The globalization of the carbon market: Welfare and competitiveness effects of linking emissions trading schemes

In the light of the prevailing goal to keep global temperature increase below 2° and recent challenges to reach a global climate agreement in the near term, linking emissions trading schemes has emerged as a prominent complementing policy option. To this end, we explicitly assess (1) the macroeconomic welfare impacts and (2) the trade-based competitiveness effects of linking the European Union (EU) Emissions Trading Scheme in the year 2020. A stylized partial market analysis suggests that, independently of regional cost characteristics, the integration of emissions trading schemes (ETS) yields economic welfare gains for all participating regions. A computable general equilibrium analysis confirms these findings at the macroeconomic level: The economic efficiency losses from emissions regulation are diminished for both EU Member States and non-EU regions by linking ETS. However, the quantitative analysis suggests opposite trade-based incentives for linking up: while EU Member States improve their terms of trade by integrating with emerging ETS, non-EU linking candidates face competitiveness losses by linking. We conclude that, for non-EU regions, the attractiveness of linking ETS is a matter of priorities for economic welfare or international competitiveness. If these priorities are hierarchized in favor of welfare, the globalization of the carbon market could become a promising policy option complementing the efforts to reach a global climate agreement in 2015.     

Policy and technological constraints to implementation of greenhouse gas mitigation options in agriculture

A recent assessment of agricultural greenhouse gas (GHG) emissions has demonstrated significant potential for mitigation, but suggests that the full mitigation will not be realized due to significant barriers to implementation. In this paper, we explore the constraints and barriers to implementation important for GHG mitigation in agriculture. We also examine how climate and non-climate policy in different regions of the world has affected agricultural GHG emissions in the recent past, and how it may affect emissions and mitigation implementation in the future. We examine the links between mitigation and adaptation and drives for sustainable development and the potential for agricultural GHG mitigation in the future.We describe how some countries have initiated climate and non-climate policies believed to have direct effects or synergistic effects on mitigating GHG emissions from agriculture. Global sharing of innovative technologies for efficient use of land resources and agricultural chemicals, to eliminate poverty and malnutrition, will significantly mitigate GHG emissions from agriculture.Previous studies have shown that as less than 30% of the total biophysical potential for agricultural GHG mitigation might be achieved by 2030, due to price- and non-price-related barriers to implementation. The challenge for successful agricultural GHG mitigation will be to remove these barriers by implementing creative policies. Identifying policies that provide benefits for climate, as well as for aspects of economic, social and environmental sustainability, will be critical for ensuring that effective GHG mitigation options are widely implemented in the future.     

Cost-effectiveness of greenhouse gases mitigation measures in the European agro-forestry sector: a literature survey

Over the last 20 years, climate change has become an increasing concern for scientists, public opinions and policy makers. Due to the pervasive nature of its impacts for many important aspects of human life, climate change is likely to influence and be influenced by the most diverse policy or management choices. This is particularly true for those interventions affecting agriculture and forestry: they are strongly dependent on climate phenomena, but also contribute to climate evolution being sources of and sinks for greenhouse gases (GHG). This paper offers a survey of the existing literature assessing cost-effectiveness and efficiency of greenhouse gas mitigation strategies or the effects of broader economic reforms in the agricultural and forestry sectors. The focus is mainly on European countries. Different methodological approaches, research questions addressed and results are examined. The main findings are that agriculture can potentially provide emissions reduction at a competitive cost, mainly with methane abatement, while carbon sequestration seems more cost-effective with appropriate forest management measures. Afforestation, cropland management and bioenergy are less economically viable measures due to competition with other land use. Mitigation policies should be carefully designed either to balance costs with expected benefits in terms of social welfare. Regional variability is one of the main drawbacks to fully assess the cost-effectiveness of different measures. Integration of models to take into account both social welfare and spatial heterogeneity seems to be the frontier of the next model generation.     

