Economic impact assessment of Turkey's post-Kyoto vision on emission trading

For the post-Kyoto period, Turkey strongly emphasizes the establishment of national emission trading system by 2015 and its integration with the EU ETS along its accession process to the EU. In this paper, we study the mechanisms of adjustment and economic welfare consequences of various ETS regimes that Turkey considers to apply by 2020, i.e. regional ETS and international trading within the EU ETS. We conduct our analysis under the current EU 20–20–20 emission target, 20%, and also under its revised version, 30%. We find that Turkey has economic gains from linking with the EU ETS under the 20% cap, in comparison to the domestic ETSs. Despite the EU's welfare loss under linkage in comparison to the case where Turkey has domestic abatement efforts, it still prefers linking as it increases economic well being compared to the case where Turkey does not abate. Under 30% cutback, Turkey has critical output loss under linkage due to high abatement burden on the EU, while the EU is better off as it passes some of its abatement burden to Turkey. Therefore, emission quotas and their allocation across the ETS and non ETS sectors become highly critical in distributing the overall economic gains from bilateral trading.     

Chinese companies’ awareness and perceptions of the Emissions Trading Scheme (ETS): Evidence from a national survey in China

China announced the launch of a national Emissions Trading Scheme (ETS) in 2017; however, companies appear show little enthusiasm for participation in the ETS in China. This paper identifies the factors affecting companies’ awareness and perceptions of ETS by conducting a national survey based on an online questionnaire from May to November 2015 in seven carbon trading pilots. The results indicate that companies’ attitudes towards the ETS are positively influenced by government regulations and policy, public relations management and estimated economic benefit. Of these, public relations management is the decisive factor and estimated economic benefit is confirmed to be a relatively weak predictor. A company's environmental and energy strategy exerts insignificant effects on its preference for the ETS, although the sampled companies are very willing to save energy and reduce emissions. There exists an inverted U-shape relationship between a company's level of mitigation technologies and its attitudes towards the ETS. The carbon price fails to stimulate companies to upgrade mitigation technologies. The majority of companies treat participation in the ETS only as a means of improving ties with governments, as well as of earning a good social reputation, rather than as a cost-effective mechanism to mitigate greenhouse gas emissions.     

The hedge value of international emissions trading under uncertainty

This paper estimates the value of international emissions trading, focusing on a here-to-fore neglected component; its value as a hedge against uncertainty. Much analysis has been done of the Kyoto Protocol and other potential international greenhouse gas mitigation policies comparing the costs of achieving emission targets with and without trading. These studies often show large cost reductions for all Parties under trading compared to a no trading case. We investigate the welfare gains of including emissions trading in the presence of uncertainty in economic growth rates, using both a partial equilibrium model based on marginal abatement cost curves and a computable general equilibrium model. We find that the hedge value of international trading is small relative to its value in reallocating emissions reductions when the burden sharing scheme does not resemble a least cost allocation. We also find that the effects of pre-existing tax distortions and terms of trade dominate the hedge value of trading. We conclude that the primary value of emissions trading in international agreements is as a burden sharing or wealth transfer mechanism and should be judged accordingly.     

Assessing the design of three carbon trading pilot programs in China

To help overcome the challenge of growing CO₂ emissions, China is experimenting with market-based instruments, including pilot CO₂ emissions trading systems (ETSs) in seven regions that serve as precursors of a national CO₂ ETS. Implementing an ETS in a rapidly growing economy in which government authorities exercise significant control over markets poses many challenges. This study assesses how well three of the most developed pilot ETSs, in Guangdong, Shanghai, and Shenzhen, have adapted carbon emissions trading to China's economic and political context. We base our study on new information gathered through interviews with local pilot ETS regulators and experts, analysis of recent trading data, and extensive legal and literature reviews. We point out instances in which pilot regulators have deftly tailored carbon emissions trading to China's unique context and instances in which designs are insufficient to ensure smooth operation. We also indicate areas in which broader institutional reforms of China's political economy may be required for carbon emissions trading to operate successfully. We make nine recommendations to improve the design and operation of the pilot programs and to inform the construction of a national CO₂ ETS.     

