A comparative study on the energy policies in Japan and Malaysia in fulfilling their nations’ obligations towards the Kyoto Protocol

Global warming and the associated changes in the world climate pattern have been accepted world wide as the gravest threat to humanity in the 20th century. To mitigate the impacts of global warming, the Kyoto Protocol was established in 1997 with the objective of reducing global greenhouse gases (GHGs) emission, in particular carbon dioxide (CO₂), by 5.2% below 1990 levels. Developed nations that ratified the Protocol are committed to GHG reduction targets while developing nations are encouraged to reduce GHG emissions on a voluntary basis. Since most of the GHGs emissions come from the energy sector, energy policy plays an important role in fulfilling the Kyoto Protocol obligations. This year marks the beginning of the commitment period for the 2012 Kyoto Protocol. In this case, it would be worthwhile to compare the energy policies in Malaysia and Japan as these nations move towards fulfilling their obligations towards the Kyoto Protocol; bearing in mind that both countries ratified the Protocol, but that Japan commits a reduction target of 6% while Malaysia bears no obligation. Based on the comparison, recommendations were made on how a developing nation like Malaysia could adopt the policies implemented in Japan to suit local conditions and contribute significantly to GHG reduction.     

Uncertain long-run emissions targets,CO2 price and global energy transition: A general equilibrium approach

The persistent uncertainty about mid-century CO₂ emissions targets is likely to affect not only the technological choices that energy-producing firms will make in the future but also their current investment decisions. We illustrate this effect on CO₂ price and global energy transition within a MERGE-type general-equilibrium model framework, by considering simple stochastic CO₂ policy scenarios. In these scenarios, economic agents know that credible long-run CO₂ emissions targets will be set in 2020, with two possible outcomes: either a “hard cap” or a “soft cap”. Each scenario is characterized by the relative probabilities of both possible caps. We derive consistent stochastic trajectories—with two branches after 2020—for prices and quantities of energy commodities and CO₂ emissions permits. The impact of uncertain long-run CO₂ emissions targets on prices and technological trajectories is discussed. In addition, a simple marginal approach allows us to analyze the Hotelling rule with risk premia observed for certain scenarios.     

Examining the role of energy efficiency and non-economic factors in energy demand and CO2 emissions in Nigeria: Policy implications

This paper examines the role of energy efficiency and non-economic factors such as consumers' preferences, lifestyles and values (which have hitherto been ignored) in energy demand and CO₂ emissions modelling for Nigeria. We use a structural time series model to estimate various energy demand and CO₂ intensity models that take account of the aforementioned factors. We adopt preferred models from these estimates to analyse how energy demand and CO₂ emissions in Nigeria might evolve by generating three different future scenarios to 2025. We find energy efficiency and non-economic factors to influence energy demand and CO₂ emissions. The long-run income and price elasticities obtained differ significantly from those in existing studies that have ignored these salient factors. In a business-as-usual scenario, the results indicate that energy demand will continue to grow. Consequently, present policies do not sufficiently mitigate aggregate CO₂ emissions in Nigeria. The lesson for policy makers is that the extant policies introduced to restrain CO₂ emissions (from a production perspective) have to be combined with new policies that influence consumers' lifestyles and behaviours, develop energy efficient technologies and apply low tariffs on imported energy efficient appliances, to drive down CO₂ emissions from a consumption perspective.     

The effects of stock market growth and renewable energy use on CO2 emissions: Evidence from G20 countries

The primary objective of this study is to empirically examine the effect of stock market growth and foreign direct investment (FDI) inflows on CO₂ emissions. Further, this study investigates the impact of renewable energy consumption on CO₂ emissions and economic output in a panel of the G20 countries. The empirical analysis was carried out on the full sample as well as on sub-samples of developed and developing economies of the G20 member countries. The results confirm a significant long-run equilibrium relationship among the variables across the panels. Further, the long-run elasticities suggest that FDI significantly reduces CO₂ emissions in the full sample and developing economies while stock market growth reduces in developed economies. Similarly, the renewable energy consumption substantially reduces CO₂ emissions and increases economic output across the panels. Our findings have important policy implications. For instance, the policy makers have to initiate effective policies to promote the renewable energy sources to meet the increasing demand for energy by replacing the use of conventional energy such as coal, gas and oil. This will therefore help to reduce the CO₂ emissions and also ensure sustainable economic development in the G20 nations.     

