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.     

Scale and benefit of global carbon markets under the 2 °C goal: integrated modeling and an effort-sharing platform

Global climate change mitigation needs all countries’ efforts under the United Nations Framework Convention on Climate Change’s guideline of equity and common but differentiated responsibilities and respective capabilities. The medium-to-long term regional emissions pathways simulated by integrated assessment models with global mitigation costs minimized to achieve the 2 °C goal might be very different from the regional emissions allowances allocated based on effort-sharing principles. Global carbon trading is a cost-effective mechanism to bridge the gap. Insight of previous papers has mainly focused on the impact of a single effort-sharing scheme on global carbon market, while this study attempts to explore the scale and benefit of global carbon market under different effort-sharing principles to achieve the 2 °C goal, with the application of a consistent modeling framework, consisting of an integrated assessment model and an effort-sharing platform. The results indicate that scale of global carbon market would be highly related with the effort-sharing principles. The global trading volumes would change from 1.8 Gigatons (Gt) carbon dioxide (CO₂) to over 12 GtCO₂ per year and largely peak between 2030 and 2040 under different kinds of effort-sharing principles. Correspondingly, annual global finance flows in the carbon market would increase gradually and reach the scale of hundreds of billions United States (US) dollars since 2020. Global carbon market would lower the abatement costs of developed countries, and the overall global abatement costs would drop by 0.4–2.6% during 2011–2050. The developing countries would not only acquire revenues from global carbon trading but also be provided with an opportunity to accelerate their domestic low-carbon energy transformation, local environmental improvement, job creation, and economic development. Linking national and regional carbon markets to develop global carbon market will be critical to maximize the utility of the market mechanism.     

排污权交易初始价格定价方案研究

排污权交易初始分配价格的合理性将在很大程度上决定排污权交易市场的活跃程度,并使排污权交易更好地发挥市场经济手段的最大效用。初始价格的确定依据应为结合排污权时限及贴现率下的不同污染物的社会平均污染治理成本,并兼顾区域经济发展、行业水平、企业公平等因素。文章从定价方式、时限、发布与调整机制、配套措施等方面研究排污权初始价格的定价方案;并以某市为例,通过调查排污量占全市排污量85%以上的企业的污染治理成本,根据所研究的方案获得该市COD、SO2等排污权交易初始分配价格。     

Reducing energy consumption in road transport through hybrid vehicles: investigation of rebound effects,and possible effects of tax rebates

Hybrid powertrains are considered to be a promising method to raise the overall fuel efficiency of passenger cars. They are predicted to enter the automobile markets in increasing numbers in the near future. This paper investigates 2 aspects relevant to the promotion of hybrid vehicles as part of an energy reduction strategy. First, are hybrid cars accompanied by rebound effects, which counteract their increased fuel efficiency? Second, do tax rebates indeed lead to higher sales numbers? We present results from a survey conducted with all 367 buyers of hybrid second-generation Toyota Prius in Switzerland in the first 9 months after market entry (response rate, 82.6%). As control group, questionnaires were also sent to 250 Toyota Corolla (61% returned) and 250 Toyota Avensis (52%) buyers. Among other items, the surveys asked for the car being replaced, if any. Main results are that the increase in car size for hybrid car buyers was lower than both, the market trend and the control group. Increase in car size was lower for hybrid car buyers than for both control group and market trend. 6% of hybrid car purchases did not replace a previously owned vehicle (control group 3%, P = 0.05), the Swiss market average being 20%. Hence rebound effects could be identified neither for vehicle size nor for vehicle ownership. As an energy policy measure, hybrid vehicles are eligible for tax rebates in parts of Switzerland. We found evidence that these tax rebates indeed lead to significant higher sales. We present a rough cost estimate of such tax rebates as CO₂ abatement policy tool.     