White certificate schemes: Economic analysis and interactions with the EU ETS

This paper examines the economic, environmental and distributional impacts of an idealised tradable white certificate (TWC) scheme and shows how the impacts are modified when the scheme operates in parallel with the EU emissions trading scheme (EU ETS). It uses simple graphical techniques to assess whether a TWC scheme will increase, decrease or have an ambiguous effect on electricity demand, wholesale and retail electricity prices, carbon emissions and investment in energy efficiency, paying particular attention to the interpretation of ‘additionality’.     

Designing an emissions trading scheme for China with a dynamic computable general equilibrium model

To fulfill its Copenhagen pledges to control carbon emissions and mitigate climate change, China plans to establish a nationwide emissions trading scheme (ETS) in 2016. This paper develops a multi-sector dynamic computable general equilibrium model with an ETS module to study the appropriate ETS policy design, including a carbon cap, permit allocation and supplementary policies (e.g., penalty policies and subsidy policies). The main results are as follows. (1) To achieve China's Copenhagen pledge, the equilibrium nationwide carbon price is observed to be between 36 and 40 RMB yuan per metric ton. (2) The ETS policy has a cost-effective mitigation effect by improving China's production and energy structures with relatively little economic harm. (3) Various ETS sub-policies should be carefully designed to balance economic growth and carbon mitigation. In particular, the carbon cap should be set according to China's Copenhagen pledge. A relatively large distribution ratio of free permits, the output-based grandfathering rule for free permits, a penalty price (on illegitimate emissions) slightly above the carbon price, and a sufficient subsidy (from ETS revenue) are strongly recommended in the early stages to avoid significant economic loss. These designs can be adjusted in later stages to enhance the mitigation effect.     

基于碳交易市场下的电力企业碳减排决策研究

中国CO2排放量巨大,其中电力企业的CO2排放量占全国总排放量的50%以上。在碳交易市场背景下,电力企业需要在拍卖购买碳配额进行减排与自主更新进行减排中作出抉择。基于成本效益法对发电企业的低碳成本进行了综合分析,将通过优化后所减少的CO2排放量作为收益,在碳排放交易市场的背景下将碳减排的经济效益进行量化,并通过与碳排放权交易市场的碳价格进行比较,从而得出火电企业所应作出的最佳决策。如结果所示,在一定条件下,如果企业进行技术更新后可以减排10%、20%、30%的电力生产CO2排放量,则火电企业所作出的碳减排决策分界点的拍卖比例分别为54%、27%与18%。     

Revisiting the case for intensity targets: Better incentives and less uncertainty for developing countries

In the debate on post-Kyoto global climate policy, intensity targets, which set a maximum amount of emissions per GDP, figure as prominent alternative to Kyoto-style absolute emission targets, especially for developing countries. This paper re-examines the case for intensity targets by critically assessing several of its properties, namely (i) reduction of cost-uncertainty, (ii) reduction of ‘hot air’, (iii) compatibility with international emissions trading, (iv) incentive to decouple carbon emissions and economic output (decarbonization), and, (v) use as a substitute for banking/borrowing. Relying on simple analytical models, it is shown that the effect on cost-uncertainty is ambiguous and depends on parameter values, and that the same holds for the risk of ‘hot air’; that the intensity target distorts international emissions trading; that despite potential asymmetries in the choice of abatement technology between absolute and intensity target, the incentive for a lasting transformation of the energy system is not necessarily stronger under the latter; and, finally, that only a well-working intensity target could substitute banking/borrowing to some extent—but also vice versa. Overall, the results suggest that due to the increased complexity and the potentially only modest benefits of an intensity target, absolute targets remain a robust choice for a cautious policy maker.     