Financing clean energy projects through domestic and foreign capital: The role of political cooperation among the EU,the G20 and OECD countries

There is a growing concern among both individuals and policy makers in relevance to increasing CO₂ emissions across the world. As a result, international organizations have started to pressurize economies to minimize their carbon emissions by increasing the share of clean energy consumption in total energy use. Hence, the goal of this paper is to empirically explore to what extent both domestic (stock market) and foreign (FDI inflows) capital affect clean energy uses across the EU, the G20, and OECD, spanning the period 1993–2012. The results of long-run elasticities document that both FDI and stock market developments play a significant role in promoting clean energy uses across all three-country groups. The results also suggest that clean energy consumption has a considerable positive and negative effect on economic output and CO₂ emissions, respectively, while the political globalization has a substantial negative impact on carbon emissions across the EU, the G20 and OECD economies.     

Impact of climate policy uncertainty on the adoption of electricity generating technologies

This paper presents a real options model where multiple options are evaluated simultaneously so that the effect of the individual options on each other is accounted for. We apply this model to the electricity sector, where we analyze three typical technologies based on fossil fuel, fossil fuel with carbon capture and renewable energy, respectively. In this way, we can analyze the transition from CO₂-intensive to CO₂-neutral electricity production in the face of rising and uncertain CO₂ prices. In addition, such a modelling approach enables us to estimate precisely the expected value of (perfect) information, i.e. the willingness of investors and producers to pay for information about the correct CO₂ price path. As can be expected, the expected value of information rises with increasing CO₂ price uncertainty. In addition, the larger the price uncertainty, the larger are the cumulative CO₂ emissions over the coming century. The reason for this is that the transition to less CO₂-intensive technologies is increasingly postponed with rising CO₂ price uncertainty. By testing different price processes (geometric Brownian motion versus jump processes with different jump frequencies), we can also make useful recommendations concerning the importance of policy predictability. We find that it is better to have climate change policies that are stable over a certain length of time and change abruptly than less abrupt but more frequently changing policies. Less frequent fluctuations reduce the expected value of information and result in smaller cumulative CO₂ emissions.     

The impact of coal consumption and CO2 emission on economic growth

This study examined the long-run and the causal relationship between total coal consumption, CO₂ emission, and GDP growth in China, the United States, India, Germany, Russia, South Africa, Japan, Australia, Poland, and South Korea. The panel model was employed during the period 1992–2009. The results showed that total coal consumption and CO₂ emission have a long-run relationship with the GDP growth. In addition, there was a short-run positive bidirectional causal relationship between total coal consumption and CO₂ emission. However, total coal consumption and CO₂ emission have no short-run or long-run causal relationship with GDP growth. Thus energy conservation policies on total coal consumption such as rationing energy consumption and controlling CO₂ emissions are likely to have no negative impact on the real output growth of the investigated countries.     

Economic growth,energy consumption and CO2 emissions in India: a disaggregated causal analysis

This study examines the long-run and short-run causal relationships among energy consumption, real gross domestic product (GDP) and CO₂ emissions using aggregate and disaggregate (sectoral) energy consumption measures utilising annual data from 1971 to 2011. The autoregressive distributed lag bounds test reveals that there is a long-run relationship among the variables concerned at both aggregate and disaggregate levels. The Toda–Yamamoto causality tests, however, reveal that the long-run as well short-run causal relationship among the variables is not uniform across sectors. The weight of evidences of the study indicates that there is short-run causality from electricity consumption to economic growth, and to CO₂ emissions. The results suggest that India should take appropriate cautious steps to sustain high growth rate and at the same time to control emissions of CO₂. Further, energy and environmental policies should acknowledge the sectoral differences in the relationship between energy consumption and real gross domestic product.     

