading program in China as a case study to examine the price dynamics over the next 10 years (2011–2020) based on Jiangsu’s new SO₂ emissions trading policy design. An adaptive agent-based simulation model was developed to estimate the price dynamics as well as the impact of energy price, policy design, and new environmental regulation on the permit price. The results showed that the equilibrium price of the Jiangsu SO₂ emissions trading market is approximately 4.20 CNY/kg, and the permit price will fluctuate around this price if the other conditions are not changed. If the coal price increases during 2011–2016, the permit price will decline to 2.79 CNY/kg by 2020 under China’s current coal–electricity price mechanism. In addition, the banking mechanism will smooth the price fluctuations and the average permit price will be generally higher when banking is not allowed. Finally, the stricter environmental regulation will reduce the market supply of permits and will raise the permit price. According to China’s potential new SO₂ discharge standard, the permit price will jump to 11 CNY/kg. The quantification of the permit price dynamics can help power plants to make decisions on emissions trading.     

Assessing the impact of emissions trading scheme on low-carbon technological innovation: Evidence from China

A global consensus on carbon emission reductions has been reached for combating climate change. The Chinese government has clearly stated that it is necessary to make full use of market means to improve the level of environmental governance. Emissions trading scheme (ETS) is a typical market means to accelerate low-carbon economic transition. Low-carbon technological innovation is one of the key factors affecting carbon emissions. However, literature on the relationship between ETS and low-carbon technological innovation is relatively scarce at present. This study assesses the effect of pilot ETSs on low-carbon technological innovation, and a difference in differences (DID) model is adopted to analyze China's provincial panel data from 2003 to 2017. The results indicate that China's pilot ETSs can significantly promote low-carbon technological innovation, and changing the window period, PSM-DID and placebo test all verify the robustness of this finding. The dynamic effect test reveals that China's pilot ETSs will gradually increase the effect on low-carbon technological innovation over time. The heterogeneity analysis shows that the effect of China's pilot ETSs on low-carbon technological innovation is more obvious in Guangdong, Hubei, Tianjin and Chongqing. The mechanism analysis suggests that marketization degree and green consumption concept can positively moderate the impact of China's pilot ETSs on low-carbon technological innovation, and industrial structure upgrading plays a positive mediating role between China's pilot ETSs and low-carbon technological innovation. This study is conducive to assessing the policy effectiveness of China's pilot ETSs and provides an empirical evidence for promoting the development of the carbon emissions trading market.     

Kyoto commitments: macro and micro insights on trading and the Clean Development Mechanism

The purpose of this paper is twofold. First, we raise some issues related to the expected dimension of the carbon market. This analysis is based on a survey of model results on the implementation of the Kyoto goal with and without reliance on emissions trading. In particular, we consider both the emissions and the financial implications associated with different trading scenarios. Transfers related to international GHG trading might be equivalent to a 400% increase in foreign direct investment to countries with economies in transition. A closer look at the GHG reductions expected from the developing world also suggests that global models may be overly optimistic in their assessment of the contribution of flexibility mechanisms in meeting the Kyoto emission goals. OECD countries may need to rely more on domestic policies to reduce their emissions than what has so far been projected by global models. Second, we use a simple microeconomic model to test the potential contribution of typical power generation technologies in the context of the Clean Development Mechanism. Projects that are defined as additional in terms of the environment but already profitable can bring about significant results at a relatively low price of certified emission reductions. To assume that the contribution of the CDM will come close to what is projected by global models (both for prices and quantities) is to assume that such projects could be credited under the CDM. This revised version was published online in July 2006 with corrections to the Cover Date.     

The FAIR model: A tool to analyse environmental and costs implications of regimes of future commitments

This article describes the policy decision-support tool, FAIR, to assess the environmental and abatement costs implications of international regimes for differentiation of future commitments. The model links long-term climate targets and global reduction objectives with regional emission allowances and abatement costs, accounting for the Kyoto Mechanisms used. FAIR consists of three sub-models: a simple climate model, an emission-allocation model and a cost model. The article also analyses ten different rule-based emission allocation schemes for two long-term concentration stabilisation targets for greenhouse gases. This analysis shows that evaluating regimes requires not only an assessment of the initial allocation, but also of the distribution of abatement costs and the impacts from emissions trading. The Multi-Stage approach (with a gradual increase of Parties adopting emission intensity or reductions targets) and the Triptych approach (with sectoral targets for all Parties) seem to provide the best prospects for most of the Parties when compared to the other allocation schemes analysed.     