Stylized agent-based modeling on linking emission trading systems and its implications for China's practice

China established a national emission trading system (ETS) to peak its carbon emission around 2030, building on the experience of pilot ETSs that are planned to be linked. Firms are the main entities that conduct carbon reduction and allowance trading. Due to the heterogeneity in the initial stock of technologies, firms' abatement costs differ, resulting in different abatement activities and the dynamics of the carbon price. Most of the studies on linking ETSs pay little attention to firms' behaviors, especially the interactions among firms' technology adoption strategies and their allowance trading strategies. In addition, whether linking ETSs can reduce carbon emission with lower system costs remains insufficiently explored. This study develops a stylized agent-based model (ABM) to explore the impact of linking two ETSs considering firms' heterogeneities and the interactions between their technology adoption strategies and allowance trading strategies. The model considers two ETSs, each of which includes energy-service-providing agents who are heterogeneous in the production scale and initial stock of technologies (and thus with different abatement costs), and attempts to minimize the total cost for a given output by adopting different technologies and trading emission allowances. The carbon price is dynamically affected by agents' willingness to pay, and a Walrasian auction is introduced to obtain the equilibrium. The results show that linking ETSs could be cost-effective to achieve carbon reduction commitment and creates a larger and more liquid carbon market; however, it also provides agents the opportunity to purchase more allowances rather than adopt low-emission technologies, which may result in more carbon emission. Adding restrictions on the linkage could somehow mediate this negative effect. Imposing strict exchange rate restrictions to the system with more balanced market shares of agents or quantitative restrictions would result in desirable results at the expense of increasing system costs. Moreover, restricted linkages could help alleviate the difficulties in initialing a linkage. The stylized ABM is mainly used for exploratory modeling purposes as a heuristic research device to examine in depth the effectiveness of unrestricted linkages and restricted linkages on adopting low-emission technologies at firms' level and the resulting carbon reduction. On the basis of the main findings of the ABM, we discuss the case if the Hubei pilot ETS links with the Guangdong pilot ETS, which could improve the understanding of the potential impact of linking ETSs on technology adoption and carbon reduction and provide policy implications for linking different ETSs.     

Evaluation of effectiveness of China's carbon emissions trading scheme in carbon mitigation

In response to climate change issues, China has set clear targets to reduce emissions. The establishment of a carbon emissions trading scheme (ETS) has an important role in China's achievement of these targets. China designed its ETS in 2011 and implemented it in pilot regions in 2013. This study investigated whether the ETS reduces carbon emissions and how it influences carbon leakage. First, the production-based emissions, consumption-based emissions, and carbon leakage of 28 industries in 30 provinces during 2005–2015 were calculated based on provincial environmentally extended input–output tables. Then, the difference-in-differences and difference-in-difference-in-differences models were used to evaluate the effectiveness of ETS. The following conclusions were derived. (1) ETS contributes to emissions mitigation in pilot regions and industries. (2) ETS has greater effect on the mitigation of production-based emissions than consumption-based emissions. (3) ETS encourages outsourcing of emissions from pilot areas to non-pilot areas, resulting in carbon leakage (or “pollution haven” effect), which aggravates the imbalance of emissions transfers among China's provinces. The success of China's ETS in promoting emissions mitigation can serve as an example for other emerging economies.     

Estimating the public’s value of implementing the CO2 emissions trading scheme in Korea

The Korean government set out the carbon dioxide (CO₂) emissions reduction target as 30% below business-as-usual by 2020. The CO₂ emissions trading scheme (ETS) was initiated in January 2015 to meet this target. We attempt to estimate the public's value of implementing the ETS for CO₂ emissions reduction. We apply the contingent valuation (CV) method using the willingness to pay (WTP) data obtained from a national CV survey of 1000 randomly selected households. The survey was conducted via in-person interviews. Value judgments required of the respondents were within their abilities. The mean WTP to achieve the stated target of CO₂ emissions reduction using ETS is estimated to be KRW 1873 (USD 1.66) per household per month, which is statistically significant at the 1% level. The aggregate national value amounts to KRW 409.2 billion (USD 363.4 million) per year. Thus, even though Korea has no obligations to cut emissions under the Kyoto protocol, the public is willing to bear a financial burden to implement the ETS. If its cost is less than this value, implementing the ETS can be socially profitable. The results of this study can serve as a basis for further policy discussions and decisions.     

