Flattening the carbon extraction path in unilateral cost-effective action

Internalizing the global negative externality of carbon emissions requires the flattening of the extraction path of world fossil energy resources (=world carbon emissions). We consider governments with sign-unconstrained emission taxes at their disposal and seeking to prevent world emissions from exceeding some binding aggregate emission ceiling in the medium term. Such a ceiling policy can be carried out either in full cooperation or by a sub-global climate coalition. Unilateral action has to cope with carbon leakage and high costs, which makes a strong case for choosing a policy that implements the ceiling in a cost-effective way. In a two-country, two-period general equilibrium model with a non-renewable fossil-energy resource, we characterize the unilateral cost-effective ceiling policy and compare it with its fully cooperative counterpart. We show that with full cooperation there exists a cost-effective ceiling policy in which only first-period emissions are taxed at a rate that is uniform across countries. In contrast, the cost-effective ceiling policy of a sub-global climate coalition is characterized by emission regulation in both periods. The share of the total stock of energy resources owned by the sub-global climate coalition turns out to be a decisive determinant of the sign and magnitude of unilateral cost-effective taxes.     

Carbon leakage and capacity-based allocations: Is the EU right?

Competitiveness and carbon leakage are major concerns for the design of CO₂ emissions permits markets. In the absence of a global carbon tax and of border carbon adjustments, output-based allocation is a third-best solution and is actually implemented (Australia, California, New Zealand). The EU has followed a different route; free allowances are allocated to existing or new capacities in proportion to a benchmark, independent of actual production. This paper compares these two schemes in a formal setting and shows that the optimal one is in fact a combination of both schemes, or output-based allocation alone if uncertainty is limited. A key assumption of our analysis is that the short-term import pressure depends both on the existing capacities and the level of demand, which is typical in capital intensive and internationally traded sectors. A calibration of the model is used to discuss the EU scheme for the cement sector in the third phase of the EU-ETS (2013–2020). This allows for a quantification of various policies in terms of welfare, investment, production, company profits, public revenues and leakage.     

Robust technology policy against emission leakage: The case of upstream subsidies

Asymmetric regulation of a global pollutant between countries can alter the competitiveness of industries and lead to emissions leakage, which hampers countries’ welfare. In order to limit leakage, governments consider supporting domestic trade-exposed firms by subsidizing their investments in abatement technology. The suppliers of such technologies tend to be less than perfectly competitive, particularly when both emissions regulations and advanced technologies are new. In this context of twin market failures, we consider the relative effects and desirability of subsidies for abatement technology. We find a more robust recommendation for upstream subsidies than for downstream subsidies. Downstream subsidies tend to increase global abatement technology prices, reduce pollution abatement abroad and increase emission leakage. On the contrary, upstream subsidies reduce abatement technology prices, and hence also emissions leakage.     

Emissions trading of global and local pollutants, pollution havens and free riding

In the presence of local (sulfur) and global (carbon) pollutants, we examine the pollution haven hypothesis and free riding behavior. Under domestic emissions trading, poorer Southern countries become pollution havens when free trade opens up whenever sulfur damage functions are linear or when sulfur levels in equilibrium are not higher in the South. With global trading of carbon permits, the pollution haven effect emerges in equilibrium whenever the convex sulfur damage functions are nonlinear. Countries that do not participate in a Global Protocol designed to reduce carbon emissions enjoy double benefits, stemming from free riding and cleaner local environments.     

International environmental agreements with support

We augment the standard cartel formation game from non-cooperative coalition theory, often applied in the context of international environmental agreements, with the possibility that singletons support coalition formation without becoming coalition members themselves. We assume their support takes the form of a monetary transfer to the coalition, in order to induce larger coalitions, higher levels of public good provision and higher payoffs. We show that, under mild conditions on the costs and benefits of contributing to the public good (e.g. abatement of greenhouse gas emissions), there exist equilibria with support. Allowing for support increases payoffs to each of three types of agents: members, supporters and free-riders.     

