Linking Russia with the European and global greenhouse gas emissions trading markets: three paths for greening the Russian assigned amount under the Kyoto Protocol

This article examines possibilities for linkage between the European Union Emissions Trading System (EU ETS) and Russia, with a view to enhancing cooperation on a broader scale than the project-based approaches that have been tested thus far. Three paths for possible EU-Russia linkage are presented by which the Russian Assigned Amount under the Kyoto Protocol can be greened in order to stimulate emissions trading: 1. Joint implementation—reductions earned via individual projects in Russia; 2. Greened allowances or green investment schemes; and 3. Linked cap-and-trade systems, in which a Russian domestic emissions trading system would link with the European Union Emissions Trading System. The authors conclude that the third option, emissions trading through linked domestic emissions trading systems, offers the best opportunities at the lowest transaction costs. The authors discuss useful innovative instruments like call options and slip level arrangements on government-to-government and business-to-business levels.

Fairness aspects of linking the European emissions trading scheme under a long-term stabilization scenario for CO2 concentration

Climate equity is a crucial but difficult element in negotiations on a post-2012 climate regime. With respect to the trading of greenhouse gas emissions the equity aspect is considered in the Kyoto Protocol which demands that emissions trading should be supplemental to domestic abatement efforts. The question arises whether a linking of the European Union Emissions Trading Scheme (EU ETS) to non-EU emission trading schemes or the Clean Development Mechanism (CDM) could have an impact on principles of climate justice and thus potentially affect ongoing negotiations. In this study, we present the results of a three step analysis: In a first step, it estimates mid-term greenhouse gas emission entitlements for Annex B and Non-Annex B countries for the year 2020 which keep within reach a stabilization of the CO₂ concentration at 450 ppmv in the long-term. In the second step, the resulting emission entitlements are used as an input to an economic partial-equilibrium model in order to assess the shift of abatement efforts under different scenarios of linking the EU ETS. In a third step, we analyze the outcome of the economic model with respect to the future trend of European per capita emissions under the current EU ETS relative to different scenarios of linking the EU ETS. The model results indicate that European per capita emissions have to be reduced to a considerably smaller extent if a linking of the EU ETS is accompanied by an optimal design of the National Allocation Plans and if low-cost CO₂ permits became available via the CDM to a large extent.

Advancing the climate regime through linking domestic emission trading systems?

More and more countries are incorporating the instrument of emissions trading into their national climate policies. This emerging mosaic of emissions trading schemes (ETS) raises the question of whether they should be linked with each other. From an economic point of view, linking of domestic schemes is supposed to increase the economic efficiency of carbon markets. In addition, linking is also expected by some to yield substantial political benefits in terms of the evolution of the UNFCCC/Kyoto regime. However, these optimistic prospects are based on a best-case scenario where all major countries establish environmentally effective emissions trading systems and then link them with each other. Real-life politics might develop rather differently. This paper therefore examines to what extent the current status of emissions trading in industrialised countries provides a basis for reinforcing and moving forward the international climate regime through linking domestic ETS. After comparing emerging emissions trading schemes from an institutional perspective, it emerges that not only emissions trading is at a very early stage in most countries, in addition the emerging systems are probably going to be designed very differently from the EU ETS. While for some design features such as the coverage design differences do not matter, there are some areas where the plans in many non-EU countries look crucially different from the EU system. The outlook for a linked international ETS is therefore currently still very uncertain. Given this state of affairs, the EU should pro-actively engage with the non-EU countries to try to harmonise their developing national emissions trading schemes with the EU ETS, widely disseminate the lessons it has learned from the EU ETS, strongly make the case for environmental integrity and at the same time make clear that systems that want to link to the EU ETS will need to meet certain quality criteria.

Linking the Northeast states of the US mitigation program to the EU Emission Trading Scheme—Implications and costs

It is argued that there are at least five reasons for the Northeast states of the United States to implement a regional emission trading scheme for carbon dioxide despite the lack of federal policy regulations: goodwill, learning, political influence, risk management and competitiveness interests. Using an energy-economy model, the carbon price to bring the firms into compliance with a 10% reduction by 2020 is estimated to be 20-150 US$ per ton C. There have been discussions about linking the ongoing EU Emission Trading Schemes to the Northeast state initiative. The prime argument is that such a linkage would encourage a change of the federal US policy, which has traditionally followed action taken at the state level. Emissions trading with binding mitigation commitments could thus be demanded and accepted also on federal level. This paper demonstrates that the impact of linkage on permit prices depends on the reduction target in the European scheme: A low EU target results in a net flow of permits to the Northeast scheme, while a 40% EU reduction target results in a net flow of permits from the Northeast. Flow of permits from the Northeast state must be compensated for by the EU because the United States is not a party of the Kyoto Protocol. The EU must therefore buy permits in allowances recognized in the Kyoto regime in an amount equal to the net flow of permits from the Northeast states.