Towards an efficient and low carbon economy post-2012: opportunities and barriers for foreign companies in the Russian energy market

Russia is one of the most energy- and carbon-intensive countries in the world. The high level of technical abrasion and a low level of investments into modernization of the Russian energy industry cause huge energy wastage and carbon emissions. This situation is regarded by countries relying on energy imports from Russia as an increasing threat to security of supply and as a major barrier to global climate change policy. This paper provides an overview of the current and future Russian energy efficiency and greenhouse gas mitigation policies. The focus is laid on the detailed investigation of the progress and future potential of the market-oriented mechanisms Joint Implementation (JI) and Green Investment Scheme (GIS), being considered as two possible channels for FDI in transnational energy efficiency and carbon mitigation projects. The analysis was conducted by reviewing the relevant scientific and non-scientific literature including a variety of theoretical and practice-oriented arguments. Based on this assessment, we conclude that JI and GIS are confronted with numerous barriers in the Russian energy market. We further scrutinize the ability of Energy Service Companies (ESCOs), as one of the market intermediary models, to overcome some of these barriers in the process of effectively integrating JI and GIS in their long-term business strategies. Due to the compatibility of the main features of JI and GIS with the working procedures under the ESCO model we conclude that numerous synergy effects can be generated and that the majority of transaction barriers specific for the Russian energy market can be overcome. Such an integrative framework for international energy efficiency and carbon mitigation projects would contribute to the modernization of the Russian energy industry and enable a “win-win” situation for foreign companies seeking to invest in a sustainable manner.     

On the Effects of Social and Economic Policies on Future Carbon Emissions

Published scenarios of carbon emissions vary over a 40:1 range, and vary greatly even when the possible effects of future climate change policies are ignored. Differences in assumptions about how social and economic policies will affect the rates of economic growth throughout the world, population growth, international trade and investment, the rate of improvement in energy efficiency, and innovations and developments in non-carbon technologies are among the main reasons for such huge differences - alongside the considerable uncertainties that remain about the structural forms and parameters of the economic models used for making projections. The following analysis shows that a low carbon emissions scenario is fully consistent with developing countries achieving economic prosperity and the rich countries increasing theirs. It would depend on the emergence of non-carbon options, such as renewable energy, and this is indeed more likely to happen with favourable conditions for economic growth and innovation.     

Reforming the CDM for sustainable development: lessons learned and policy futures

The Clean Development Mechanism (CDM) has successfully demonstrated that market-based mechanisms can achieve some cost effective emissions reductions in developing countries. However the distribution of CDM projects has been extremely uneven across countries and regions, and a few technologies and sectors have dominated the early stages of CDM experience. This has caused some to question whether the CDM has fallen short of its potential in contributing to sustainable development. We review the broad patterns of CDM project approvals and evaluate 10 CDM projects according to their sustainability benefits. The difficulty of defining “sustainable development” and the process of defining criteria by individual non-Annex 1 governments has meant that sustainable development concerns have been marginalized in some countries. Given these observed limitations, we present possible CDM policy futures, focusing on the main proposals for a post-2012 climate regime. Five options for enhancing the sustainable development benefits in the CDM are discussed, including proactive approaches to favour eligibility of emission reduction projects which ensure such co-benefits.     

The effect of different mitigation strategies on international financing of adaptation

Recent proposals at the UNFCCC meeting in Bali in December 2007 suggest that a 2% levy on the CDM could finance adaptation costs in developing regions. Other proposals include extending the scope of the levy to emissions trading. This study applies an Integrated Assessment Model to gain insight in the interactions between adaptation costs, residual damages and mitigation costs and to analyse the effectiveness of a 2% levy on both the CDM and emissions trading from developing countries. We show that adaptation is especially important in lower income regions where damages are higher. The revenues of a 2% levy strongly depend on both the climate mitigation target and the burden-sharing regime. A more stringent climate mitigation target results in more emissions trade and, in the longer run, less need for adaptation. Both factors increase the share of adaptation costs that can be funded. The burden-sharing regime strongly affects the revenues of a 2% levy as well: relatively more stringent targets for developed countries increase the revenues of a 2% levy. However, in the next two decades the share of adaptation that can be financed remains well below 20% in most cases. Additional funding mechanisms are therefore necessary to substantially finance adaptation costs in developing countries.     

