BP's emissions trading system

Between 1998 and 2001, BP reduced its emissions of greenhouse gases by more than 10%. BP's success in cutting emissions is often equated with its use of an apparently market-based emissions trading program. However no independent study has ever examined the rules and operation of BP's system and the incentives acting on managers to reduce emissions. We use interviews with key managers and with traders in several critical business units to explore the bound of BP's success with emissions trading. No money actually changed hands when permits were traded, and the main effect of the program was to create awareness of money-saving emission controls rather than strong price incentives. We show that the trading system did not operate like a “textbook” cap and trade scheme. Rather, the BP system operated much like a “safety valve” trading system, where managers let the market function until the cost of doing so surpassed what the company was willing to tolerate.     

Decomposing international polarization of per capita CO2 emissions

The aim of this paper is to analyze the international polarization of per capita CO₂ emissions with exogenous groups based on the Z–K measure (Zhang and Kanbur, 2001), whose main differential advantage lies on its factor-decomposability. In particular, we propose to use the factor decomposition based on Kaya (1989) by applying the methodology suggested by Duro and Padilla (2006). The main empirical results derived can be summarized as follows. First, the international polarization of emissions has significantly decreased over time during the period 1971–2006, when regional sets of nations based on the IEA structure are used; secondly, this decrease can be almost exclusively based on the reduction of the average dissimilarities among sets of countries and not due to a within-group cohesion process. Lastly, this reduction can be mainly attributed to the role of the affluence factor, and to a lesser extent, to the energy intensities. Thus, and given the values achieved for the different components, it seems that further reductions in the international polarization will continue be based on the economic convergence among groups.     

Potential cost savings from internal/external CO2 emissions trading in the Korean electric power industry

Korea plans to introduce an emissions trading scheme for the controlling greenhouse gas emissions in 2015. Using Shephard's (1970) output distance function, we first estimate the shadow price of CO₂ for power generators in the Korean fossil-fueled electric generation industry. Then, by assuming that each power generator is required to reduce CO₂ emissions by one ton, we compute the potential cost savings from internal trading among generators within the same plant and from external trading across plants at prevailing market prices. The results indicate that, on average, the generators paid $14.63 to abate one ton of CO₂ emissions in 2007. Plants realized additional gains through external trading. In particular, cost savings from trades between different fuel-fired plants were substantial.     

CO2 emission trading within the European Union and Annex B countries: the cement industry case

The cement industry is the third largest carbon emitting industrial sector in the EU. This article presents the foreseeable technological evolution of the cement industry under business as usual circumstances, and examines the effects on the sector of carbon trading. For those purposes a global dynamic simulation model of the cement industry (CEMSIM) has been developed. The model is composed of a series of interconnected modules on cement consumption and production, international trade and capacity planning. This study quantifies the benefits achieved from emission trading in different markets (EU15, EU27 and Annex B), derived both from the revenues of emission trading, and from the lower compliance costs. The magnitude of the potential carbon leakage effect is also assessed.     

Assessment of the impact of the European CO2 emissions trading scheme on the Portuguese chemical industry

This paper describes an assessment of the impact of the enforcement of the European carbon dioxide (CO₂) emissions trading scheme on the Portuguese chemical industry, based on cost structure, CO₂ emissions, electricity consumption and allocated allowances data from a survey to four Portuguese representative units of the chemical industry sector, and considering scenarios that allow the estimation of increases on both direct and indirect production costs. These estimated cost increases were also compared with similar data from other European Industries, found in the references and with conclusions from simulation studies. Thus, it was possible to ascertain the impact of buying extra CO₂ emission permits, which could be considered as limited. It was also found that this impact is somewhat lower than the impacts for other industrial sectors.     

Evaluating carbon dioxide emissions in international trade of China

China is the world's largest emitter of carbon dioxide (CO₂). As exports account for about one-third of China's GDP, the CO₂ emissions are related to not only China's own consumption but also external demand. Using the input–output analysis (IOA), we analyze the embodied CO₂ emissions of China's import and export. Our results show that about 3357 million tons CO₂ emissions were embodied in the exports and the emissions avoided by imports (EAI) were 2333 million tons in 2005. The average contribution to embodied emission factors by electricity generation was over 35%. And that by cement production was about 20%. It implies that the production-based emissions of China are more than the consumption-based emissions, which is evidence that carbon leakage occurs under the current climate policies and international trade rules. In addition to the call for a new global framework to allocate emission responsibilities, China should make great efforts to improve its energy efficiency, carry out electricity pricing reforms and increase renewable energy. In particular, to use advanced technology in cement production will be helpful to China's CO₂ abatement.     

