Korea׳s emission trading scheme and policy design issues to achieve market-efficiency and abatement targets

In 2008, the government of Republic of Korea (Korea) announced the national abatement target aiming at 30% reductions from the Business-as-Usual projections by 2020. Accordingly, the Emission Trading Scheme (ETS) will be implemented from 2015 onwards. As ETS performance substantially depends on the structural design, it is critically important to examine the details of Korean ETS for the achievement of cost effectiveness and concurrent development of an active emission trading market. This paper addresses several policy design issues for this purpose. After providing an overview on the current framework of Korean ETS, we propose ways to achieve flexibility, consistency and market efficiency of the program in consideration of the preexisting policies. Issues in policy design are discussed by focusing on allowance allocation, market stabilization measures and price mechanism in the emission and energy markets in Korea. This paper will serve as a practical guideline for establishing sustainable and market-efficient Korean ETS that can be compatible with the international standards as in the EU ETS.     

Pollution control under emission constraints: Switching between regimes

In this paper we develop a model of pollution control. The aim of the society is to maximize the net social benefits which are negatively affected by the emission of pollutants. We show that the presence of an upper constraint on pollution growth rate affects the actual trajectory of emissions even when emissions are far below the level where the constraint binds. We get three main results. First, we find that for a society it is optimal to take into account the impact of the latent constraint at the outset of the planning horizon and to modify the emission flows even when the constraint is still slack. Second, we analyze how the constraint works effectively in the intermediate phases before the constraint binds. One crucial result is that the constraint on pollution growth may generate the unexpected result of increasing, instead of reducing, the emissions at the beginning and in the intermediate phases before the constraint binds. Finally, we state the boundary conditions to compute the optimal trajectory of emissions switching between regimes.     

An integrated optimization modeling approach for planning emission trading and clean-energy development under uncertainty

The growing concern for global warming caused by the increased atmospheric concentration of carbon dioxide (CO₂) has a significant effect on environmental and energy policies and economic activities, due to the ever-increasing use of fossil fuels such as coal, oil and natural gas throughout the world. A variety of complexities and uncertainties exist in CO₂-emission-related processes and various impact factors, such as CO₂-emission inventory, mitigation measure, and cost parameter. Decision makers face problems of how many clean-energy resources (or carbon credits) are needed to be replaced (or bought) by measuring electric-power benefits and uncertain economic penalties from random excess CO₂ exceeding to given discharge permits. In this study, an integrated optimization modeling approach is developed for planning CO₂ abatement through emission trading scheme (ETS) and clean development mechanism (CDM), where uncertainties presented in terms of fuzzy sets, interval values, and random variables can be addressed. The developed model is also applied to a case study of planning CO₂-emission mitigation for an electric-power system (EPS) that involves three fossil-fueled power plants (i.e., gas, oil and coal-power plants). Different trading schemes and clean-energy development plans corresponding to different CO₂-emission management policies have been analyzed. The results demonstrate that CO₂-emission reduction program can be performed cost-effective through emission trading and clean-energy development projects. Violation analyses are also conducted to demonstrate that different violation levels for model’s objective and constraints have different effects on system benefit and satisfaction degree as well as emission trading and clean-energy development.     

A two-stage inexact-stochastic programming model for planning carbon dioxide emission trading under uncertainty

In this study, a two-stage inexact-stochastic programming (TISP) method is developed for planning carbon dioxide (CO₂) emission trading under uncertainty. The developed TISP incorporates techniques of interval-parameter programming (IPP) and two-stage stochastic programming (TSP) within a general optimization framework. The TISP can not only tackle uncertainties expressed as probabilistic distributions and discrete intervals, but also provide an effective linkage between the pre-regulated greenhouse gas (GHG) management policies and the associated economic implications. The developed method is applied to a case study of energy systems and CO₂ emission trading planning under uncertainty. The results indicate that reasonable solutions have been generated. They can be used for generating decision alternatives and thus help decision makers identify desired GHG abatement policies under various economic and system-reliability constraints.     