Adaptation and mitigation strategies in agriculture: an analysis of potential synergies

As climate changes due to rising concentrations of greenhouse gases in the atmosphere, agriculture will be one of the key human activities affected. Projections show that while overall global food production in the coming decades may keep pace with the food requirements of a growing world population, climate change might worsen existing regional disparities because it will reduce crop yields mostly in lands located at lower latitudes where many developing countries are situated. Strategies to enhance local adaptation capacity are therefore needed to minimize climatic impacts and to maintain regional stability of food production. At the same time, agriculture as a sector offers several opportunities to mitigate the portion of global greenhouse gas emissions that are directly dependent upon land use, land-use change, and land-management techniques. This paper reviews issues of agriculture and climate change, with special attention to adaptation and mitigation. Specifically, as adaptation and mitigation strategies in agriculture are implemented to alleviate the potential negative effects of climate change, key synergies need to be identified, as mitigation practices may compete with modifications to local agricultural practices aimed at maintaining production and income. Under future climate and socio-economic pressures, land managers and farmers will be faced with challenges in regard to selecting those mitigation and adaptation strategies that together meet food, fiber and climate policy requirements.     

Spatial and temporal variability of greenhouse gas emissions from rural development land use operations

Climate change objectives of mitigation and adaptation are being mainstreamed into many policies and strategies around the world. In Europe, this has included the Rural Development Programme, which aims to tackle multiple social, economic and environmental objectives in rural areas, and the integration of climate change objectives adds another strand of complexity to the decision making process. When formulating policies determining the likely effectiveness of any particular measure can be challenging, especially with respect to the spatial and temporal variability of greenhouse gas emissions. This is a challenge faced by all countries and regions around the world. This study uses Europe as an example to explore this issue. It highlights the variability in emissions from land use operations that may be encountered under different conditions and time horizons and considers this in the context of policy formulation. The Optimal Strategies for Climate change Action in Rural Areas software has been adapted to derive net greenhouse gas emissions for rural development operations for all regions in Europe. Operations have been classified into five categories based on their benefit/burden over different time horizons. The analysis shows that it is important to understand the time period over which benefits or burdens are realised and determine how this fits with policy instruments, such as land management agreements and the permanency of actions. It also shows that in some regions an operation can have benefits, but in other regions it has burdens; thus, location can be critical. Finally, in the context of developing operations to meet multiple social, economic and environmental objectives, it is important to acknowledge that seeking options that only reduce emissions may not always be practical or possible. In some instances, we may have to accept an increase in emissions in order to meet other objectives. It is important that we evaluate the net greenhouse gas emissions of all operations, not just those aimed at climate change mitigation. We can then select those with the least burden in the process of developing optimal solutions to meet multiple objectives.     

The impacts of information and communication technology,energy consumption,financial development,and economic growth on carbon dioxide emissions in 12 Asian countries

This study aims to investigate the effects of information and communication technology (ICT), energy consumption, economic growth, and financial development on carbon dioxide emissions using 1993–2013 panel data from 12 Asian countries. The study employs a panel unit root test accounting for the presence of cross-sectional dependence and found that Internet usage is stationary and carbon dioxide emissions, energy consumption, gross domestic production (GDP), and financial development are first-difference stationary. The results form Pedroni panel cointegration test confirms that the variables are cointegrated. The results of the cointegration test indicate that the ICT-energy-GDP-carbon dioxide emissions nexus has long-run equilibrium. Both energy consumption and GDP have significant, positive impacts on carbon dioxide emissions; energy consumption and GDP have an effect on carbon dioxide emissions growth. ICT has a significantly negative effect on carbon dioxide emissions; the promotion of ICT becomes one of the important strategies introduced to mitigate carbon dioxide emissions for various countries. Causality results show that energy consumption, GDP, and financial development cause more carbon dioxide emissions. Energy consumption, GDP, and carbon dioxide emissions cause ICT. GDP causes financial development, whereas energy consumption and GDP are interdetermined. The feedback hypothesis exists in the region; those countries need to develop alternative energy to replace fossil fuels. ICT does not threaten the environment and ICT policy can be seen as a part of carbon dioxide emissions reduction policy.     