Setting greenhouse gas emission targets under baseline uncertainty: the Bush Climate Change Initiative

There is substantial uncertainty regarding baseline greenhouse gas (GHG) emissions forecasts—i.e., how GHG emissions will grow over time in the absence of policy intervention. Thus baseline uncertainty should be a key consideration in setting GHG emissions targets as a mitigation strategy to respond to global climate change. At a minimum, the emissions target must be less than the baseline level to induce changing behavior and new investment. Despite this fundamental policy criterion, baseline considerations have played only a minor role in target setting under international climate policy. Baseline uncertainty applies to both absolute and intensity based emissions targets. It is demonstrated that one advantage of intensity targets is reduced uncertainty in the projected baseline, however there will always be some residual uncertainty in model projections. To illustrate the importance of considering baseline uncertainty in GHG target setting, the Bush Climate Change Initiative is analyzed against its projected baseline as a case study of a modest intensity target. Based on comparison with historical data, the range of projections by major energy-economic models, past discrepancies in the accuracy of model projections and the added complexity of sector-specific drivers for non-CO₂ GHGs, it is shown that the Bush Initiative cannot be guaranteed or even expected to deliver actual reductions against an uncertain baseline. This finding emphasizes the importance of setting a target that accounts for baseline uncertainty to achieve genuine mitigation of GHG emissions.

Assessing the dynamic efficiency of internal mitigation projects. An evolutionary perspective

Internal mitigation projects have recently been proposed as an additional flexibility mechanism, particularly in the context of the European Union. Their main objective is to engage sectors not included in the European Union emissions trading scheme (EU ETS) in cost-effective emissions reductions. However, in this paper it is argued that, when assessed in terms of dynamic efficiency, the instrument is likely to be, at best, irrelevant to induce the scale of systemic technological changes which are required to tackle the climate change problem and, at worst, detrimental for this task. Insights from the Evolutionary Economics of technological change complemented with political economy considerations are used to support this claim.

Greenhouse gas mitigation in developing countries through technology transfer?: a survey of empirical evidence

While greenhouse gas (GHG) emissions are projected to rise primarily in the developing countries, the potential for developing new GHG mitigation technologies exists primarily in the industrialized countries. It is thus important, not only for predictions about future emission paths but also for climate change mitigation policies, to understand how the international diffusion of such technologies takes place and how it affects the energy infrastructure and GHG emissions in developing countries. This paper provides an overview of the channels through which these technologies diffuse and focuses on the empirical evidence pertaining to the effects these technologies have on GHG emissions in developing countries.

Land use change and forestry climate project regional baselines: a review

Climate change programs have largely used the project-specific approach for estimating baseline emissions of climate mitigation projects. This approach is subjective, lacks transparency, can generate inconsistent baselines for similar projects, and is likely to have high transaction costs. The use of regional baselines, which partially addresses these issues, has been reported in the literature on forestry and agriculture projects, and in greenhouse gas (GHG) mitigation program guidance for them (e.g., WRI/WBCSD GHG Project Protocol, USDOE’s 1605(b) registry, UNFCCC’s Clean Development Mechanism). This paper provides an assessment of project-specific and regional baselines approaches for key baseline tasks, using project and program examples. The regional experience to date is then synthesized into generic steps that are referred to as Stratified Regional Baselines (SRB). Regional approaches generally, and SRB in particular explicitly acknowledge the heterogeneity of carbon density, land use change, and other key baseline driver variables across a landscape. SRB focuses on providing guidance on how to stratify lands into parcels with relatively homogeneous characteristics to estimate conservative baselines within a GHG assessment boundary, by applying systematic methods to determine the boundary and time period for input data.