Asymmetric relationship between carbon emission trading market and stock market: Evidences from China

This paper has investigated the asymmetric relationship between carbon emission trading market and stock market in China by using the nonlinear auto-regressive distributed lag (NARDL) model. Based on our investigation on both of the overall and sector level of stock market, we have obtained interesting and convincing empirical results that show there are significantly negative long-run and short-run asymmetric relationships between carbon emission trading market and overall stock market in China. Specifically, we have noticed that while passing the effects from the former to the later, the increasing of carbon emission trading price would make greater effects on the stock price than its decreasing. Also, on the sector level, carbon emission trading price is significantly related to some energy intense sectors and financial sector stock market. Furthermore, we have surprisingly found out that there are no significant effects passing from stock index to carbon emission trading price in China, neither on the overall level nor on the sector level of stock market.     

碳排放交易现状及其在中航工业的发展展望

介绍碳交易的起源、基本原理及碳交易的市场机制,分析了国内外碳交易市场现状及未来发展方向,阐述减少碳排放已经成为全球共同减缓气候变暖的原因,并对碳交易在中航工业的应用进行了展望。     

Renewable energy sources in European energy supply and interactions with emission trading

This paper presents a model-based approach, which allows to determine the optimised structure and operation of the EU-15 electricity supply under different political and economic framework conditions, with a focus on the integration of renewable energy sources for electricity generation (RES-E) in the EU-15 countries. The approach is designed to take into account the characteristics of power production from both renewable and conventional sources, including the technological and economic characteristics of existing plants as well as those of future capacity expansion options. Beyond that, fuel supply structures are modelled, as well as the international markets for power and CO₂-certificates with their restrictions. Thus, a profound evaluation of the exploitation of mid-term renewable potentials and an assessment of the market penetration of the various renewable power generation technologies under the (normative) premise of a cost-optimised evolution of the power system becomes possible. Results show that a promotion of renewable energies reduces the scarcity of CO₂-emission allowances and thus lowers marginal costs of CO₂ reduction up to 30% in 2030. Despite the higher overall costs, a diversification of the energy resource base by RES-E use is observed, as primarily natural gas and nuclear fuels are replaced.     

Impact assessment of emissions stabilization scenarios with and without induced technological change

The main aim of this paper is to investigate quantitatively the economic impacts of emissions stabilization scenarios with and without the inclusion of induced technological change (ITC). Improved technological innovations are triggered by increased research and development (R&D) expenditures that advance energy efficiencies. Model results show that ITCs due to increased investment in R&D reduce compliance costs. Although R&D expenditures compete with other investment expenditures, we find that increased R&D expenditures improve energy efficiency, which substantially lowers abatement costs. Without the inclusion of ITC, emissions targets are primarily reached by declines in production, resulting in overall welfare reductions. With the inclusion of ITCs, emissions mitigation can result in fewer production and GDP drawbacks.     

Flame stabilization and emission of small Swiss-roll combustors as heaters

The characteristics of small Swiss-roll combustors were investigated experimentally in detail. Three types of Swiss-roll combustors of different designs and two cases of heat transfer conditions were studied. The effects of design parameters on the performance of these combustors were examined. Each combustor consisted of a combustion region at the center (called the combustion room) and double spiral-shaped channels, the widths of which were smaller than the minimum quenching distance of a propane premixed flame at a normal state. Flames could be stabilized successfully for a wide range of equivalence ratios and mean velocities by using the recirculated heat from the burned gas, and blow-off was not observed. Temperature distributions of the combustors, variation of gas temperature, and the concentrations of the exhaust gas from the combustors were also investigated. Mean temperatures of the combustors were found to be governed by both the radiant heat loss from the combustors and the total chemical energy liberated by the combustors. Efficiencies of the combustors as heaters were evaluated. As a combustor became smaller, its thermal efficiency as a heater increased and its NO_x emission decreased, while the emission of CO increased. By adding a catalytic reactor at the exhaust port, it was found that the emission of CO could be eliminated. This study provides new experimental results for a small Swiss-roll combustor, which represents an essential step toward the development of a microcombustor.     

A MERGE model with endogenous technological change and the cost of carbon stabilization

Two stylized backstop systems with endogenous technological learning (ETL) are introduced in the “model for evaluating regional and global effects” (MERGE): one for the electric and the other for the non-electric markets. Then the model is applied to analyze the impacts of ETL on carbon-mitigation policy, contrasting the resulting impacts with the situation without ETL. We model research and development (R&D) spending and learning subsidies for the demonstration and deployment stage as control variables, and we investigate the ability of this extra spending to create path-dependent experience and knowledge to aid in the implementation of carbon-free technologies. Based on model estimations and sensitivity analyses, we conclude that increased commitments for the development of new technologies to advance along their learning curves has a potential for substantial reductions in the cost of mitigating climate change and thereby helping to reach safe concentrations of carbon in the atmosphere.     