Dynamic equity carbon permit allocation scheme to limit global warming to two degrees

Significant international collaboration is required to limit global temperature increase to below 2 °C above pre-industrial levels. Equity is the foundation of cooperation, and therefore, this study proposed a new dynamic carbon permit allocation scheme based on four principles: equality, historical responsibility, capability, and future development opportunities. Decision makers could have different preferences for allocating carbon permits, therefore, four equity rules or indicators (equality, responsibility, capacity, and sovereignty) were assigned different weights. Based on the global carbon budget of the 2 °C target, emission permits were calculated and relevant economic implications analyzed using the Global Change Assessment Model. Results indicated that developed countries should reduce emissions immediately, while allowances for developing regions could permit an initial increase in emissions until peaking. Applying different weights to the indicators resulted in multifarious regional allowances. Developed regions would benefit from the “preferring sovereignty” scenario and most developing countries would benefit under the “preferring responsibility” and “preferring capacity” scenarios. Compared with the Intended Nationally Determined Contributions submitted to the United Nations Framework Convention on Climate Change, this study found that in the short term, developed countries might insist on sovereignty as the preferred indicator. However, preferring sovereignty would place substantial mitigation pressures on developing countries in the long term. Therefore, in addressing global climate change, a dynamic choice in the weighting distribution for different indicators might be conducive to international agreement. Furthermore, a market-based trading instrument could help all participants both mitigate global climate change by reducing regional and global costs and facilitate mitigation capital flow from developed to less developed regions.     

The ‘hidden’ social costs of forestry offsets

The article quantifies the size of ‘hidden’ social costs that are incurred by forestry offsets in the voluntary market that promise to offset present emissions sometime in the future. It does this by estimating the difference between the social costs of carbon (C) emitted and of costs offset by removal of C from the atmosphere by reforestation/afforestation. All current attempts to make forestry offsets more reliable focus on quality control rather than the mismatch of the timing of emissions and their offset. Recommendations that follow from the analysis are twofold. First, that markets for carbon dioxide equivalent (CO2e) removals by voluntary offsets should be confined to the annual incremental removals actually achieved. Second, the promoters of voluntary offsets projects should declare the annual stream of carbon credits and debits expected so that buyers can place a present value on such projects.     

Optimize emission reduction commitments for international environmental agreements

In order to restrict global warming to no more than 2 ^°C, more efforts are needed. Thus, how to attract as more as possible countries to international environment agreements (IEAs) and realize the maximum reduction targets are meaningful. The motivation of this paper is exploring a set of method of designing IEA proposals. The paper built a chance-constrained two-stage cartel formation game model, which can explore whether a country signs an agreement in the first stage and discusses how the countries joining the coalition can make the best emission commitments in the second stage. Based on the model, the real emission data of 45 countries was collected for numerical experiments, which almost completely depict the current global emissions of different countries. A numerical experiment has also been carried out in the paper. Then some interesting results emerge as follows: risk averse, high cost, high emission reduction duty, and external stability impede large coalition formation; transfer scheme and high perceived benefits stimulate countries to join IEAs and make a good commitment; the most influential countries for coalition structure and commitment are those low-cost and low-emission entities. The results also demonstrate that the design of IEA proposals should not only pay attention to those economically developed and high-emission “big” countries, but also attach importance to those low-emission “small” countries.     

Linking the emissions trading schemes of Europe and China - Combining climate and energy policy instruments

Both Europe and China have announced targets for greenhouse gas emissions reduction and renewable energy development. To achieve their emissions targets, Europe has introduced emissions trading scheme (ETS) since 2005 and China has planned to establish a national ETS in 2015. We assess the impact of a joint Europe-China ETS when both climate and energy policy instruments are simulated in a multiregional general equilibrium model. Our results show that a joint ETS markedly increases total carbon emissions from fossil fuels even though global mitigation costs are reduced. Moreover, a joint ETS helps China achieve its renewable energy target, but for Europe, it works opposite. While the renewable energy target does not help Europe achieve additional abatement, the renewable energy target in China reduces mitigation costs and emissions, and increases renewable energy consumption and sales of carbon allowances. Financial transfer through a joint ETS remains marginal compared to China’s demand for renewable energy subsidies. We conclude that as long as an absolute emissions cap is missing in China, a joint ETS is not attractive for mitigation and China’s renewable energy target can reduce emissions.     

