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.     

Carbon trading across sources and periods constrained by the Marrakesh Accords

We examine the potential effects on permit prices and abatement costs of four compliance rules governing emissions trade across sources and periods in the Kyoto Protocol: The banking rule that allows excess permits to be used later; the restoration rate rule that penalizes borrowing; the commitment period reserve rule that limits sales; and finally, the suspension rule that restricts borrowing and sales. Our framework is a two-period model where parties may be out of compliance in the Kyoto period, but are assumed to comply at a later time. Under varying assumptions about market power and US participation, we find that the rules may have pronounced effects on individual costs, but overall efficiency is not severely affected.     

Heterogeneous firms and the environment: a cap-and-trade program

Currently, cap-and-trade programs are a cornerstone of many countries' climate change policies and proposals. This paper investigates the economic and environmental effects of different climate change policy designs in a general equilibrium setting with heterogeneous firms and monopolistic competition. The analysis predicts that the cap on emissions perfectly defines the environmental quality but has no effect on firms' profits, or decisions to enter or exit the market. In contrast, increasing the share of free allocations of emission allowances, as opposed to auctions, has no effect on environmental quality but reallocates resources among firms toward the most productive ones which has an impact on firms' entry and exit decisions, the mass of firms, and the composition of the market. Firm heterogeneity magnifies these economic effects of changes in the initial allocation of allowances. The paper provides a decomposition of the change in aggregate emissions which takes account of the changes at sector level, across the firms within a sector, and at the firm level.     

Market design in cap and trade programs: Permit validity and compliance timing

Cap and trade programs have considerable heterogeneity in permit validity and compliance timing. For example, permits have different validities across time (e.g., banking, borrowing, and seasons) and space (e.g., zonal restrictions), and compliance timing can be annual, in overlapping cycles, or in multi-year periods. We discuss nine prominent cap and trade programs along these dimensions and construct a general model of permit validity and compliance timing. We derive sufficient conditions under which abatement is invariant to compliance timing, i.e., compliance timing cannot smooth abatement cost shocks. Under these conditions, (i) expected compliance costs are invariant, (ii) the variance of compliance costs increases with the delayed compliance, (iii) equilibrium prices may not be unique, and (iv) the delayed compliance equilibrium may rely on “degenerate” prices not determined by marginal abatement costs. We demonstrate the model's broad applicability by illustrating different types of temporal permit validity.     

Terminating links between emission trading programs

Links between emission trading programs are not immutable, as highlighted by New Jersey׳s exit from the Regional Greenhouse Gas Initiative in 2011. This raises the question of what to do with existing permits that are banked for future use—choices that have consequences for market behavior in advance of, or upon speculation about, delinking. We consider two delinking policies. One differentiates banked permits by origin, the other treats banked permits the same. We describe the price behavior and relative cost-effectiveness of each policy. Treating permits differently generally leads to higher costs, and may lead to price divergence, even with only speculation about delinking.     

Enforcement and price controls in emissions trading

This paper examines how enforcement affects the structure and performance of emissions trading programs with price controls under uncertainty about firms' abatement costs. The analysis highlights how an enforcement strategy can cause abatement-cost risk to be transmitted to enforcement costs via the price of permits. When this occurs, accommodating the effect of abatement-cost risk with an optimal policy results in higher expected emissions and lower expected permit price than their second-best optimal values. However, it is possible to design an enforcement strategy that shields enforcement costs from abatement-cost risk by tying sanctions directly to permit prices. This enforcement strategy stabilizes enforcement effort, the optimal permit supply and price controls are independent of enforcement costs, and the policy produces the second-best optimal outcome.     

