Tracking the implementation of green credit policy in China: top-down perspective and bottom-up reform

The Chinese government has introduced the green credit policy to mitigate the environmental impact of industrialization by reining in credit loans to companies and projects with poor environmental performance. This research investigated the implementation of the green credit policy both at the national and provincial levels. Our results show that the green credit policy is not fully implemented. The wide-ranging impact on high-polluting and high energy-consuming industries, vague policy details unclear implementing standards, and lack of environmental information are the main problems in the implementation of the green credit policy in China. On the other hand, the practice at local level (Jiangsu Province) is more practical by integrating green credit policy with the environmental performance rating system. Finally, suggestions are outlined to improve China's green credit policy.     

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.     

Air pollution control by economic incentives in the U.S.: Policy,problems, and progress

This paper deals with cost-effectiveness of the economic incentive policies of the bubble concept and offset credits relative to the policy of direct regulations of air emissions. The second section discusses single- and multi-plant bubbles, their adoption across regions and industries, the methods used to control emissions and the extent of savings in costs. We conclude that despite the delay resulting from duplication of review of state implementation plans by both the state and the Environmental Protection Agency, the required technological commands, the requirement to model air quality and the restrictions to permit bubbling only in the attainment areas, the policy is progressing successfully and should be encouraged by eliminating the restrictions. The third section analyzes the policy of emission offset credit, trading, and banking which can permit economic growth in nonattainment areas. It reviews the available literature, which deals only with aggregation of offsets across cities instead of individual offset trades. Progress by individual offset trades is analyzed in terms of the number of offsets, their acceptance across regions, the extent of reductions in emissions, and the classification of the offsets into internal and external trades. Comparison of estimated capital costs and prices of individual offsets with direct regulation costs reveals that the former are economical. We conclude that despite the problems of high tradeoff ratios, the short and uncertain life of the emission offset credits and the technological commands, the policy is progressing successfully and should be encouraged further by relaxing restrictions.This paper represents the author's personal views. Neither the Commission nor any member of its staff is in any way responsible for these views.     

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.