Emission trading in agriculture: a study of design options using an agent-based approach

The Scottish Government has proposed reducing Scotland’s greenhouse gas (GHG) emissions by at least 80% by 2050, compared to the 1990 baseline level. It is not yet clear how these reductions will be achieved, but it is likely that all sectors will be expected to make some contribution. Depending on their farm activities, farmers have different sets of abatement alternatives—the challenge facing them, however, is in finding strategies that help to meet reduction targets while maintaining their income. In this paper, we use an agent-based modelling approach to study the implications of carbon trading design options aimed at reducing GHG emissions in the agricultural sector, such as auctions, fixed carbon prices, or carbon credit banking. The feasibility of carbon trading scheme options is assessed regarding their ability to ensure that farmers obtain carbon credits at an affordable and adequate price, since low prices would reward farmers not adopting on-farm abatement options and high prices would encourage non-compliance to targets, thus increasing enforcement costs. Assuming a closed market within the agricultural sector, this study shows that farmers may face up to 50% loss of income to achieve a 30% reduction target if this requires a cut in production. However, market design options such as credits banking may allow farmers to progressively adapt to the scheme constraints. At an individual level, the rate of on-farm compliance and the mandated emission reduction target will determine which farmer strategy is the most efficient to cope with a trading scheme.     

Climate change control: the Lindahl solution

The main purpose of this paper is to evaluate different burden sharing rules with respect to abatement of carbon emissions. We evaluate seven different rules both in terms of their redistributive impact and by the extent to which they realize the aim of optimal abatement. We show that the Lindahl solution, where the burden sharing rule of carbon abatement is determined by each region’s willingness to pay, is to be preferred above the non-cooperative Nash outcome. Poor regions however would prefer the social planner outcome with a global permit market, because then the burden sharing rule has a secondary role of income redistribution by means of transfers from rich to poor, on top of its primary role of assigning abatement burdens. Based on these findings, we argue that in order to control global greenhouse gas emissions, the level of individual country emission abatement effort should be a function of their willingness to pay to curb climate change, rather than their historical emissions or ability to abate.     

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.     

Tradable CO2 permits for cars and trucks

The accelerated diffusion of cleaner vehicles to reduce CO₂ emissions in transport can be explicitly integrated in emission trading designs by making use of cross-sectoral energy efficiency investment opportunities that are found in data on CO₂ emissions during the production and the use of cars and trucks. We therefore elaborate the introduction of tradable certificates that are allocated or grandfathered to manufacturers that provide vehicles (and other durable goods) that enable their customers to reduce their own CO₂ emissions. This certificate is an allowance for each tonne CO₂ avoided. Manufacturers can then sell these certificates on the emission market and use the revenues to lower the price of their cleanest vehicles. This mechanism should partially overcome the price difference with less efficient cars. In a simulation, we found that the introduction of the certificate in tradable permit systems can lead to very significant reductions of CO₂ emissions. The simulations indicate that CO₂ emissions resulting from the car fleet can be reduced by 25–38% over a period of 15 years (starting in 1999). For the truck fleet, the reduction potential is more limited but still very interesting.     

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.     

论排污权交易制度体系构建的初步研究

排污权交易制度是一种通过市场机制实现对环境容量资源的基础性配置,以达到控制污染、保护环境的方法。我国借鉴发达国家的成功经验,于1988年开始尝试引入排污权交易制度进行环境治理工作,并取得了一定的成效。但综合看来,我国排污权交易制度体系的构建仍处于起步阶段,在总量控制的科学确定、排污权初始的公平分配、培育交易市场等问题上仍有待于进一步探索和研究。     

The impact of carbon trading on regulated agents in China

Facing requirements of sustainable development and tremendous international pressures, China has initiated a serious of trials for mandatory carbon trading schemes. In this study, to investigate the impact of carbon trading on commodity prices, emissions, outputs and profits of the regulated agents such as power plants in China, a partial equilibrium model is constructed based on the Cournot theory of oligopoly. Three key results were found. First, following the implementation of a carbon trading scheme there is a shift of production from plants with high emission rates to those with low rates. Second, the emission-based updating (EBU) allocation of allowable emissions would provide a buffer in which the reduced outputs and profits of plants with high emissions are alleviated. Third, if the electricity price is market oriented it will vary with the carbon price. Based on these results, we conclude that the carbon constraint will result in cleaner generating technologies and be helpful in promoting the development of low carbon technologies in China. In addition, the EBU allocation is more feasible at the beginning of the national carbon trading in China. Given that electricity prices in China are regulated now, we argue that mandatory carbon trading should be implemented at the beginning of coordinated reforms of market-oriented pricing in electricity.     