A methodology for territorial distribution of CO2 emission reductions in transport sector

Greenhouse gas emission reduction is the pillar of the Kyoto Protocol and one of the main goals of the European Union (UE) energy policy. National reduction targets for EU member states and an overall target for the EU‐15 (8%) were set by the Kyoto Protocol. This reduction target is based on emissions in the reference year (1990) and must be reached by 2012. EU energy policy does not set any national targets, only an overall reduction target of 20% by 2020. This paper transfers global greenhouse gas emission reduction targets in both these documents to the transport sector and specifically to CO₂ emissions. It proposes a nonlinear distribution method with objective, dynamic targets for reducing CO₂ emissions in the transport sector, according to the context and characteristics of each geographical area. First, we analyse CO₂ emissions from transport in the reference year (1990) and their evolution from 1990 to 2007. We then propose a nonlinear methodology for distributing dynamic CO₂ emission reduction targets. We have applied the proposed distribution function for 2012 and 2020 at two territorial levels (EU member states and Spanish autonomous regions). The weighted distribution is based on per capita CO₂ emissions and CO₂ emissions per gross domestic product. Finally, we show the weighted targets found for each EU member state and each Spanish autonomous region, compare them with the real achievements to date, and forecast the situation for the years the Kyoto and EU goals are to be met. The results underline the need for ‘weighted’ decentralised decisions to be made at different territorial levels with a view to achieving a common goal, so relative convergence of all the geographical areas is reached over time. Copyright © 2011 John Wiley & Sons, Ltd.     

ACROPOLIS: An example of international collaboration in the field of energy modelling to support greenhouse gases mitigation policies

Energy models are considered as valuable tools to assess the impact of various energy and environment policies. The ACROPOLIS initiative, supported by the European Commission and the International Energy Agency, used up to 15 energy models to simulate and evaluate selected policy measures and instruments and then compare their impacts on energy systems essentially in terms of costs of greenhouse gas emissions (GHG) reduction and energy technology choice. Four case studies are formulated considering policies and measures on renewable portfolio schemes and internationally tradable green certificates, emissions trading and global GHG abatement target, energy efficiency standards and internalisation of external costs. The main focus of the project is on the electricity sector. From a large set of quantified results, ACROPOLIS provides an international scientific consensus, on some key issues, which could be useful in assessing and designing energy and environment policies at the world, European and national/regional levels. It concludes that the Kyoto targets (and their continuation beyond 2010 in specific scenarios) could be achieved at a cost around 1% of GDP through global emissions trading, indicating also that this flexibility mechanism is a more cost-effective instrument for GHG mitigation than meeting the goal domestically without trade. It demonstrates that internalising external costs through a price increase reduces local pollutants (SO_x, NO_x, and others) and it produces other benefits such as triggering the penetration of clean technologies in addition to the curbing of CO₂ emissions.     

Impact of the Kyoto Protocol on the Iberian Electricity Market: A scenario analysis

This paper presents an assessment of the impact of the Kyoto Protocol on the Iberian Electricity Market during two periods: the first phase (2005–2007) and the second phase (2008–2012). A market-equilibrium model is used in order to analyze different conditions faced by generation companies. Scenarios involving CO₂-emission prices, hydro conditions, demand, fuel prices and renewable generation are considered. This valuation will show the significance of CO₂-emission prices as regards Spanish and Portuguese electricity prices, generation mix, utilities profits and the total CO₂ emissions. Furthermore, the results will illustrate how energy policies implemented by regulators are critical for Spain and Portugal in order to mitigate the negative impact of the Kyoto Protocol. In conclusion, the Iberian electricity system will not be able to reach the Kyoto targets, except in very favorable conditions (CO₂-emission prices over €15/ton and the implementation of very efficient energy policies).     

CO2 emissions,energy consumption and economic growth in China: A panel data analysis

This paper examines the causal relationships between carbon dioxide emissions, energy consumption and real economic output using panel cointegration and panel vector error correction modeling techniques based on the panel data for 28 provinces in China over the period 1995–2007. Our empirical results show that CO₂ emissions, energy consumption and economic growth have appeared to be cointegrated. Moreover, there exists bidirectional causality between CO₂ emissions and energy consumption, and also between energy consumption and economic growth. It has also been found that energy consumption and economic growth are the long-run causes for CO₂ emissions and CO₂ emissions and economic growth are the long-run causes for energy consumption. The results indicate that China's CO₂ emissions will not decrease in a long period of time and reducing CO₂ emissions may handicap China's economic growth to some degree. Some policy implications of the empirical results have finally been proposed.     