Incentives and prices in an emissions trading scheme with updating

Emissions trading schemes where allocations are based on updated baseline emissions give firms less incentive to reduce emissions for a given quota (or allowance) price. Nevertheless, according to Böhringer and Lange [On the design of optimal grandfathering schemes for emission allowances, Europ. Econ. Rev. 49 (2005) 2041–2055], such allocation schemes are cost-effective if the system is closed and allocation rules are identical across firms. In this paper, we show that the cost-effective solution may be infeasible if marginal abatement costs grow too fast. Moreover, if a price cap or banking/borrowing is introduced, the abatement profile is no longer the same as in the case with an auction (or lump-sum allocation). In addition, we show that with allocation based on updated emissions, the quota price will always exceed marginal abatement costs, possibly misguiding policy makers and investors about abatement costs. Numerical simulations indicate that the quota price most likely will be several times higher than marginal abatement costs, unless a significant share of allowances is auctioned.     

Male butterfly investment in successive ejaculates in relation to mating system

In Lepidoptera, female mating systems range from strict monandry to strong polyandry. Males transfer an ejaculate during copulation that contains both sperm and accessory gland substances. In butterflies the male ejaculate has at least three effects: it (1) contains sperm that can fertilize the eggs of the male’s mating partner, (2) influences the refractory period of the mated female, and (3) contains nutrients that can be used by the female to increase her reproductive output. A number of recent studies have shown that males in polyandrous mating systems are endowed with adaptations to increase mating capabilities. Relative to males in more monandrous species they transfer larger first ejaculates which contain relatively more protein, and allocate proportionally more resources to reproduction. The objective of this study was to compare male reproductive investment in successive ejaculates, in terms of both mass and quality, to determine if males of polyandrous species are capable of maintaining the production of larger and more nutritious ejaculates than males of more monandrous species. We used three species of pierid butterfly, with mating systems ranging from relative monandry to polyandry. The degree of polyandry had a substantial effect on the reproductive performance of males. The cumulative protein content of ejaculates increased with the degree of polyandry. Only males of the most polyandrous species, Pieris rapae, produced three successive ejaculates of similar mass and protein content. In the relatively monandrous species, Aporia crataegi and P. brassicae, males in subsequent matings never produced another ejaculate as large as that transferred by males mating for the first time, although the protein content (mg) of ejaculates did not differ in second and third ejaculates. Moreover, the ability to remate varied with the degree of polyandry. Given the opportunity to remate, the majority of P. rapae males mated three times, whereas relatively few A. crataegi and P. brassicae males were able to perform three matings. These results suggest that male capacity to produce large, nutritious ejaculates is limited in relatively monandrous species. In this study only males belonging to the most polyandrous species had the ability to recuperate quickly from a mating event and remate. Our results suggest that males in polyandrous systems are better adapted to mating more than once. Received: 3 November 1995/Accepted after revision: 13 July 1996     

Status of Species Conservation Banking in the United States

Abstract:  Receiving financial gains for protecting habitat may be necessary to proactively protect endangered species in the United States. Species conservation banking, the creation and trading of "credits" that represent biodiversity values on private land, is nearly a decade old. We detail the biological, financial, and political experience of conservation banking in the United States. We contacted agencies, nongovernmental organizations, and bank owners and compiled comprehensive accounts of the experiences of current banks. There are 76 properties identified as conservation banks in the United States, but only 35 of these are established under a conservation banking agreement approved by the U.S. Fish and Wildlife Service (USFWS). The 35 official conservation banks cumulatively cover 15,987 ha and shelter a range of biodiversity, including more than 22 species listed under the U.S. Endangered Species Act. Financial motives drove the establishment of 91% of conservation banks, and the majority of for-profit banks are breaking even or making money. With credit prices ranging from $3,000 to $125,000/0.41 ha (1 acre), banking agreements offer financial incentives that compete with development and provide a business-based argument for conserving habitat. Although the bureaucracy of establishing an agreement with the USFWS was burdensome, 63% of bank owners reported they would set up another agreement given the appropriate opportunity. Increasing information sharing, decreasing the time to establish agreements (currently averaging 2.18 years), and reducing bureaucratic challenges can further increase the amount of private property voluntarily committed to banking. Although many ecological uncertainties remain, conservation banking offers at least a partial solution to the conservation versus development conflict over biodiversity.     