An empirical study of estimating vehicle emissions under cordon and distance based road user charging in Leeds, UK

This paper presents the impact of road user charging (RUC) on vehicle emissions through application of traffic assignment and pollutant emission models. It presents results of an analysis of five RUC schemes on vehicle emissions in Leeds, UK for 2005. The schemes were: a ￡3 inner ring road cordoncharge; a double cordon with a ￡2 inner ring road and a ￡1 outer ring road charge; and distance charges of 2, 10 and 20 p/km levied for travel within the outer cordon. Schemes were compared to a no charge option and results presented here. Emissions are significantly reduced within the inner cordon, whilst beyond the cordon, localised increases and decreases occur. The double cordon exhibits a similar but less marked pattern. Distance charging reduces city-wide emissions by 10% under a 2 p/km charge, 42–49% under a 10 p/km charge and 52–59% under a 20 p/km charge. The higher distance charges reduce emissions within the charge zone, and are also associated with elevated emissions outside the zone, but to a lesser extent than that observed for cordon charging.     

Variability of building environmental assessment tools on evaluating carbon emissions

With an increasing importance of sustainability in construction, more and more clients and designers employ building environmental assessment (BEA) tools to evaluate the environmental friendliness of their building facilities, and one important aspect of evaluation in the BEA models is the assessment of carbon emissions. However, in the absence of any agreed framework for carbon auditing and benchmarking, the results generated by the BEA tools might vary significantly which could lead to confusion or misinterpretation on the carbon performance of a building. This study thus aims to unveil the properties of and the standard imposed by the current BEA models on evaluating the life cycle carbon emissions. The analyses cover the (i) weighting of energy efficiency and emission levels among various environmental performance indicators; (ii) building life cycle stages in which carbon is taken into consideration; (iii) objectiveness of assessment; (iv) baseline set for carbon assessment; (v) mechanism for benchmarking the emission level; and (v) limitations of the carbon assessment approaches. Results indicate that the current BEA schemes focus primarily on operational carbon instead of the emissions generated throughout the entire building life cycle. Besides, the baseline and benchmark for carbon evaluation vary significantly among the BEA tools based on the analytical results of a hypothetical building. The findings point to the needs for a more transparent framework for carbon auditing and benchmarking in BEA modeling.     

International Environmental Agreements: Design of Optimal Transfers Under Heterogeneity

International environmental agreements (IEAs) can coordinate abatement of transboundary pollutants. This paper investigates how heterogeneous countries facing a stock pollutant might structure such an agreement. In particular, we examine how an IEA might be implemented with a set of monetary transfers. The focus is on transfers that are time invariant, linear in emissions, and consistent with budget balance. There is a range of such schemes that would induce efficient emissions. We provide a simple and intuitive characterization of these penalties and describe how specific proposals might be chosen in order to facilitate compliance and implementation. Our proposals are illustrated with a simple example. We show that heterogeneity reduces the scope for penalty schemes to jointly satisfy desirable properties.     

Carrots and sticks for new technology: Abating greenhouse gas emissions in a heterogeneous and uncertain world

Many governments use technology incentives as an important component of their greenhouse gas abatement strategies. These carrots are intended to encourage the initial diffusion of new, greenhouse-gas-emissions-reducing technologies, in contrast to carbon taxes and emissions trading which provide a stick designed to reduce emissions by increasing the price of high-emitting technologies for all users. Technology incentives appear attractive, but their record in practice is mixed and economic theory suggests that in the absence of market failures, they are inefficient compared to taxes and trading. This study uses an agent-based model of technology diffusion and exploratory modeling, a new technique for decision-making under conditions of extreme uncertainty, to examine the conditions under which technology incentives should be a key building block of robust climate change policies. We find that a combined strategy of carbon taxes and technology incentives, as opposed to carbon taxes alone, is the best approach to greenhouse gas emissions reductions if the social benefits of early adoption sufficiently exceed the private benefits. Such social benefits can occur when economic actors have a wide variety of cost/performance preferences for new technologies and either new technologies have increasing returns to scale or potential adopters can reduce their uncertainty about the performance of new technologies by querying the experience of other adopters. We find that if decision-makers hold even modest expectations that such social benefits are significant or that the impacts of climate change will turn out to be serious then technology incentive programs may be a promising hedge against the threat of climate change.     

Modelling and assessing inter-regional trade of CO2 emission reduction units

A cost-efficient way to allocate carbon dioxide (CO₂) emission reductions among countries or regions is to harmonise their marginal reduction costs. This could be achieved by a market of emission reduction units (ERUs). To model such a market, we use a multi-regional MARKAL-MACRO model. It gives insights into the consequences of co-ordinating CO₂ abatement on regional energy systems and economies. As a numerical application, we assess the establishment of a market of ERUs among three European countries for curbing their CO₂ emissions.     