中外碳交易市场发展现状分析

《京都议定书》的生效,标志着国际社会开始以法律手段来限制温室气体排放,其中采取的重要机制之一就是碳排放权交易。清洁发展机制(CDM)、联合实施机制(JI)、国际排放权交易体系(IET)三种灵活机制作为碳金融工具,在关键国家和地区实施并迅速发展。CDM和JI是基于项目的市场,IET是基于配额的市场。目前国际碳交易市场以配额为主体,以项目交易为补充。西方发达国家已建成了全球性的碳交易市场,其中欧盟排放交易体系(EU ETS)是目前全球最大的排放交易体系。近年全球碳交易量及交易额迅速增长,预计2020年有望分别达到440×108t和5799亿美元,国际金融机构也积极参与碳交易市场。我国碳交易市场仍处于起步阶段,目前还只有CDM一种交易机制,国家已批准在7省市成立碳排放权交易试点。截至2013年6月底,我国签发的CDM项目数占到世界总量的61.76%。针对目前国内存在的问题,建议国家应设法扩大碳金融的影响力,建立统一的排放权交易平台,加强金融业对CDM项目的支持,完善碳金融法律框架,加大知识产权保护力度,同时要大力发展中介市场。     

2012年欧盟碳市场评述

欧盟碳排放贸易体系(EU ETS)自2005年至今已运行了8年。在体系不断成熟的同时,也面临着一系列问题。本文总结了EU ETS2012年度的运行情况,回顾了年度主要政策,对存在的主要问题和经验进行了分析与总结,并为我国推进碳排放交易工作提出相关建议。     

EU-type carbon regulation and the waterbed effect of green energy promotion

This paper studies waterbed effects in a stylized model of carbon regulation, in which all countries participate in an emissions trading scheme (ETS), implement national emissions caps on non-ETS emissions, and support green electricity. Since a change in some country's ETS emissions is exactly offset by opposite changes in the other countries' ETS emissions (waterbed effect), allocative disturbances in one country affect all other ETS countries. We analyze the allocative displacement effects on inputs, outputs, prices and trade that a country, say country A, triggers at home and in the other ETS countries, when it unilaterally increases its support of green electricity via raising its feed-in tariff. ETS emissions turn out to decline in country A and to rise in the other countries. Another remarkable waterbed effect is that country A suffers a welfare loss, whereas the other countries are better off. Country A’s welfare loss is larger than it would be if there would be national ETSs instead of the joint ETS. If green electricity support takes the form of subsidies on the electricity price instead of feed-in tariffs, we get another waterbed effect: green electricity production increases in country A, but declines in the other countries. Various decarbonization indicators improve in country A, but tend to point into the opposite direction in the other countries.     

The initial impact of EU ETS verification events on stock prices

This paper studies the impact of verified emissions publications in the European Emissions Trading Scheme (EU ETS) on the market value of participating companies. Using event study methodology on a unique sample of 368 listed companies, we show that verified emissions only resulted in statistically significant market responses when the carbon price was high and allowance scarcity was anticipated. The cross-section analysis of abnormal returns surrounding the publication of verified emissions shows that share prices decrease when actual emissions relative to allocated emissions increase. This negative relationship between allocation shortfalls and firm value is only significant for firms that are either carbon-intensive, compared to sector peers, or are less likely to pass through carbon-related costs in their product prices. The results suggest that although the EU ETS has been deemed unsuccessful so far due to over-allocation and low carbon price, shareholders initially perceived allowance holdings as value relevant. Our results highlight that a significant carbon market price and addressing pass-through costing are essential for successful future reforms of the EU ETS and other analogous carbon cap-and-trade systems implemented or planned worldwide.     

