The environment as a factor of production

This paper uses firm-level data about electric utilities to develop an empirical model of how electric utilities use and bank SO₂ pollution permits under the Acid Rain Program. The empirical model considers emissions, fuels, and labor as variable inputs with quasi-fixed stocks of permits and capital. Consequently, substitution possibilities between the environment and other production factors can be measured and tested. The results reveal substantial substitution between emissions, permit stocks, capital, fuel, and labor. The empirical findings also indicate that firms bank permits primarily as a hedge against uncertainty and for other firm-specific reasons. Overall, the results suggest that cap-and-trade approaches can reduce the cost of meeting environmental goals by providing a mechanism for addressing regulatory and market risks and by signaling an appropriate price for factor use, especially irreversible capital investments.     

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.

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.

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.

水生植物生物能在苏州市CO2减排中的作用

苏州市的CO2排放量在逐年上升,CO2减排工作任务艰巨。开发无污染的新能源替代化石燃料是CO2减排的一种思路。苏州作为一个江南水乡城市,水资源丰富,水生植物生长旺盛。主要探讨了水生植物(包括藻类和水葫芦)生物能在苏州市CO2减排中的作用。通过粗略估算,藻类和水葫芦产生的年生物能(折算为标准煤)1 200.35万t,大约占苏州年总能耗的四分之一,即可以减少大约四分之一的CO2排放。因此,水生植物生物能在苏州市CO2减排中具有重要的作用。     

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.     

Carbon neutral Biggar: calculating the community carbon footprint and renewable energy options for footprint reduction

The objective of this research was to develop a community carbon footprint model that could be used to assess the size and major components of a community’s carbon dioxide (CO₂) emissions. The town of Biggar aims to become Scotland’s first carbon neutral town. As expected for this rural community, car transport accounted for nearly half of the CO₂ emissions, with natural gas and electricity consumption resulting in a further 24% and 12% of total emissions, respectively, and air travel being the last major component at 10% of emissions. An assessment was also made of the wind and solar resources of the town. One large wind turbine would provide the town’s electricity, while three to four turbines would be needed to offset all CO₂ emissions. In contrast, offsetting by tree planting would require in the region of 2,000 ha of trees.

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.     

Comparing the greenhouse gas emissions from three alternative waste combustion concepts

Three alternative condensing mode power and combined heat and power (CHP) waste-to-energy concepts were compared in terms of their impacts on the greenhouse gas (GHG) emissions from a heat and power generation system. The concepts included (i) grate, (ii) bubbling fluidised bed (BFB) and (iii) circulating fluidised bed (CFB) combustion of waste. The BFB and CFB take advantage of advanced combustion technology which enabled them to reach electric efficiency up to 35% and 41% in condensing mode, respectively, whereas 28% (based on the lower heating value) was applied for the grate fired unit. A simple energy system model was applied in calculating the GHG emissions in different scenarios where coal or natural gas was substituted in power generation and mix of fuel oil and natural gas in heat generation by waste combustion. Landfilling and waste transportation were not considered in the model. GHG emissions were reduced significantly in all of the considered scenarios where the waste combustion concepts substituted coal based power generation. With the exception of condensing mode grate incinerator the different waste combustion scenarios resulted approximately in 1 Mton of fossil CO₂-eq. emission reduction per 1 Mton of municipal solid waste (MSW) incinerated. When natural gas based power generation was substituted by electricity from the waste combustion significant GHG emission reductions were not achieved.     

The regional economic impact of reducing greenhouse gas emissions: Western Australia

This study analyses the general-equilibrium impacts of an international climate change response policy on the economy of Western Australia (WA), one of the most mining-based and energy-intensive states of Australia. It finds that emissions would fall by up to 11% from the base level in WA. However, such environmental benefits emanate at some costs to the state economy; in terms of foregone gross state product, the costs are up to 3% of the base level. Indeed, the actual costs and benefits depend on the precise design of the climate change response policy as well as on the other policies within which it operates. For example, when emission quota permits are sold to industries and no tradeable carbon credits (i.e. credits for the carbon sequestrated in Kyoto forests) are granted, emissions decline by about 8% and GSP falls by about 3% of the base levels. If carbon credits are tradeable, however, the environmental benefits could be increased and the GSP cost could be reduced substantially. Also, the reduced economic activity caused by emission abatement results in a modest fall in net government revenue, despite the additional revenue from permit sales in some cases. Accordingly, government’s fiscal package surrounding the emission permits would influence the emission abatement impacts on the economy. With regard to the effects on the structure of the state economy, the oil and gas industry suffers only a slight contraction but the energy-supplying sector as a whole contracts substantially. It is therefore not surprising that the impacts on the WA economy of curbing emissions by energy and transport industries alone are quite significant when compared to those resulted from all industries’ compliance with the abatement scheme. It needs to be noted that the model projections analysed in the paper are based on simplifying assumptions and tentative scenarios, and hence should be viewed with caution and not be understood as unconditional forecasts.