Trade''s Dynamic Solutions to Transboundary Pollution

This study develops a differential game to examine the effects of trade liberalization on transboundary water pollution. Water pollution is due to wastewater emissions from countries in a shared waterway along the U.S.–Mexico border with available data of pollution abatement costs, public health damages, and trade benefits. Noncooperative and cooperative games are examined with changes in trade policy and public health damages. Results show trade liberalization leads Mexico to curtail pollution in both games. Cooperation and trade liberalization limit emissions from both countries and curtail strategic behavior of the United States from Mexico's pollution control efforts in the noncooperative game.     

The case for international emission trade in the absence of cooperative climate policy

We evaluate the efficacy of international trade in carbon emission permits when countries are guided strictly by their national self-interest. To do so, we construct a calibrated general equilibrium model that jointly describes the world economy and the strategic incentives that guide the design of national abatement policies. Countries’ decisions about their participation in a trading system and about their initial permit endowment are made non-cooperatively; so a priori it is not clear that permit trade will induce participation in international abatement agreements or that participation will result in significant environmental gains. Despite this, we find that emission trade agreements can be effective; that smaller groupings pairing developing and developed-world partners often perform better than agreements with larger rosters; and that general equilibrium responses play an important role in shaping these outcomes.     

The principal–agent model with multilateral externalities: An application to climate agreements

We consider contracting of a principal with an agent if multilateral externalities are present. The motivating example is that of an international climate agreement given private information about the willingness-to-pay (WTP) for emissions abatement. Due to multilateral externalities the principal uses her own emissions besides subsidies to incentivize the agent and to assure his participation. Optimal contracts equalize marginal abatement costs and, thus, can be implemented by a system of competitive permit trading. Moreover, optimal contracts can include a boundary part (i.e., the endogenous, type dependent participation constraint is binding), which is not a copy of the outside option of no contract. Compared to this outside option, a contract can increase emissions of the principal for types with a low WTP, and reduce her payoff for high types. Subsidies can be constant or even decreasing in emission reductions, and turn negative so that the agent reduces emissions and pays the principal.     

The case for international emission trade in the absence of cooperative climate policy

We evaluate the efficacy of international trade in carbon emission permits when countries are guided strictly by their national self-interest. To do so, we construct a calibrated general equilibrium model that jointly describes the world economy and the strategic incentives that guide the design of national abatement policies. Countries’ decisions about their participation in a trading system and about their initial permit endowment are made non-cooperatively; so a priori it is not clear that permit trade will induce participation in international abatement agreements or that participation will result in significant environmental gains. Despite this, we find that emission trade agreements can be effective; that smaller groupings pairing developing and developed-world partners often perform better than agreements with larger rosters; and that general equilibrium responses play an important role in shaping these outcomes.     

Strategic environmental disclosure: Evidence from the DOE's voluntary greenhouse gas registry

Although mandatory disclosure programs have been studied extensively, strategic voluntary environmental disclosures by firms are not well understood. We study the motivations for and impacts of firms' strategic disclosure of greenhouse gas reductions to the US government. We first model firms' joint abatement and disclosure decisions, incorporating both economic and political incentives. We then use data from the Department of Energy's Voluntary Greenhouse Gas Registry to compare reported reductions to actual emissions. We find that participants in the program engage in highly selective reporting: in the aggregate, they increase emissions over time but report reductions. In contrast, non-participants decrease emissions over time. Participants tend to be large firms facing strong regulatory pressure; pressure from environmental groups reduces the likelihood of participation, suggesting such groups viewed the program as a form of greenwash. Participating in the 1605(b) program had no significant effect on a firm's changes in carbon intensity over time.     

Subgame-perfect cooperative agreements in a dynamic game of climate change

We model climate change as a dynamic game and prove existence of a unique subgame-perfect Nash equilibrium (SPNE) that is also Markov perfect. We interpret this unique SPNE as the business-as-usual (BAU) equilibrium and show that if the countries are not sufficiently symmetric then the familiar trigger strategy equilibria may not be Pareto improvements over the BAU equilibrium and may even lack efficiency properties. We then motivate and introduce a subgame-perfect cooperative agreement as an improvement over the BAU equilibrium in the sense that every country or coalition of countries is better off in every subgame, irrespective of the extent of heterogeneity of the countries. We characterize subgame-perfect cooperative agreements and identify sufficient conditions for their existence. We show that (direct or indirect) transfers between countries to balance the costs and benefits of controlling climate change are a necessity and not a matter of approach.     