Re-thinking water policy priorities in the Mediterranean region in view of climate change

Water is scarce in Mediterranean countries: cities are crowded with increasing demand; food is produced with large amounts of water; ecosystems demand more water that is often available; drought affects all. As climate change impacts become more noticeable and costlier, some current water management strategies will not be useful. According to the findings of CIRCE, the areas with limited water resources will increase in the coming decades with major consequences for the way we produce food and we protect ecosystems. Based on these projections this paper discusses water policy priorities for climate change adaptation in the Mediterranean. We first summarise the main challenges to water resources in Mediterranean countries and outline the risks and opportunities for water under climate change based on previous studies. Recognising the difficulty to go from precipitation to water policy, we then present a framework to evaluate water availability in response to natural and management conditions, with an example of application in the Ebro basin that exemplifies other Mediterranean areas. Then we evaluate adaptive capacity to understand the ability of Mediterranean countries to face, respond and recover from climate change impacts on water resources. Social and economic factors are key drivers of inequality in the adaptive capacity across the region. Based on the assessment of impacts and adaptive capacity we suggest thresholds for water policy to respond to climate change and link water scarcity indicators to relevant potential adaptation strategies. Our results suggest the need to further prioritise socially and economically sensitive policies.     

Joint Implementation Under the U.N. Framework Convention on Climate Change: Technical and Institutional Challenges

The U.N. Framework Convention on Climate Change (FCCC) allows for the joint implementation (JI) of measures to mitigate the emissions of greenhouse gases. The concept of JI refers to the implementation of such measures in one country with partial or full financial and/or technical support from another country, potentially fulfilling some of the supporting country's emission-reduction commitment under the FCCC. At present, all JI transactions are voluntary, and no country has claimed JI credit against existing FCCC commitments. Nevertheless, JI could have important implications for both the economic efficiency and the international equity of the implementation of the FCCC. This paper discusses some of the information needs of JI projects and seeks to clarify some of the common assumptions and arguments about JI. Issues regarding JI are distinguished according to those that are specific to JI and those that apply to JI as well as other types of regimes and transactions. The focus is on the position of developing countries and their potential risks and benefits regarding JI.     

On integration of policies for climate and global change

Currently envisaged mitigation of greenhouse gases (GHG) emissions will be insufficient to appreciably limit climate change and its impacts. Adaptation holds the promise of ameliorating the impacts on a small subset of systems being affected. There is no question that both will be needed. However, climate change is only part of a broader multi-stress setting of global through to local changes. Privileging climate related policies over other concerns leads to tragic outcomes. Climate policies need to be designed for and integrated into this broader and challenging context. This paper focuses on placing climate change within the broader context of global change and the importance of aligning climate policy objectives with the myriad other policies that still need to be implemented if our primary goal is improving human welfare rather than limiting our focus to climate change and its impacts.     

Major challenges of integrating agriculture into climate change mitigation policy frameworks

Taking the European Union (EU) as a case study, we simulate the application of non-uniform national mitigation targets to achieve a sectoral reduction in agricultural non-carbon dioxide (CO₂) greenhouse gas (GHG) emissions. Scenario results show substantial impacts on EU agricultural production, in particular, the livestock sector. Significant increases in imports and decreases in exports result in rather moderate domestic consumption impacts but induce production increases in non-EU countries that are associated with considerable emission leakage effects. The results underline four major challenges for the general integration of agriculture into national and global climate change mitigation policy frameworks and strategies, as they strengthen requests for (1) a targeted but flexible implementation of mitigation obligations at national and global level and (2) the need for a wider consideration of technological mitigation options. The results also indicate that a globally effective reduction in agricultural emissions requires (3) multilateral commitments for agriculture to limit emission leakage and may have to (4) consider options that tackle the reduction in GHG emissions from the consumption side.     