Carbon emission flow: from electricity network to multiple energy systems

Anthropogenic carbon emissions associated with energy consumption are rapidly increasing. Such carbon emissions are further directly related to global climate change. Thus, reducing carbon emissions to mitigate global climate change has been attracting increasing attention. Energy production and energy consumption is linked by energy networks. The network-constrained energy flow leads to a virtual circulation of embedded carbon emissions. This paper introduces the concept and significance of carbon emission flow (CEF), which helps identify the relationship between carbon emissions and energy consumption. Challenges for extending the CEF from an electricity network to multiple energy systems (MES) are analyzed, and CEF models in both the electricity network and MES are summarized. The distribution of CEF and transfer of carbon emissions are studied using realistic case studies based on the energy interconnection system of Southeast Asia and real-world MES in the Jing-Jin-Ji economic circle. Considering the electricity trade in Southeast Asia in 2050, the results show that significant amounts of carbon emissions are transferred among countries. Approximately 19698 ktCO₂ of carbon emissions in Malaysia are attributable to electricity demands of other countries. Conversely, the Philippines and Vietnam would be responsible for additional carbon emissions of 10620 ktCO₂ and 42375 ktCO₂, respectively. With the CEF model, carbon emissions in different energy sectors can be reasonably quantified, thus facilitating the allocation of emission reduction targets in climate change negotiations and low-carbon policymaking.     

Interaction among China carbon emission trading markets: Nonlinear Granger causality and time-varying effect

China makes great efforts to reduce carbon emissions and mitigate global greenhouse gas. In order to identify the interaction among China CET markets, this paper comprehensively investigates nonlinear Granger causality and time-varying effect in markets by using the Hiemstra and Jones (HJ) test, Diks and Panchenko (DP) test and time-varying parameter structure vector autoregressive (TVP-SVAR) model. The empirical analysis has demonstrated China major CET markets significantly bidirectional nonlinear Granger cause each other. As to time-varying effect, we have obtained convincing findings that time-varying impulse responses are among China major CET markets in the short term. Specifically, Guangdong, Hubei and Shenzhen CET markets are time-varying co-movement, negatively or positively related to each other over time, implying there are deep bases for China national CET market construction. Furthermore, the specific time point impulse effects support our discoveries in time-varying impulse responses.     

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.     

石膏板烘房节能减排技术改造

节能减排正以越来越严峻的态势成为制约各行业发展的瓶颈,也是促进社会经济发展、走可持续发展是企业求生存的必由之路.目前常用的建材干燥烘房干燥后产生的水分及其汽化潜热随废气排放至大气环境中,既对大气环境造成热污染又浪费了能源.介绍了石膏板的生产工艺,简述了烘房的热平衡测试结果及烟气带走热量的计算结果,提出了采用烘房热交换器冷凝水回收技术的可行性.计算结果表明,该技术具有较好的节能效果,在建材行业中具有较广阔的推广应用前景.     

Waste gas emission control and constraints of energy and economy in China

This paper studies the characteristics of waste gas emission (WGE), energy consumption (EC) and economic development in China, and analyzes the reason for the change of waste gas intensity (WI) in order to provide necessary information for policy maker. Firstly, this paper describes the situation of WGE and the primary factors in China in general to describe the relationship among energy, economy and environmental at the national level. Then we detect the main sectors for WGE that have notable effectiveness for economic and EC through the comparison of the percentage of EC, value added (VA) and industrial WGE from combustion in 39 industrial sectors. Then with the calculation of energy intensity (EI), clean level (CL) and WI, this paper selects those crucial sectors for waste gas control and shows the efficiency of waste gas control in these sectors from 2001 to 2005. The result showed most waste gas came from heavy industrial sectors. However, heavy industrial sectors usually have lower CL than light industries. Moreover, within these sectors, some sectors, particularly Production and supply of electric power and heat power, showed the tendency of worsening efficiency for waste gas control from 2001 to 2005.     