Investment in cleaner technology and signaling distortions in a market with green consumers

I analyze the pricing and investment behavior of a firm that signals the environmental attributes of its production technology through its price to uninformed environmentally conscious consumers. I then analyze the effect of change in environmental regulation on the signaling outcome and the firm's ex ante incentive to invest in cleaner technology. When regulation is weak, a firm signals cleaner technology through higher price; in this case, the firm earns lower profit when it has cleaner technology and thus, has no incentive to invest in cleaner technology. The price charged by the clean firm declines sharply beyond a critical level of regulation. When regulation is sufficiently stringent, the firm with cleaner technology charges lower price but earns higher signaling profit, and ex ante the firm has positive incentive to invest in cleaner technology. With weak regulation, the incentive of the firm to directly disclose its environmental performance rather than signal it through price is increasing in the level of regulation; the opposite holds when regulation is sufficiently stringent.     

Sperm exchange in a simultaneous hermaphrodite

Many simultaneously hermaphroditic animals cross-inseminate when copulating, even though unilateral sperm exchange is functionally possible. The question is why reciprocity is the rule. This study addresses sperm exchange in a hermaphroditic planarian flatworm, Dugesia polychroa, in which self-fertilisation does not occur. We investigated the availability of self sperm for inseminating a partner, how self sperm affects the likelihood of sperm donation, and whether sperm donation depends on reciprocation by the partner. The amount of self sperm depended on body size, duration of isolation and experimental date, and animals that had more self sperm were more likely to mate. Depletion of allosperm (sperm received from partners) played only an indirect role, suggesting that animals copulate more to donate sperm rather than to replenish allosperm reserves. Among 60 copulating pairs, reciprocal insemination was more common (63.3%) than unilateral transfer (18.3%). A surprising 18.3% did not exchange sperm in either direction. Individuals were more likely to behave like their partners, resulting in more symmetrical matings (either reciprocity or no sperm exchange) than asymmetrical matings (unilateral sperm donation). The amount of self sperm donated during a copulation depended mainly on the amount available before the copulation and not on the amount received from the partner. The results suggest that conditional sperm exchange, or sperm trading, takes place in D. polychroa. Received: 31 May 1997 / Accepted after revision: 1 December 1997     

天津市排污权交易评估与分析

在简要介绍天津市排污权交易试点的开展历程与现状的基础上,对天津市排污交易试点进行了评估。分析了排污交易试点过程中存在的主要问题,即排污权交易难以为环境管理服务,其执行状况与实施初衷不完全相符,基础数据的现状尚不支持交易的有效进行,交易跟踪系统尚不健全,初始排污权分配技术方法不成熟。针对以上问题,对＂十二五＂期间天津市排污交易试点开展提出了建议。     

Economic Growth and Biodiversity Loss in an Age of Tradable Permits

Abstract:  Tradable permits are increasingly becoming part of environmental policy and conservation programs. The efficacy of tradable permit schemes in addressing the root cause of environmental decline—economic growth—will not be achieved unless the schemes cap economic activity based on ecological thresholds. Lessons can be learned from the largest tradable permit scheme to date, emissions trading now being implemented with the Kyoto Protocol. The Kyoto Protocol caps neither greenhouse gas emissions at a level that will achieve climate stability nor economic growth. If patterned after the Kyoto Protocol, cap-and-trade schemes for conservation will not ameliorate biodiversity loss either because they will not address economic growth. In response to these failures to cap economic growth, professional organizations concerned about biodiversity conservation should release position statements on economic growth and ecological thresholds. The statements can then be used by policy makers to infuse these positions into the local, national, and international environmental science-policy process when these schemes are being developed. Infusing language into the science-policy process that calls for capping economic activity based on ecological thresholds represents sound conservation science. Most importantly, position statements have a greater potential to ameliorate biodiversity loss if they are created and released than if this information remains within professional organizations because there is the potential for these ideas to be enacted into law and policy.     