Tools for developing adaptation policy to protect human health

Anthropogenic climate change is likely to add significant pressure to the determinants of public health, and to current health and social protection measures in high, middle and low income countries. Adaptation strategies within the health sector are being developed to address the multi-dimensional nature of the costs and impacts. We further develop and apply a new generic conceptual framework for development-compatible climate policy planning to evaluate policy options for middle and low income countries that reduce the adverse health effects of climate change. The criteria used for comparative evaluation included economic, environment, social and institutional factors. The proposed framework, incorporating system dynamics, provides a foundation for a decision-analytical approach to support the formulation of robust climate change adaptation policies to protect human health.     

Estimating the non-market benefits of climate change adaptation of river ecosystem services: A choice experiment application in the Aoos basin,Greece

Mountains are important global reservoirs of water resources. However they are highly vulnerable to climate change as limited alterations in temperature and precipitation may cause harmful effects to water systems. Southern Europe and especially Greece are expected to undergo a drought trend over the next decades, resulting in less recharge for the aquifers and water services reduction. Thus, climate change may distort both natural and socioeconomic characteristics of freshwater ecosystem services deteriorating the general social welfare related to them. This paper examines the economic impacts of climate change on river uses of the Aoos basin in Greece. In this regard, a choice experiment is conducted to estimate the value changes in different ecological and economic services in a mountain community. The econometric simulations using conditional logit, random parameters logit and latent class models reveal that despite existing preference heterogeneity, respondents on average derive positive and significant welfare effects from climate change adaptation measures. The findings of the survey may assist in adaptation planning for the Aoos River basin, with possible extensions to other river systems enduring similar climate change indications.     

Oil price scenarios and climate policy: welfare effects of including transportation in the EU emissions trading system

The stringency of policies needed to meet a climate target is influenced by uncertain oil prices because price changes cause emission changes, making the robustness of climate policy instruments important. As a result of its dependence on oil, emissions from the transport sector are particularly sensitive to oil price changes. We use a computable general equilibrium model to study the effects of including the transport sector in the EU??s emissions trading scheme under three future oil price scenarios. Our results show that there are potentially significant welfare gains from including transportation in the emissions trading scheme because the system as a whole helps absorb required changes in climate policy to meet the overall EU cap on emissions. There is, however, a cost in terms of somewhat greater permit price uncertainty.     

An integration of net imported emissions into climate change targets

There is an international divide between net emissions importers and net emissions exporters, with industrialised nations mainly falling into the former and emerging economies the latter. Integrating emissions transfers into climate policy, so as not to disadvantage export-intensive countries, has been suggested to increase participation in international emissions reduction commitments. Consumption-based scenarios are presented for the UK identifying the geographic and sectorial source of emissions to meet future consumer demands given the current international climate policy landscape. The analysis is applied to the UK yet the discussion is applicable to international climate policy; assigning national responsibility for global emissions reductions; and extending the mitigation potential for net importing countries. Two trajectories for UK consumption emissions are calculated in which (1) international reduction targets are consistent with those pledged today equating to four degrees of temperature rise and (2) international reduction targets achieve a two degree future. By 2050 it is estimated that UK consumption emissions are 40–260% greater than UK territorial emissions depending on the strength of global reduction measures, and assuming the UK meets its 80% reduction in 1990 emissions by 2050 target. Cumulative emissions are presented alongside emissions trajectories, recognising that temperature rise is directly related to every tonne of carbon emitted. Whilst this paper argues that the current UK emissions targets underestimate the UK's contribution to global mitigation for two degrees, it shows how expanding the focus of policy towards consumption introduces new opportunities for reduction strategies at scale. The paper advocates the implementation of consumption-based emissions accounting which reveals underexploited policy interventions and increases the potential to break down barriers that exist between industrialised and emerging economies in international climate policy.     

The prospects for global green car mobility

The quest for green car mobility faces two major challenges: air pollution from exhaust emissions and global climate change from greenhouse gas emissions. Vehicle air pollution emissions are being successfully tackled in many countries by technical solutions such as low-sulphur fuels, unleaded petrol and three-way catalytic converters. Many researchers advocate a similar approach for overcoming transport's climate change impacts. This study argues that finding a technical solution for this problem is not possible. Instead, the world will have to move to an alternative surface transport system involving far lower levels of motorised travel.