Which factors drive CO<Subscript>2</Subscript> emissions in EU-15? Decomposition and innovative accounting

This study breaks down carbon emissions into six effects within the 15 European Union countries group (EU-15) and analyses their evolution in four distinct periods: 1995–2000 (before European directive 2001/77/EC), 2001–2004 (after European directive 2001/77/EC and before Kyoto), 2005–2007 (after Kyoto implementation), and 2008–2010 (after Kyoto first stage), to determine which of them had more impact in the intensity of emissions. The complete decomposition technique was used to examine the carbon dioxide (CO₂) emissions and its components: carbon intensity (CI effect); changes in fossil fuels consumption towards total energy consumption (EM effect); changes in energy intensity effect (EG effect); the average renewable capacity productivity (GC effect); the change in capacity of renewable energy per capita (CP effect); and the change in population (P effect). It is shown that in the post Kyoto period there is an even greater differential in the negative changes in CO₂ emissions, which were caused by the negative contribution of the intensity variations of the effects EM, GC, CP and P that exceeded the positive changes occurred in CI and EG effects. It is also important to stress the fluctuations in CO₂ variations before and after Kyoto, turning positive changes to negative changes, especially in France, Italy and Spain, revealing the presence of heterogeneity. Moreover, the positive effect of renewable capacity per capita and the negative effect of renewable capacity productivity are the main factors influencing the reduction in CO₂ emissions during the Kyoto first stage. It is possible to infer from the results that one of the ways to reduce emissions intensity will be by increasing the renewable capacity and the productivity in energy generation and consequently through the reduction of the share of the consumption of fossil fuels.     

Assessing the effects of CO2 price caps on electricity investments—A real options analysis

This paper uses real options modeling to assess the impact of different climate change policy instruments on investment, profits and cumulative emissions in the electricity sector. Even though CO₂ price caps or “safety valves” have been suggested as methods to limit uncertainty emanating from fluctuating prices of CO₂ permits that would hurt the industry's profit and thereby also energy security, our analysis shows that price caps set at a too low level are detrimental to the adoption of e.g. modern biomass-fired capacity as a replacement for existing coal-fired power plants. We therefore conduct a series of experiments with different policy scenarios to analyze under which regime emissions are most effectively reduced. With respect to CO₂ price uncertainty, it turns out that even for moderately rising CO₂ prices, fluctuations frequently lead to investment into carbon capture and storage (CCS), while investment is often not triggered in the face of deterministic CO₂ prices.     

Effects of nuclear power plant shutdowns on electricity consumption and greenhouse gas emissions after the Tohoku Earthquake

This study analyzes how the substitution of fossil fuels for nuclear power due to the shutdown of nuclear power plants after the Tohoku Earthquake affects electricity consumption and greenhouse gas emissions in Japan. Results indicate that Japan generated 4.3 million metric tons (or 0.3%, with a 95% confidence interval) of additional CO₂ emissions in 2011 following the earthquake. The increase in CO₂ emissions stemmed from the combined effects of decreased electricity consumption due to energy conservation efforts and the substitution of fossil fuels for nuclear power following the Tohoku Earthquake. Results also show considerable spatial variation in the impacts of the earthquake on net CO₂ emissions. A majority of the prefectures (40 of 47 prefectures, or 85%) were predicted to experience higher CO₂ emissions after the Tohoku Earthquake while the remaining (7 prefectures) were predicted to experience lower CO₂ emissions. Our findings suggest that Japan and countries under similar risks may want to reformulate energy policy by emphasizing utilization of diverse power and energy sources, including more renewable energy production and electricity conservation. The policy reform should also consider spatial variation in the combined effects of reduced reliance on nuclear power and increased CO₂ conversion factors.     

US long-term energy intensity: Backcast and projection

Energy intensity of the economy is often modeled as being determined by the combined effect of a fixed price elasticity of demand, and an exogenously specified, fixed technical change parameter denoted as the autonomous energy efficiency improvement (AEEI). Typically, the AEEI rate is set to 0.5–1.5% improvement per annum. Here, we study historic aggregate energy intensity trends for the US from 1954 to 1994. We show that the historic trends are inconsistent with an autonomous model of improved energy efficiency—especially when the model is used to inform policies that impact energy prices. As an alternative we propose a model of price-induced efficiency, π, in which aggregate energy intensity trends respond to changes in energy prices beyond price elasticity of demand ε.Our exercise reveals that the aggregate price elasticity of energy demand of the US economy has declined by roughly 15% over the past four decades. But beyond this decline, bringing our simulations and historical data into close correspondence requires π to change sign before and after 1974. Before 1974, after accounting for price elasticity of demand, the economy was growing less energy efficient. After 1974, after accounting for the price elasticity of demand, the economy was growing more energy efficient. Furthermore, since 1984, the rate of energy efficiency gain has been declining.When projections of long-term energy use are compared, those with a price-induced energy efficiency formulation generate significantly more price sensitive energy use and emissions trajectories. When in the business as usual scenario energy prices are expected to be rising, climate policies involve lower shadow carbon prices with π than with AEEI formulations. In scenarios where energy prices are relatively flat, energy intensity rises leading to CO₂ emissions far higher than standard business as usual projections utilizing AEEI assumptions.     