Does a regional greenhouse gas policy make sense? A case study of carbon leakage and emissions spillover

The Regional Greenhouse Gas Initiative (RGGI) is a state-level effort by ten northeast states in the U.S. to control CO₂ emissions from the electric sector. The approach adopted by RGGI is a regional cap-and-trade program, which sets a maximal annual amount of regional CO₂ emissions that can be emitted from the electric sector. However, incoherence of the geographic scope of the regional electricity market is expected to produce two undesirable consequences: CO₂ leakage and NO_x and SO₂ emissions spillover. This paper addresses these two issues using transmission-constrained electricity market models. The results show that although larger CO₂ leakage is associated with higher allowance prices, it is negatively related to CO₂ prices if measured in percentage terms. On the other hand, SO₂ and NO_x emissions spillover increase in commensurate with CO₂ allowance prices. Demand elasticity attenuates the effect of emissions trading on leakage and emissions spillover. This highlights the difficulties of designing a regional or local climate policy.     

Environmental and economic benefits resulting from citizens’ participation in CO2 emissions trading: An efficient alternative solution to the voluntary compensation of CO2 emissions

Over the last few months in the emerging and lucrative carbon project market, a growing number of organizations have proposed to offset citizens’ greenhouse gas emissions. The target of these carbon-offset initiatives is to satisfy the increasing demand of individuals wishing to take part in the fight against climate change. In this paper, we review and criticize these carbon-offsetting programs in general terms. We then propose an alternative that, in our opinion, should prove to be a better solution for citizens who are willing to pay for protecting the environment. This alternative is to organize citizens’ participation in carbon emissions trading on a large scale in order to purchase and retire (destroy) CO₂ permits. To do so, a benevolent Regulator or non-governmental organization must correct certain CO₂ emissions market failures; this particularly concerns the high transaction costs, which represent an entry barrier and prevent citizens from purchasing and withholding permits. Based on theoretical findings, we demonstrate that implementing citizens’ participation in emissions trading is an economically efficient and a morally preferable option.     

Swedish industry and Kyoto—An assessment of the effects of the European CO2 emission trading system

We assess the effects on Swedish industry input demands and output of different climate policy scenarios connected to energy policy induced by the Kyoto protocol. We use a unique dataset containing firm-level data on outputs and inputs between 1991 and 2001 to estimate a factor demand model, which we use to simulate different policy scenarios. Sector-specific estimation suggests that the proposed quadratic profit function specification exhibits properties and robustness that are consistent with economic theory; that is, all own-price elasticities are negative and all output elasticities are positive. Furthermore, the elasticities show that the input demands are, in most cases, relatively inelastic. Simulation of the model for six different policy scenarios reveal that effects on the Swedish base industry of a EU-level permit-trading system depends on (i) the removal or maintenance of the current CO₂ tax, (ii) the price of permits, and (iii) the future price of electricity. Our analysis shows that changes in electricity price may be more important than the price of permits for some sectors.     

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.     

考虑隔墙售电模式和碳排放权交易的分布式光伏项目经济性分析

为实现“3060”碳减排目标,我国鼓励发展清洁能源,近期国家大力推行整县市分布式光伏项目,各大能源集团积极抢占市场争取整县市分布式光伏项目备案及开发建设。按照目前我国风电、光伏项目政策,整县市分布式光伏项目均执行平价上网,使得项目经济效益不佳。依据现行政策,以汕头市某分布式光伏项目为例,利用PVsyst软件模拟项目日发电量,在考虑属地区域分时电价政策的情况下,通过实行与周边大用户协商直售电模式提高售电收入,并综合考虑申请核证自愿减排量通过碳排放权交易增加收益,并与全额上网模式进行项目经济性对比发现,分布式光伏项目如适当施行隔墙售电模式并获取碳排放权收益,可有效提高项目经济性,达到项目投资预期。     

Efficiency of European emissions markets: Lessons and implications

While prior studies have shown that emission rights and futures contracts on emission rights are efficiently priced, there are no studies on the efficiency of the options market. Therefore, this study fills the gap. We examine empirical evidence regarding the efficiency of the options market for emissions rights in Europe. We employ the put-call parity approach to test the efficiency of options on emission rights traded in the European market. This implies that firms can trade options on emission rights in addition to other existing strategies in order to manage their greenhouse gas emissions.     

Predicting future UK housing stock and carbon emissions

This paper presents a novel method for exploring future transformations in the UK housing stock. The method is shown to be more robust and faster than existing methods through various tests. A Java-based implementation of the method in a new model of the UK housing stock, DECarb, is examined using a back-cast scenario from 1970 to 1996. The results show an average difference of −5.4% between predicted and actual energy demand. Comparison with predicted carbon emissions from the BRE's BREHOMES model shows a difference of around −0.9% for the same period. These results suggest that DECarb is likely to be an effective tool in examining future scenarios since the same objects and processes used in back-casting in the model are also used in forecasting. The model has an open framework and could therefore significantly benefit ongoing domestic and non-domestic climate futures research.     