Equity analysis of personal tradable carbon permits for the road transport sector

The personal road transport sector is one of the largest and fastest growing sources of CO₂ emissions. This paper investigates a tradable permit policy for mitigating carbon emissions from personal road transport and discusses various issues of permit allocation. As tradable permits will effectively raise the price of fuel, the policy has important distributional implications. The distribution of burden depends on permit allocation strategies and on the consumer response to an increase in price. The behavioural response varies among different segments of the population depending on their travel needs, which in turn are contingent upon their income, location of residence and other factors. A model previously estimated by [Wadud, Z., Graham, D.J., Noland, R.B., 2007. Modelling gasoline demand for different socio-economic groups. In: Proceedings of the 86th Annual Meeting of the Transportation Research Board, Washington, DC, USA, January 2007] with group-wise aggregated US consumer expenditure survey data for 20 years provides behavioural responses for different income groups. The resulting welfare distribution in the USA is evaluated in this paper. Different permit allocation schemes are also considered in the analysis.     

Is an environmental management system able to influence environmental and competitive performance? The case of the eco-management and audit scheme (EMAS) in the European union

The EMAS Regulation (Reg 761/01 EC) is EU scheme implemented by the European Commission since 1993 and it is for the implementation of an Environmental Management System (EMS) by any organization. The EMS was originally proposed by the European Commission and by the ISO as the frontrunner of a series of policy tools that enable companies to simultaneously pursue environmental objectives and competitive targets in a synergetic way.Based on the unique dataset of the EVER project, this paper investigates whether or not an EMS implemented within the EMAS Regulation has any effect on firm performance both from an environmental and a competitive point of view. Our econometric analysis shows the positive impact of a well-designed environmental management system on environmental performance and, as a consequence, on technical and organizational innovations. Effects on other competitive variables such as market performance, resource productivity and intangible assets are not strongly supported.     

A method to improve the international comparability of emission data from industrial installations

Emissions from industrial installations are regulated under several international conventions and directives to prevent harmful impacts on environment and human health. Stricter limitations often exist in national legislations, or due to regional and local conditions, than in the international conventions. The international comparability of emission data from industrial installations is currently poor. Comparability is an essential element when the environmental performance of different installations or techniques is studied, as well as in reviewing data presented in emission registers. The availability of reliable and comparable data is an important requirement for the emissions trading market. Comparable emission data ought to be used when reviewing compliance with the national emission reduction targets established under international conventions, as well as in reviewing the compliance of industrial installations with the requirements set in the environmental permit conditions. There are currently no internationally agreed principles or a comprehensive strategy for production of emission data at the level of an industrial installation.The data production chain principle presented in this paper provides a tool for identifying elements that are essential in comparing emission data correctly and that need to be taken into consideration to ensure emission data reliability. The method was originally developed and applied in Finland for emission and impact monitoring of wastewaters from industrial installations and fisheries. Due to the implementation of the Integrated Pollution Prevention and Control (IPPC) directive the methodology was reconstructed for integrated emissions monitoring purposes. The data production principle was introduced for European use when preparing the BREF document on monitoring of emissions. It will also be relevant when the industrial installations report their emissions data to the Pollutant Release and Transfer Registers (PRTRs).     

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.     

Article 3.3 and 3.4 of the Kyoto Protocol: consequences for industrialised countries’ commitment,the monitoring needs,and possible side effects

In the Kyoto Protocol, industrialised countries have agreed to reduce their carbon dioxide emissions. To achieve that target, direct human induced activities initiated in the Land-use Change and Forestry sector since 1990, shall be included. However, the wording in the Protocol has caused confusion. The IPCC has been requested to deliver a Special Report on Land-use, Land-use Change and Forestry issues arising from this Protocol. In the present study a limited initial assessment of the implications of alternative interpretations of Afforestation, Reforestation and Deforestation (ARD), addition of the soils compartment, the selection of additional activities, and feasibility of monitoring was done for a limited number of countries.The results show that it is possible to keep the biosphere articles in the Protocol even though we had to make several assumptions concerning for example, areas of application and effectiveness of additional activities. The consequences of alternative interpretations for ARD have a large impact on the countries’ assigned amount; varying from a compensation of 26% of total national emissions (Forestry interpretation for Sweden) to an addition of an extra 13% of the emissions (Global interpretation for Australia). Through selection of a large set of additional activities, most of the studied industrialised countries achieve more sequestration than the reduction of emissions they have committed themselves to. Methods for monitoring are available, but there is no one ideal method. Depending on scale and site: a combination of forest inventory with flux measurements and remote sensing is proposed.