Tropical deforestation in a future international climate policy regime—lessons from the Brazilian Amazon

The possibility of adopting national targets for carbon dioxide (CO₂) emissions from tropical deforestation in a future international climate treaty has received increasing attention recently. This attention has been prompted by proposals to this end and more intensified talks on possible commitments for developing countries beyond the United Nations Framework Convention on Climate Change Kyoto Protocol. We analyze four main scientific and political challenges associated with national targets for emissions from tropical deforestation: (1) reducing the uncertainties in emission inventories, (2) preserving the environmental integrity of the treaty, (3) promoting political acceptance and participation in the regime, and (4) providing economic incentives for reduced deforestation. We draw the following conclusions. (1) Although there are large uncertainties in carbon flux from deforestation, these are in the same range as for other emissions included in the current Kyoto protocol (i.e., non-CO₂ GHGs), and they can be reduced. However, for forest degradation processes the uncertainties are larger. A large challenge lies in building competence and institutions for monitoring the full spectrum of land use changes in developing countries. (2 and 3) Setting targets for deforestation is difficult, and uncertainties in future emissions imply a risk of creating ‘tropical hot air’. However, there are proposals that may sufficiently deal with this, and these proposals may also have the advantage of making the targets more attractive, politically speaking. Moreover, we conclude that while a full carbon accounting system will likely be politically unacceptable for tropical countries, the current carbon accounting system should be broadened to include forest degradation in order to safeguard environmental integrity. (4) Doubts can be cast over the possible effect a climate regime alone will have on deforestation rates, though little thorough analysis of this issue has been made.

Integrating Joint Implementation Projects for Energy Efficiency on the Built Environment with White Certificates in The Netherlands

In this paper we analyze policy interactions between two innovative climate and energy policy instruments, namely White Certificates (WhC) and Joint Implementation (JI) that target at energy efficiency improvement and reductions of Greenhouse Gas (GHG) emissions. We have selected The Netherlands and Bulgaria as a case study given that the former has a cumulated experience in energy efficiency policies and the latter for a growing potential in JI projects as a host country. Based on a method of analyzing policy interactions, we demonstrate how a possible design of such a scheme can take place and how it should function. A couple of parameters that deserve attention are a baseline definition and a conversion rate for credits. Our basic finding is that an integrated scheme is complementary and can assist substantially in achieving Dutch national United Nations Framework Convention on Climate Change (UNFCCC) Kyoto Protocol targets. Dutch electricity and gas suppliers (parties that receive energy efficiency obligations) can implement energy efficiency projects domestically and in other countries, hence reducing total abatement costs. Furthermore, such a scheme can stimulate further energy efficiency actions from other stakeholders participating in energy markets. Based on an ex-ante assessment, a carefully designed hybrid WhC and JI scheme appears to be effective in terms of targets, efficient, generating positive impacts on markets and society, while uncertain in stimulating innovation.

The interaction between emissions trading and renewable electricity support schemes. An overview of the literature

The public promotion of electricity from renewable energy sources coexists in many countries with the recent implementation of emissions trading schemes. As shown by several papers, this coexistence may lead to significant interactions between both instruments, in the form of synergies and conflicts. This paper provides an overview and analysis of the literature on such coexistence and interactions. A major conclusion is that policy measures aiming at exploiting the synergies between both instruments should be implemented. The greatest synergy effects from the use of both instruments take place through appropriate coordination of their targets. Another key finding is that, although some stylised facts can be inferred from the studies, some results from those complex interactions are context-specific since they depend on the design of the instruments in particular countries. In spite of the significant policy implications of such interactions for the effective and cost-effective functioning of both instruments, this is a surprisingly under searched field. It is so concerning, both, theoretical and empirical analysis.

Linking the EU emissions trading scheme: economic implications of allowance allocation and global carbon constraints

We investigate the role of domestic allowance allocation and global emissions constraints for the carbon-market impacts of linking the EU Emissions Trading Scheme (ETS) internationally. Employing a quantitative simulation model of the global carbon market, we find that the economic benefits from connecting the European ETS to emerging non-EU schemes strongly depend on the regional allowance allocation of the linking participants: In a world of moderate carbon constraints, an economically efficient regional allowance allocation induces a much stronger fall in total compliance costs than a sub-optimal (i.e. too high) domestic allocation of emissions permits. However, a more efficient (i.e. stricter) allocation shifts abatement efforts and compliance costs to energy-intensive industries which are covered by the domestic ETS. We further find that committing to ambitious global emissions reduction targets (compatible with stabilizing CO₂ concentrations at 450 ppm) induces much stronger regional abatement efforts and substantially higher compliance costs for the abating regions. In such an ambitious climate policy regime, an efficient domestic allocation of allowances is even more important from an economic perspective: Here, linking emissions trading schemes diminishes the associated compliance costs on the largest scale.