The empirical effects of a gasoline tax on CO2 emissions reductions from transportation sector in Korea

The introduction of carbon tax is expected to mitigate GHG emissions cost-effectively. With this expectation identifying the impacts of carbon tax on energy demand and GHG emission reductions is an interesting issue. One of the basic methods of estimating these impacts is using the price elasticity.     

Applying bottom-up analysis to identify the system boundaries of non-energy use data in international energy statistics

Data on the non-energy use of fossil fuels in energy statistics are subject to major uncertainties. We apply a simple bottom-up methodology to recalculate non-energy use for the entire world and for the 50 countries with the highest consumption of fossil fuels for non-energy purposes. We quantify worldwide non-energy use in the year 2000 to be 24±2 exajoules (EJ), thereby accounting for 6% of the global total primary energy supply (TPES). Our bottom-up estimates are in line with data from international energy statistics for the entire world and for 14 individual countries. Our estimates exceed official non-energy use data for 22 countries, whereas they are lower than official data in the case of 14 countries. Inconsistent system boundaries of non-energy use data in international energy statistics can explain parts of the observed deviations. We regard our bottom-up methodology as reliable albeit being attached with uncertainties. We recommend its use for energy statisticians and greenhouse gas (GHG) inventory makers to generate a shortlist of countries, for which efforts should be made to clarify and improve the quality of non-energy use data in national and international energy statistics.     

Modeling the prospects of plug-in hybrid electric vehicles to reduce CO2 emissions

This study models the CO₂ emissions from electric (EV) and plug-in hybrid electric vehicles (PHEV), and compares the results to published values for the CO₂ emissions from conventional vehicles based on internal combustion engines (ICE). PHEVs require fewer batteries than EVs which can make them lighter and more efficient than EVs. PHEVs can also operate their onboard ICEs more efficiently than can conventional vehicles. From this, it was theorized that PHEVs may be able to emit less CO₂ than both conventional vehicles and EVs given certain power generation mixes of varying CO₂ intensities. Amongst the results it was shown that with a highly CO₂ intensive power generation mix, such as in China, PHEVs had the potential to be responsible for fewer tank to wheel CO₂ emissions over their entire range than both a similar electric and conventional vehicle. The results also showed that unless highly CO₂ intensive countries pursue a major decarbonization of their power generation, they will not be able to fully take advantage of the ability of EVs and PHEVs to reduce the CO₂ emissions from automotive transport.     

An interval-fuzzy two-stage stochastic programming model for planning carbon dioxide trading under uncertainty

In this study, an IFTSP (interval-fuzzy two-stage stochastic programming) method is developed for planning carbon dioxide (CO₂) emission trading under uncertainty. The developed IFTSP incorporates techniques of interval fuzzy linear programming and two-stage stochastic programming within a general optimization framework, which can effectively tackle uncertainties described in terms of probability density functions, fuzzy membership functions and discrete intervals. The IFTSP cannot only tackle uncertainties expressed as probabilistic distributions and discrete intervals, but also provide an effective linkage between the pre-regulated CO₂ mitigation policies and the associated economic implications. The developed model is applied to a case study of CO₂-emission trading planning of industry systems under uncertainty, where three trading schemes are considered based on different trading participants. The results indicate that reasonable solutions have been generated. They are help for supporting: (a) formulation of desired GHG (greenhouse gas) mitigation policies under various economic and system-reliability constraints, (b) selection of the desired CO₂-emission trading pattern, and (c) in-depth analysis of tradeoffs among system benefit, satisfaction degree, and CO₂ mitigation under multiple uncertainties.     

An innovative indicator of carbon dioxide emissions for developing countries: A study of Taiwan

Ever since the Kyoto Protocol entered into force, the issues of climate change and greenhouse gas (GHG) emissions have drawn more and more attention globally. However, the major concern of the Kyoto Protocol to reduce the overall GHG emissions might be inaccessible for most developing countries, which rely heavily on the energy-intensive industries for exports and economic growth. In this study, an innovative indicator of net carbon dioxide (CO₂) emissions, which excludes the emissions corresponding to the exports, is proposed to explicitly reveal domestic situations of developing countries. By introducing the indicator of net CO₂ emissions to top five energy-intensive industries in Taiwan, the analysis indicates that the increase in CO₂ emissions from 1999 to 2004 is mostly contributed by the expanded exports rather than the domestic demand. The distinct growth patterns of the apparent and net CO₂ emissions also imply the transformation of the industrial sector. It is expected that, for developing countries, the concept of net emissions may not only serve as a proper interim target during the process of international negotiations over GHG reductions but also highlights the prominence of addressing the emissions from the industrial sector as the top priority.     

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.