The spatial links tool: Automated mapping of habitat linkages in variegated landscapes

The removal, alteration and fragmentation of habitat in many parts of the world has led to a loss of biodiversity. Within the prevailing societal limitations the process is not easily reversed. Attempts are being made to minimise the fragmentation of remaining habitat by strategically reversing or managing habitat loss. Although their relative usefulness is a topic of debate among ecologists, habitat corridors are seen as one way of maintaining spatially dependent ecological processes within landscapes where habitat has been seriously depleted. Corridors can only be effective if they significantly contribute to the species sustaining processes of gene flow, resource access or the colonisation of vacant patches. We present a spatial habitat modelling methodology for evaluating the contribution and potential contribution of connecting paths to landscape connectivity. We have developed the spatial links tool (SLT), which maps link value across a region. The SLT combines connectivity measures from metapopulation ecology with the least cost path algorithm from graph theory, and can be applied to continuously variable landscape data. Combined with expert judgement, link value maps can be used to delineate habitat corridors. The approach capitalises on some synergies between ecological relevance and computational efficiency to produce an easily applied heuristic tool that has been successfully applied in NSW Australia.     

On reducing the windfall profits in environmental subsidy programs

Investment subsidies are widely used to induce adoption of new technologies that can lower the (marginal) cost of reducing emissions. To economize on these subsidies, governments would like to distinguish between firms that need to receive a subsidy to adopt a new technology, and firms that would adopt that technology even without subsidies. We show that policies consisting of a menu of emission taxes and investment subsidies can potentially induce firms to self-select.     

Local Participation in Natural Resource Monitoring: a Characterization of Approaches

Abstract: The monitoring of trends in the status of species or habitats is routine in developed countries, where it is funded by the state or large nongovernmental organizations and often involves large numbers of skilled amateur volunteers. Far less monitoring of natural resources takes place in developing countries, where state agencies have small budgets, there are fewer skilled professionals or amateurs, and socioeconomic conditions prevent development of a culture of volunteerism. The resulting lack of knowledge about trends in species and habitats presents a serious challenge for detecting, understanding, and reversing declines in natural resource values. International environmental agreements require signatories undertake systematic monitoring of their natural resources, but no system exists to guide the development and expansion of monitoring schemes. To help develop such a protocol, we suggest a typology of monitoring categories, defined by their degree of local participation, ranging from no local involvement with monitoring undertaken by professional researchers to an entirely local effort with monitoring undertaken by local people. We assessed the strengths and weaknesses of each monitoring category and the potential of each to be sustainable in developed or developing countries. Locally based monitoring is particularly relevant in developing countries, where it can lead to rapid decisions to solve the key threats affecting natural resources, can empower local communities to better manage their resources, and can refine sustainable‐use strategies to improve local livelihoods. Nevertheless, we recognize that the accuracy and precision of the monitoring undertaken by local communities in different situations needs further study and field protocols need to be further developed to get the best from the unrealized potential of this approach. A challenge to conservation biologists is to identify and establish the monitoring system most relevant to a particular situation and to develop methods to integrate outputs from across the spectrum of monitoring schemes to produce wider indices of natural resources that capture the strengths of each.     

Source apportionment of PM2.5 in Tangshan,China—Hybrid approaches for primary and secondary species apportionment

The new hybrid approaches for the source apportionment of PM_2.5 were proposed. The hybrid approach can be used for source apportionment of secondary species. The metallurgy industry was the biggest contribution source to PM_2.5 of Tangshan. In winter, the contribution from the coal-fired boilers was the largest one. The objective of this paper is to propose a hybrid approach for the source apportionment of primary and secondary species of PM_2.5 in the city of Tangshan. The receptor-based PMF (Positive Matrix Factorization) is integrated with the emission inventory (EI) to form the first hybrid method for the source apportionment of the primary species. The hybrid CAMx-PSAT-CP (Comprehensive Air Quality Model with Extensions – Particulate Source Apportionment Technology – Chemical Profile) approach is then proposed and used for the source apportionment of the secondary species. The PM_2.5 sources identified for Tangshan included the soil dust, the metallurgical industry, power plants, coal-fired boilers, vehicles, cement production, and other sources. It is indicated that the PM_2.5 pollution is a regional issue. Among all the identified sources, the metallurgy industry was the biggest contribution source to PM_2.5, followed by coal-fired boilers, vehicles and soil dust. The other-source category plays a crucial role for PM_2.5, particularly for the formation of secondary species and aerosols, and these other sources include non-specified sources such as agricultural activities, biomass combustion, residential emissions, etc. The source apportionment results could help the local authorities make sound policies and regulations to better protect the citizens from the local and regional PM_2.5 pollution. The study also highlights the strength of utilizing the proposed hybrid approaches in the identification of PM_2.5 sources. The techniques used in this study show considerable promise for further application to other regions as well as to identify other source categories of PM_2.5.     