Marginal Abatement Costs and Marginal Welfare Costs for Greenhouse Gas Emissions Reductions: Results from the EPPA Model

Marginal abatement cost (MAC) curves, relationships between tonnes of emissions abated and the CO₂ (or greenhouse gas (GHG)) price, have been widely used as pedagogic devices to illustrate simple economic concepts such as the benefits of emissions trading. They have also been used to produce reduced-form models to examine situations where solving the more complex model underlying the MAC is difficult. Some important issues arise in such applications: (1) Are MAC relationships independent of what happens in other regions?, (2) are MACs stable through time regardless of what policies have been implemented in the past?, and (3) can one approximate welfare costs from MACs? This paper explores the basic characteristics of MAC and marginal welfare cost (MWC) curves, deriving them using the MIT Emissions Prediction and Policy Analysis model. We find that, depending on the method used to construct them, MACs are affected by policies abroad. They are also dependent on policies in place in the past and depend on whether they are CO₂-only or include all GHGs. Further, we find that MACs are, in general, not closely related to MWCs and therefore should not be used to derive estimates of welfare change. We also show that, as commonly constructed, MACs may be unreliable in replicating results of the parent model when used to simulate GHG policies. This is especially true if the policy simulations differ from the conditions under which the MACs were simulated.     

How to effectively guide carbon reduction behavior of building owners under emission trading scheme? An evolutionary game-based study

The building sector accounts for the largest proportion of global carbon emissions. The implementation of a market-based emission trading scheme offers a wider range of strategic choices and greater flexibility for building owners to reduce carbon emissions, but few of them are enthusiastic and actively engaged. To address the problem, this study explores how governments can effectively guide the carbon mitigation actions of building owners under an emission trading scheme (ETS) by continually adjusting and optimizing their regulation strategies. First, an extended evolutionary game model is built, considering the synergistic effect of multiple regulation policies, to theoretically depict the long-term interactive, extensive correlative, and dynamic feedback relationship between the government and building owners. Second, taking advantage of system dynamics as a policy laboratory, a scenario cultivation and simulation analysis is conducted to fully investigate the implementation effects of different regulation strategies based on the behavioral responses of building owners under different scenarios. The city of Shenzhen is a pioneer in covering the building sector in its carbon trading scheme in China, and its hotels above four stars are selected as the realistic setting for the simulation analysis. The results demonstrate that under the emission trading scheme, compared with increasing levels of carbon monitoring and non-financial incentives for building owners, intervention measures, including penalties, subsidies, and public scrutiny, are more efficient and important for the government. These findings provide important theoretical guidance and practical implications for the government to further adjust and optimize its carbon regulation strategies for the building sector.     

Insights for climate policy in Europe

In this paper, the following key issues are addressed: the so-called “South” – the Group of 77 and China – and how to engage their interest and commitment; the purported savings if the flexible mechanisms are availed of, and the macro-economic impacts of meeting the Kyoto objectives; the associated issues of narrowing the extent and scope for such trading by setting a limit on how much can be traded, and “hot air” – the surplus quota above their own projected needs which Russia and most of the old Soviet Union have to offer; operational issues, including units to be traded, monitoring and enforcement, allocation of permits, competitiveness and risk management; in the case of emissions trading, the initial allocation of permits. This revised version was published online in July 2006 with corrections to the Cover Date.     

The Role of Abatement Costs in GHG Permit Allocations: A Global Stabilization Scenario Analysis

Our objective is to propose permit allocation schemes that lead to a fair distribution of the net abatement cost among regions in a global greenhouse gas (GHG) stabilization scenario. We use a detailed technology-based energy model, World-MARKAL, to determine efficient abatement decisions, and to calculate the regional gross abatement costs (before permit allocation and trading). The net abatement costs are then calculated and used for different permit allocation schemes.     

Emissions from gas processing platforms to the atmosphere-case studies versus benchmarks

This study compares oil and gas industry benchmark non-methane volatile organic compounds emission data with predicted and reported emissions from a number of recent case studies. Specifically, we contrast predicted emissions from the Tamar and Leviathan processing platforms in the Eastern Mediterranean with actual emissions where available, and with a compilation of industry benchmarks. This work reveals a series of flaws in the adopted EIA practices in the case studies discussed, starting from the emissions model that grossly underestimates intermittent NMVOC and benzene emissions relative to available data from other sites, and the unrealistic assumption of a constant and uniform emission profile in contrast to real world emission scenarios that are characterized by discrete large emission events. Furthermore, the dispersion model used in the EIAs as part of the request for a business (emissions) permit has a number of significant failings, including the use of an unsuitable model, use of over-simplistic meteorological inputs, and lack of consideration of critical dispersion phenomena. This study highlights the need to rethink the currently used environmental impact assessment and atmospheric permit request methodologies in the oil and gas industry, which rely on unrealistic uniform emission models.     