Modelling the impacts of a carbon emission-differentiated vehicle tax system on CO2 emissions intensity from new vehicle purchases in Ireland

The increasing awareness of the effects of climate change on the environment and the economic pressure on oil supply has focused international attention on reducing CO₂ emissions and energy usage across all sectors. In order to meet their Kyoto protocol commitments and in line with European Union policy, the Irish government has introduced a carbon-based tax system for new vehicles purchased from the 1st of July 2008. This new legislation aims to reduce carbon emissions in the transport sector, a sector which is responsible for a significant proportion of both. This paper presents the results of the development, calibration, and application of a car choice model which predicts the changes in CO₂ emissions intensity from new vehicle purchases as a result of the changes in vehicle tax policy and fuel price in Ireland. The model also predicts the impact of such changes on tax revenue for the Irish government and the changes in the split between the number of diesel and petrol vehicles purchased. The investigation found that the introduction of these new carbon-based taxes in Ireland will result in a reduction of 3.6–3.8% in CO₂ emissions intensity and a reduction in annual tax revenue of €191 M.     

Environmental degradation,economic growth and energy consumption: Evidence of the environmental Kuznets curve in Malaysia

This paper tests for the short and long-run relationship between economic growth, carbon dioxide (CO₂) emissions and energy consumption, using the Environmental Kuznets Curve (EKC) by employing both the aggregated and disaggregated energy consumption data in Malaysia for the period 1980–2009. The Autoregressive Distributed Lag (ARDL) methodology and Johansen–Juselius maximum likelihood approach were used to test the cointegration relationship; and the Granger causality test, based on the vector error correction model (VECM), to test for causality. The study does not support an inverted U-shaped relationship (EKC) when aggregated energy consumption data was used. When data was disaggregated based on different energy sources such as oil, coal, gas and electricity, the study does show evidences of the EKC hypothesis. The long-run Granger causality test shows that there is bi-directional causality between economic growth and CO₂ emissions, with coal, gas, electricity and oil consumption. This suggests that decreasing energy consumption such as coal, gas, electricity and oil appears to be an effective way to control CO₂ emissions but simultaneously will hinder economic growth. Thus suitable policies related to the efficient consumption of energy resources and consumption of renewable sources are required.     

Using performance indicators to reduce cost uncertainty of China's CO2 mitigation goals

Goals on absolute emissions and intensity play key roles in CO₂ mitigation. However, like cap-and-trade policies with price uncertainty, they suffer from significant uncertainty in abatement costs. This article examines whether an indicator could be established to complement CO₂ mitigation goals and help reduce cost uncertainty with a particular focus on China. Performance indicators on CO₂ emissions per unit of energy consumption could satisfy three criteria: compared with the mitigation goals, (i) they are more closely associated with active mitigation efforts and (ii) their baselines have more stable projections from historical trajectories. (iii) Their abatement costs are generally higher than other mitigation methods, particularly energy efficiency and conservation. Performance indicators could be used in the following way: if a CO₂ goal on absolute emissions or intensity is attained, the performance indicator should still reach a lower threshold as a cost floor. If the goal cannot be attained, an upper performance threshold should be achieved as a cost ceiling. The narrower cost uncertainty may encourage wider and greater mitigation efforts.     

On the income–nuclear energy–CO2 emissions nexus revisited

This paper seeks to contribute to the debate over the income–nuclear enery–CO₂ emissions nexus by taking specific account of the possible endogeneity of income, which has been largely ignored by early studies. A multivariate cointegrated vector autoregression (CVAR) is applied to top six nuclear generating countries. We find that nuclear energy tends to reduce CO₂ emission for all countries. It is also found that income has a beneficial effect on the environment only in some countries. Finally, we find that CO₂ emissions and income are indeed determined simultaneously, while nuclear energy acts exogenously, indicating that nuclear energy is the driving variable, which significantly influences the long-run movements of CO₂ emissions and income, but is not affected by CO₂ emissions and income in the model.