The value of virtual conferencing for ecology and conservation

The objectives of conservation science and dissemination of its research create a paradox: Conservation is about preserving the environment, yet scientists spread this message at conferences with heavy carbon footprints. Ecology and conservation science depend on global knowledge exchange—getting the best science to the places it is most needed. However, conference attendance from developed countries typically outweighs that from developing countries that are biodiversity and conservation hotspots. If any branch of science should be trying to maximize participation while minimizing carbon emissions, it is conservation. Virtual conferencing is common in other disciplines, such as education and humanities, but it is surprisingly underused in ecology and conservation. Adopting virtual conferencing entails a number of challenges, including logistics and unified acceptance, which we argue can be overcome through planning and technology. We examined 4 conference models: a pure‐virtual model and 3 hybrid hub‐and‐node models, where hubs stream content to local nodes. These models collectively aim to mitigate the logistical and administrative challenges of global knowledge transfer. Embracing virtual conferencing addresses 2 essential prerequisites of modern conferences: lowering carbon emissions and increasing accessibility for remote, time‐ and resource‐poor researchers, particularly those from developing countries.     

International environmental agreements with consistent conjectures

We introduce consistent conjectures into Barrett (1994) canonical model of international environmental agreements. The existing literature assumes inconsistent Nash conjectures, despite the fact that policymakers recognize that abatement levels are strategic substitutes and increases in abatement generate carbon leakage. With consistent conjectures much of the conventional wisdom is reversed. The non-cooperative abatement level is below the Nash equilibrium. The difference between Nash and consistent conjectures is greatest when benefits are large and costs are small. We find that large coalitions cannot form. However, small coalitions can result in substantial increases in abatement relative to the non-cooperative outcome.     

Domestic politics and the formation of international environmental agreements

We investigate the effect of domestic politics on international environmental policy by incorporating into a classic stage game of coalition formation the phenomenon of lobbying by special-interest groups. In doing so, we contribute to the theory of international environmental agreements, which has overwhelmingly assumed that governments make decisions based on a single set of public-interest motivations. Our results suggest that lobbying on emissions may affect the size of the stable coalition in counterintuitive ways. In particular, a powerful business lobby may increase the government's incentives to sign an agreement, by providing it with strong bargaining power with respect to that lobby at the emission stage. This would result in lower total emissions when the number of countries involved is not too large. We also show that things change radically when lobbying bears directly on the membership decisions, suggesting that both the object and timing of lobbying matter for the way in which membership decisions, emissions and welfare are affected.     

Development of a low-carbon economy in China

Under the pressures of climate change, many countries are trying to adapt to a low-carbon economy. In this paper, we review the development pattern of the low-carbon economy of major countries and its impact on the world economy. We then argue that economic development and abatement of greenhouse gas (GHG) emissions in China should be balanced. The challenges that China faces should also be considered carefully. It is necessary for China to find an approach to solve the issues of climate change, which should include new technologies and establishing incentive mechanisms and reform-oriented policies. These guidelines can adjust the structure of the economy and energy use, improve energy efficiency, promote the development of alternative and renewable energy, enhance the potential of carbon sinks, and develop advanced technology to perfect a 'Clean Development Mechanism' and sustainable development through international cooperation.     

Cross-country electricity trade,renewable energy and European transmission infrastructure policy

This paper develops a multi-country multi-sector general equilibrium model, integrating high-frequency electricity dispatch and trade decisions, to study the effects of electricity transmission infrastructure (TI) expansion and renewable energy (RE) penetration in Europe for gains from trade and carbon dioxide emissions in the power sector. TI can benefit or degrade environmental outcomes, depending on RE penetration: it complements emissions abatement by mitigating dispatch problems associated with volatile and spatially dispersed RE but also promotes higher average generation from low-cost coal if RE production is too low. Against the backdrop of European decarbonization and planned TI expansion, we find that emissions increase for current and targeted year-2020 levels of RE production and decrease for year-2030 targets. Enhanced TI yields sizeable gains from trade that depend positively on RE penetration, without creating large adverse impacts on regional equity.     