Ensuring the environmental effectiveness of linked emissions trading schemes over time

Linking emissions trading schemes allows the combined emissions cap to be achieved at lower cost. Linking is usually environmentally neutral, but some design features can lead to higher aggregate emissions if schemes are linked. Technical solutions to limit the potential emissions increases due to design differences implemented when schemes are linked are not sufficient to ensure the environmental effectiveness of the linked schemes over time. Technological, economic, administrative and other changes that can lead to higher aggregate emissions are inevitable. The administrators of the linked schemes must ensure the stringency of the emissions cap relative to the “business as usual” emissions of affected sources, the accuracy of the emissions reported by affected sources, the integrity of the allowance registry, effective compliance enforcement, and the environmental integrity of the credits issued for emission reduction projects over time. This will require a process for agreeing on revisions to the regulations of the linked schemes, a mechanism to provide assurance of the environmental effectiveness of each of the linked schemes, and a procedure for terminating the linking agreement.

Foresty offsets in emissions trading systems: a link between systems?

An important aspect in the linking of different emissions trading schemes is the degree to which these systems allow (or ban) external offset project categories. The EU Emission Trading Scheme (EU ETS) currently allows the use of credits from energy and industry projects developed under the Kyoto Protocol’s Joint Implementation (JI) and Clean Development Mechanism (CDM) but excludes the use of carbon credits from forestry projects for compliance in the EU ETS. Forestry credits generated by the CDM have a limited lifetime and expire at the end of a project’s crediting period, or earlier if the carbon stock for which the credits have been issued ceases to exist. According to the recently adopted amendment of the EU ETS Directive forestry credits will remain to be excluded until 2020. The present article reviews how the New South Wales Greenhouse Gas Abatement Scheme (Australia), the Regional Greenhouse Gas Initiative (US) and the voluntary scheme of the Chicago Climate Exchange integrate forestry offsets into the respective system and how they deal with the risk of losing stored and credited biomass. By comparing the results of different scenarios this article shows how differences in the treatment of forestry offsets could impact the efforts to link various emission trading systems in future.

Complementarity between mitigation and adaptation: the water sector

The water cycle, a fundamental component of climate, is likely to be altered in important ways by climate change. Climate change will most likely worsen the already existing water related problems. Then the question is how should policy makers respond to this dilemma. Climate change mitigation, through greenhouse gas (GHG) emissions reduction and sequestration is not a sufficient response. Adaptation will also need to feature as a response strategy. Mitigation and adaptation need to be viewed as complementary responses to climate change. Complementarity between adaptation and mitigation in the water sector will be addressed in this paper. The paper will also outline the main impacts of climate change on water resources and identify those areas that are most dependent and vulnerable to hydrological systems (e.g., hydroelectric systems, irrigation, agriculture) and any changes thereof resulting from climate change. It will aim to assess the impact of water demand and water use, with a view to identifying the main relationships between mitigation and adaptation in the water sector and the means through which individual mitigation and adaptation actions can potentially interact with each other for the benefit of the water sector as a whole. It will also explore the implications of climate change on the management of water resources. Adaptation and mitigation options would be considered in the context of their socio-economic and environmental impacts and their contribution to sustainable development. A brief evaluation of how this information can be directly used for planning purpose will also be presented.

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Socioeconomic potential of carbon sequestration through agroforestry in the West African Sahel

The recognition of agroforestry as a greenhouse-gas mitigation strategy under the Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC) offers an opportunity to agroforestry practitioners to benefit from the global Carbon (C) credit market. Our knowledge on this important topic from the semiarid regions such as the West African Sahel (WAS) is, however, very limited. In order to fill this gap, this study was undertaken in the Ségou region of Mali (annual temperature, 29°C; annual rainfall, 300–700 mm in 60 to 90 days), focusing on two improved agroforestry systems (live fence and fodder bank) along with traditional parkland agroforestry systems of the region. A cost–benefit analysis was conducted to assess the economic profitability and risks associated with the systems considering them as 25-year projects and their potential for participation in C credit market. The traditional systems had high C stock in their biomass and soil, but little potential for sequestering additional C; on the other hand, the improved systems had low C stock, but high sequestration potential. For the standard size live fence (291 m) and fodder bank (0.25 ha) projects, the estimated net present values (NPV) were $ 96.0 and $158.8 without C credit sale, and $109.9 and $179.3 with C sale, respectively. From the C sale perspective, live fence seemed less risky and more profitable than fodder bank. Carbon credit sale is likely to contribute to economic development of the subsistence farmers in the WAS.