Competitive Markets for Pollution Permits: Impact on Factor Income and International Equilibrium

We are interested in the impact of pollution permits on wages and profits. We analyze important consequences of introducing a market of pollution permits. A fundamental issue concerns the initial allocation of such permits: should they be allocated freely by grandfathering or be auctioned. The international symmetric case allows us to capture the essence of the problem on income factor. We show that allocating permits to factors in proportion of their contribution to production leads to an efficient (neoclassical) distribution. Considering the international asymmetric case, we show that a permit market does not modify the competitive world equilibrium without permits when the total allocation is large enough. When it is not, if allocation of permits is not proportional to the emissions in the world without permits, there is a reduction factor of emissions that results from the equilibrium allocation of capital.     

A Stochastic Dynamic Game of Carbon Emissions Trading

This paper proposes a computable stochastic equilibrium model to represent the possible competition between Russia and China on the international market of carbon emissions permits. The model includes a representation of the uncertainty concerning the date of entry of developing countries (e.g., China) on this market in the form of an event tree. Assuming that this date of entry is an uncontrolled event, we model the competition as a dynamic game played on an event tree and we look for a solution called S-adapted equilibrium. We compare the solution obtained from realistic data describing the demand curves for permits and the marginal abatement cost curves in different countries, under different market and information structures: (i) Russia's monopoly, (ii) Russia–China competition in a deterministic framework, (iii) Russia–China competition in a stochastic framework. The results show the possible impact of this competition on the pricing of emissions permits and on the effectiveness of Kyoto and post-Kyoto agreements, without a US participation.     

Modelling Equity: A Debate About Values

This paper discusses equity issues in relation to climate change. Models of long-term climate assessments study changes in relative prices. These changes lead to gains and losses for different economic actors and these consequences are held responsible for problems related to social acceptability. Policy recommendations issued by such models cannot be put into practice. Equity should be integrated into those models in order to make them more relevant for policy. This paper considers this problem in three parts.The first part shows that equity is only one aspect of the social dimension of sustainable development, which cannot be treated separately. It invites an understanding of complexity. Equity is also interrelated with the economic and ecological dimensions of sustainable development.The second part deals with the fact that different aspects of equity have to be taken into account and several concepts of equity co-exist. If only distribution of income is taken into account, equity can effectively be addressed through economic growth, but the specific characteristics of sustainable development are left out of the analysis.Therefore, the third part is a questioning of traditional modelling approaches and of the reasons why modelling should be carried out. The paper concludes with a short discussion about the normative content of any attempt to model climate change.     

经济开发区危险废物排放权交易模

简要介绍污染物排放权交易制度的理论基础，根据经济开发区自身特点，提出其在危险废物减量化管理中运用的新思路，并通过数学模型，以控制总量、分配决定因子等为制约条件，发展了一套针对经济开发区危险废弃物排放权交易系统的计算方法。     

Future Trends and Mitigation Options for Energy Consumption and Greenhouse Gas Emissions in a Developing Country of the Middle East Region: a Case Study of Lebanon’s Road Transport Sector

The road transport system in Lebanon is one of the most unsustainable in the Middle East region due to, in large part, the absence of a national transportation strategy. This study proposes mitigation measures based on Lebanon’s commitments for reducing fossil fuel use and CO₂ emissions from road transport by increasing the share of fuel-efficient and hybrid electric vehicles and increasing the utilization of the existing bus service. Results show that increasing the market share of fuel-efficient vehicles to 35% in 2040 stabilizes energy use and emissions. The addition of hybrid vehicles to the first strategy, with a target of 10% market share by 2040, leads to 11% additional savings. Increasing the share of bus passenger kilometers traveled to 45% in 2040 leads to a reversal of adverse impacts. A combined strategy of all three measures leads to 63% reductions in 2040 compared to 2010, which is even superior to their cumulative savings.     

Climatic Implications of Revised IPCC Emissions Scenarios, the Kyoto Protocol and Quantification of Uncertainties

In December 1997, the United Nations Framework Convention on Climate Change (FCCC) adopted the Kyoto Protocol. This paper describes a framework that models the climatic implications of this international agreement, using Monte Carlo simulations and the preliminary Intergovernmental Panel on Climate Change emissions scenarios (SRES). Emissions scenarios (including intervention scenarios), climate sensitivity, and terrestrial carbon sink are the key sampled model parameters. This framework gives prior probability distributions to these parameters and, using a simple climate model, posterior distributions of global temperature change are determined for the future. Our exercise showed that the Kyoto Protocol's effectiveness will be mostly dependent upon which SRES world evolves. In some worlds the Protocol decreases the warming considerably but in others it is almost irrelevant. We exemplified this approach with a current FCCC issue, namely “hot air”. This modelling framework provides a probabilistic assessment of climate policies, which can be useful for decision-makers involved in global climate change management. This revised version was published online in July 2006 with corrections to the Cover Date.