Tax versus emissions trading scheme in the long run

In this paper we compare the performance of emission taxes and tradable permits under free market entry when firms face idiosyncratic ex ante cost uncertainty. We show that under auctioned permits insufficient entry occurs, while under a linear emission tax scheme, depending on parameters, market entry can be either excessive or insufficient. Our long-run analysis thus contrasts with Spulber׳s (1985) equivalence result and also modifies Weitzman׳s result in favor of an ETS in that the superiority of a tax over an ETS is not guaranteed, even when the Weitzman condition favors a tax. We also show that an ETS is superior to a tax scheme when the entry cost is low and the magnitude of uncertainty/asymmetric information and the size of the output market are large.     

The role of agri‐environment schemes in conservation and environmental management

Over half of the European landscape is under agricultural management and has been for millennia. Many species and ecosystems of conservation concern in Europe depend on agricultural management and are showing ongoing declines. Agri‐environment schemes (AES) are designed partly to address this. They are a major source of nature conservation funding within the European Union (EU) and the highest conservation expenditure in Europe. We reviewed the structure of current AES across Europe. Since a 2003 review questioned the overall effectiveness of AES for biodiversity, there has been a plethora of case studies and meta‐analyses examining their effectiveness. Most syntheses demonstrate general increases in farmland biodiversity in response to AES, with the size of the effect depending on the structure and management of the surrounding landscape. This is important in the light of successive EU enlargement and ongoing reforms of AES. We examined the change in effect size over time by merging the data sets of 3 recent meta‐analyses and found that schemes implemented after revision of the EU's agri‐environmental programs in 2007 were not more effective than schemes implemented before revision. Furthermore, schemes aimed at areas out of production (such as field margins and hedgerows) are more effective at enhancing species richness than those aimed at productive areas (such as arable crops or grasslands). Outstanding research questions include whether AES enhance ecosystem services, whether they are more effective in agriculturally marginal areas than in intensively farmed areas, whether they are more or less cost‐effective for farmland biodiversity than protected areas, and how much their effectiveness is influenced by farmer training and advice? The general lesson from the European experience is that AES can be effective for conserving wildlife on farmland, but they are expensive and need to be carefully designed and targeted.     

Permitted emissions of major air pollutants from coal-fired power plants in China based on best available control technology

Based on the activity level and technical information of coal-fired power-generating units (CFPGU) obtained in China from 2011 to 2015, we, 1) analyzed the time and spatial distribution of SO₂ and NO_x emission performance of CFPGUs in China; 2) studied the impact of installed capacity, sulfur content of coal combustion, and unit operation starting time on CFPGUs’ pollutant emission performance; and 3) proposed the SO₂ and NO_x emission performance standards for coal-fired power plants based on the best available control technology. Our results show that: 1) the larger the capacity of a CFPGU, the higher the control level and the faster the improvement; 2) the CFPGUs in the developed eastern regions had significantly lower SO₂ and NO_x emission performance values than those in other provinces due to better economic and technological development and higher environmental management levels; 3) the SO₂ and NO_x emission performance of the Chinese thermal power industry was significantly affected by the single-unit capacity, coal sulfur content, and unit operation starting time; and 4) based on the achievability analysis of best available pollution control technology, we believe that the CFPGUs’ SO₂ emission performance reference values should be 0.34 g/kWh for active units in general areas, 0.8 g/kWh for active units in high-sulfur coal areas, and 0.13 g/kWh for newly built units and active units in key areas. In addition, the NO_x emission performance reference values should be 0.35 g/kWh for active units in general areas and 0.175 g/kWh for new units and active units in key areas.

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