Carbon emission offsets for aviation-generated emissions due to international travel to and from New Zealand

International air transport emissions are not subject to liability under the Kyoto Protocol. However, pressure is mounting globally for international aviation to be included in post-Kyoto arrangements. In the absence of international collective action, a number of so-called carbon offsetting schemes have emerged that allow individual travellers and companies to compensate for their international air travel emissions. These schemes offer technological solutions, such as planting sink forests to sequester emissions. To consider the implications of future collective action, this paper presents a case study assessment of the physical feasibility of five schemes for all short duration journeys to and from New Zealand. This is the first comprehensive national-level case study assessment of competing offsetting options for international aviation emissions in the peer-reviewed literature. The CO₂-e emissions produced by the air travel of international visitors to New Zealand, and for New Zealand residents travelling overseas, is calculated in this paper to be 7893 and 3948 Gg, respectively, in 2005. It is then shown that no single offsetting scheme targeted inside the country appears physically and/or politically realistic. This indicates the sheer size of these emissions, and the challenge that the international community faces for collective action on this matter.     

Carbon trading: Current schemes and future developments

This paper looks at the greenhouse gas (GHG) emissions trading schemes and examines the prospects of carbon trading. The first part of the paper gives an overview of several mandatory GHG trading schemes around the world. The second part focuses on the future trends in carbon trading. It argues that the emergence of new schemes, a gradual enlargement of the current ones, and willingness to link existing and planned schemes seem to point towards geographical, temporal and sectoral expansion of emissions trading. However, such expansion would need to overcome some considerable technical and non-technical obstacles. Linking of the current and emerging trading schemes requires not only considerable technical fixes and harmonisation of different trading systems, but also necessitates clear regulatory and policy signals, continuing political support and a more stable economic environment. Currently, the latter factors are missing. The global economic turmoil and its repercussions for the carbon market, a lack of the international deal on climate change defining the Post-Kyoto commitments, and unfavourable policy shifts in some countries, cast serious doubts on the expansion of emissions trading and indicate that carbon trading enters an uncertain period.     

Does EU ETS lead to emission reductions through trade? The case of the Swedish emissions trading sector participants

The first trading period of the European Emissions Trading Scheme (EU ETS) has recently come to an end. The experiences of the actors in the trading sector will be of great importance in evaluating the aim and direction of this “Grand Policy Experiment”. This paper gives an account of the attitudes and actions of the companies included in the Swedish emissions trading sector after about 15 months of experience with the system. The data are based on a study commissioned by the Swedish Environmental Protection Agency, and is a comprehensive survey that encompasses all companies operating installations included in the Swedish Emission Trading Registry. However, the results point in a somewhat disquieting direction. Although the Swedish companies have shown significant interest in reducing emissions, this survey indicates that this is done without close attention to the pricing mechanism of the market-based instruments. If this praxis is widespread within the European trading sector, it can have a serious negative effect on the efficiency of the system.     

An analysis of the driving forces of CO2 emissions embodied in Japan–China trade

By using the latest China–Japan input–output data sets and the index decomposition analysis (IDA) approach, this article analyzes the driving forces of CO₂ emissions embodied in trade between the two countries during 1990–2000. We found that the growth of trade volume had a large influence on the increase of CO₂ emissions embodiments in bilateral trade. The dramatic decline in carbon intensity of the Chinese economy is a primary cause in offsetting CO₂ emissions exported from China to Japan over 1995–2000. We argue that a better understanding of the factors affecting CO₂ emissions embodied in international trade will assist in seeking more effective climate policies with wider participation in the post-Kyoto regime.     

Carbon footprint analysis as a tool for energy and environmental management in small and medium-sized enterprises

The reduction of carbon emissions has become a top priority in the decision-making process for governments and companies, the strict European legislation framework being a major driving force behind this effort. On the other hand, many companies face difficulties in estimating their footprint and in linking the results derived from environmental evaluation processes with an integrated energy management strategy, which will eventually lead to energy-efficient and cost-effective solutions. The paper highlights the need of companies to establish integrated environmental management practices, with tools such as carbon footprint analysis to monitor the energy performance of production processes. Concepts and methods are analysed, and selected indicators are presented by means of benchmarking, monitoring and reporting the results in order to be used effectively from the companies. The study is based on data from more than 90 Greek small and medium enterprises, followed by a comprehensive discussion of cost-effective and realistic energy-saving measures.