Achievements,challenges and global implications of China’s carbon neutral pledge

China has been committed to achieving carbon neutrality by 2060. China’s pledge of carbon neutrality will play an essential role in galvanising global climate action, which has been largely deferred by the Covid-19 pandemic. China’s carbon neutrality could reduce global warming by approximately 0.2–0.3 °C and save around 1.8 million people from premature death due to air pollution. Along with domestic benefits, China’s pledge of carbon neutrality is a “game-changer” for global climate action and can inspire other large carbon emitters to contribute actively to mitigate carbon emissions, particularly countries along the Belt and Road Initiative (BRI) routes. In order to achieve carbon neutrality by 2060, it is necessary to decarbonise all sectors in China, including energy, industry, transportation, construction, and agriculture. However, this transition will be very challenging, because major technological breakthroughs and large-scale investments are required. Strong policies and implementation plans are essential, including sustainable demand, decarbonizing electricity, electrification, fuel switching, and negative emissions. In particular, if China can peak carbon emissions earlier, it can lower the costs of the carbon neutral transition and make it easier to do so over a longer time horizon. China’s pledge of carbon neutrality by 2060 and recent pledges at the 26^th UN Climate Change Conference of the Parties (COP26) are significant contributions and critical steps for global climate action. However, countries worldwide need to achieve carbon neutrality to keep the global temperature from growing beyond the level that will cause catastrophic damages globally.     

Co-benefits and additionality of the clean development mechanism: An empirical analysis

The Clean Development Mechanism (CDM) allows industrialized countries to comply with the Kyoto Protocol by using carbon offsets from developing countries. There are two puzzles within this carbon market: additionality (the proposed activity would not have occurred in its absence) and co-benefits (the project has other environmental benefits besides climate mitigation). This paper proposes an econometric approach to evaluate the CDM effect on sulfur dioxide emission reductions and assess its additionality indirectly. Our empirical model is applied to China's emissions at the prefecture level. We found that the CDM does not have a statistically significant effect in lowering sulfur dioxide emissions. This result casts doubt on additionality of these CDM activities, that is, they would have happened anyway.     

Strategic climate policy with offsets and incomplete abatement: Carbon taxes versus cap-and-trade

This paper provides a first analysis of a “policy bloc” of fossil fuel importers which implements an optimal climate policy, faces a (non-policy) fringe of other fuel importers, and an exporter bloc, and purchases offset from the fringe. We compare a carbon tax and a cap-and-trade scheme for the policy bloc, in either case accompanied by an efficient offset mechanism for reducing emissions in the fringe. The policy bloc is shown to prefer a tax over a cap, since only a tax reduces the fuel export price and by more when the policy bloc is larger. Offsets are also more favorable to the policy bloc under a tax than under a cap. The optimal offset price under a carbon tax is below the tax rate, while under a cap and free quota trading the offset price must equal the quota price. The domestic carbon and offset prices are both higher under a tax than under a cap when the policy bloc is small. When the policy bloc is larger, the offset price can be higher under a cap. Fringe countries gain by mitigation in the policy bloc, more under a carbon tax since the fuel import price is lower.     

低碳经济与农业发展思考

大气中碳浓度的升高是导致全球气候变化的主要原因.以低能耗、低排放、低污染为特征的低碳经济是目前人类应对全球气候变化,减缓温室气体排放的根本出路.农业生产与全球气候变化息息相关,农业是温室气体的第二大重要来源,如何减少农业温室气体排放量并探寻减排方法已经成为当务之急.从低碳经济这一热点问题谈起,论述了农业生产与全球气候变化的关系,以及当前农业面临的问题和挑战,提出了发展低碳农业的对策以及具体措施,旨在为呼应低碳经济,应对全球气候变化提供科学决策,促进现代农业由高碳经济向低碳经济转型,实现农业的可持续发展.