Analysis of the impacts of combining carbon taxation and emission trading on different industry sectors

Application of price mechanisms has been the important instrument for carbon reduction, among which the carbon tax has been frequently advocated as a cost-effective economic tool. However, blanket taxes applied to all industries in a country might not always be fair or successful. It should therefore be implemented together with other economic tools, such as emission trading, for CO₂ reduction. This study aims to analyze the impacts of combining a carbon tax and emission trading on different industry sectors. Results indicate that the “grandfathering rule (RCE2000)” is the more feasible approach in allocating the emission permit to each industry sector. Results also find that the accumulated GDP loss of the petrochemical industry by the carbon tax during the period 2011–2020 is 5.7%. However, the accumulated value of GDP will drop by only 4.7% if carbon taxation is implemented together with emission trading. Besides, among petrochemical-related industry sectors, up-stream sectors earn profit from emission trading, while down-stream sectors have to purchase additional emission permits due to failure to achieve their emission targets.     

The effect of financial constraints,technological progress and long-term contracts on tradable green certificates

Tradable green certificates (TGCs) have recently become a diffuse instrument to support renewable electricity in OECD countries. Although it is perhaps too early to draw a conclusive judgement on the effectiveness of this instrument in increasing renewable capacity and decreasing the price of certificates, one view in the literature maintains that long-term contracts are of particular importance for TGCs to be effective. This paper contributes to this debate by analysing how financial constraints and technological progress can induce investors to hold pessimistic expectations of their ability to sell green certificates and still make a profit. Clearly, these expectations will prevent investors from building new capacity to fulfil the quota comprised in TGCs and will keep the price of certificates traded in the market high. As this kind of expectation is not influenced by most design features of TGCs, one can conclude that long-term contracts are particularly important in determining the effectiveness and cost-effectiveness of these instruments. Some attention should therefore be paid to the features of the TGCs, which induce obliged parties to offer long-term contracts to renewable generators.     

Intra- and extra-union flexibility in meeting the European Union's emission reduction targets

The EU has proposed four flexibility mechanisms for the regulation of greenhouse gas emissions in the period 2013–2020: (1) the Emissions Trade Scheme (ETS), a permit market between selected companies; (2) trade in non-ETS allotments between Member States; (3) the Clean Development Mechanism (CDM) to purchase offsets in developing countries; and (4) trade in CDM warrants between Member States. This paper shows that aggregate abatement costs fall as flexibility increases. However, limited flexibility creates rents so that increasing flexibility raises costs in some Member States. Costs are reduced more by the CDM than by non-ETS trade. The CDM warrants market reduces costs by a small amount only; market power is a real issue. However, the warrants market is obsolete in case there is non-ETS trade. The CDM leads to price convergence between the ETS and non-ETS market. There would be one price for carbon in the European Union if the proposed limits on CDM access are relaxed slightly.     

实施大气污染物排放总量控制后能源系统的减排效果

要以上海为例,采用MARKAL模型研究了能源系统对未来环境政策的响应。政策情景包括提高能源效率、能源结构调整、实施SO2排放总量控制等。研究结果显示,提高能源效率和实施能源结构调整后,上海市CO2、SO2和PM10排放量将明显降低。进一步削减NOx和PM10排放将主要取决于末端处理技术。     

Environmental and economic effects of the Copenhagen pledges and more ambitious emission reduction targets

A multi-region, multi-sector dynamic computable general equilibrium model is applied to explore the economic and welfare effects of the pledges submitted by developed countries (Annex I countries) and major developing (non-Annex I) countries for 2020 under the Copenhagen Accord. In addition to analyzing scenarios reflecting the upper and lower bounds of the Copenhagen Pledges, one additional policy scenario where Annex I countries as a group reduce CO₂-emissions by 30% in 2020 compared to 1990 levels, and where major non-Annex I countries reduce CO₂ emissions 15% below baseline, is also analyzed. Economic effects are measured as changes in GDP compared to baseline and welfare effects are measured via the equivalent variation. Assuming that countries with emission targets may trade certificates, average reductions in GDP for countries with targets range between 0.1% and 0.7% in 2020 for the policy scenarios. While the GDP losses are larger for major non-Annex I countries with emission targets compared to Annex I countries, this is not the case for the changes in welfare. With the exception of Mexico, the welfare losses for the major non-Annex I regions, as a percentage of projected GDP in 2020, are lower than for the large Annex I countries.