Adaptation and mitigation as complementary tools for reducing the risk of climate impacts

This paper uses the likelihood of flooding along Brahmaputra and Ganges Rivers in India to explore the hypothesis that adaptation and mitigation can be viewed as complements rather than sustitutes. For futures where climate change will produce smooth, monotonic and manageable effects, adopting a mitigation strategy is shown to increase the ability of adaptation to reduce the likelihood of crossing critical threshold of tolerable climate. For futures where climate change will produce variable impacts overtime, though, it is possible that mitigation will make adaptation less productive for some time intervals. In cases of exaggerated climate change, adaptation may fail entirely regardless of how much mitigation is applied. Judging the degree of complementarity is therefore an empirical question because the relative efficacy of adaptation is site specific and path dependent. It follows that delibrations over climate policy should rely more on detailed analyses of how the distributions of possible impacts of climate might change over space and time.

Impact of bioenergy crops in a carbon dioxide constrained world: an application of the MiniCAM energy-agriculture and land use model

In the coming century, modern bioenergy crops have the potential to play a crucial role in the global energy mix, especially under policies to reduce carbon dioxide emissions as proposed by many in the international community. Previous studies have not fully addressed many of the dynamic interactions and effects of a policy-induced expansion of bioenergy crop production, particularly on crop yields and human food demand. This study combines an updated agriculture and land use (AgLU) model with a well-developed energy-economic model to provide an analysis of the effects of bioenergy crops on energy, agricultural and land use systems. The results indicate that carbon dioxide mitigation policies can stimulate a large production of bioenergy crops, dependent on the level of the policy. This production of bioenergy crops can lead to several impacts on the agriculture and land use system: decreases in forestland and unmanaged land, decreases in the average yield of food crops, increases in the prices of food crops, and decreases in the level of human demand of calories.

Methodological issues in forestry mitigation projects: a case study of Kolar district

There is a need to assess climate change mitigation opportunities in forest sector in India in the context of methodological issues such as additionality, permanence, leakage and baseline development in formulating forestry mitigation projects. A case study of forestry mitigation project in semi-arid community grazing lands and farmlands in Kolar district of Karnataka, was undertaken with regard to baseline and project scenario development, estimation of carbon stock change in the project, leakage estimation and assessment of cost-effectiveness of mitigation projects. Further, the transaction costs to develop project, and environmental and socio-economic impact of mitigation project was assessed. The study shows the feasibility of establishing baselines and project C-stock changes. Since the area has low or insignificant biomass, leakage is not an issue. The overall mitigation potential in Kolar for a total area of 14,000 ha under various mitigation options is 278,380 t C at a rate of 20 t C/ha for the period 2005–2035, which is approximately 0.67 t C/ha/year inclusive of harvest regimes under short rotation and long rotation mitigation options. The transaction cost for baseline establishment is less than a rupee/t C and for project scenario development is about Rs. 1.5–3.75/t C. The project enhances biodiversity and the socio-economic impact is also significant.

Application of the “Climafor” baseline to determine leakage: the case of Scolel Té

The acceptance of forestry-based project activities to mitigate greenhouse gases emissions has been subjected to a number of methodological questions to be answered, of which the most challenging are baseline establishment and identification of and measuring leakage. Here we pose hypotheses for and quantify leakage of the Scolel Té project in Chiapas, Mexico. In this project small-scale farmers are implementing forestry, agroforestry, and forest conservation activities, with carbon sequestration as one of the goals. The main leakage monitoring domain is defined as the area owned by the participating farmers or communities outside the area where the specific project activities take place. The null-hypothesis (no leakage) is that non-project land owned by the farmer or community will experience the same carbon stock changes as predicted by the regional baseline, specifically developed for the project. First we assessed the most likely causes and sources of leakage that may occur in the project. From this analysis, one type of leakage seems to be important, i.e., activity shifting. Second we estimated the leakage of a sample of participating farmers and communities. Actual land use was then compared with expected land use derived from the baseline. The Plan Vivo of each participant, complemented with readily available tools to identify the main sources and drivers of leakage are used to develop simple leakage assessment procedures, as demonstrated in this paper. Negative leakage was estimated to be negligible in this study. Incorporating these procedures already in the project planning stage will reduce the uncertainties related to the actual carbon mitigation potential of any forestry project.