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This paper constructs a unique dataset of clean energy and collects firm-level green innovation data that matches it with provinces and cities. Then, this paper executes quasi-natural experiments on green innovation to examine the effects of China's emission trading policy on green innovation. Further, this paper introduces the interactive terms of the pilot time and pilot area dummy variables into the spatial Durbin model (SDM) and spatial dynamic panel model (SDPM) to construct quasi-natural experiments to examine the spatial effect. The findings confirm a negative association between the 'policy treatment effect' and green innovation. The results also indicate a significant negative association between the emissions trading policy and clean energy. Besides, the empirical results reveal a positive correlation between clean energy and green innovation; clean energy promotes green innovation in the region and the surrounding areas. This paper complements existing research and provides empirical evidence and policy implications for developing clean energy, promoting green innovation, and improving the emission trading policy. [ABSTRACT FROM AUTHOR]

Environmental policy in the European Union is a hot topic for both practitioners and researchers. Their interests are attracted mainly by the main tool of this policy—emissions trading within the EU ETS. In literature focusing on the impacts of the EU ETS, the EU is usually considered to be a compact unit and its structure is omitted there. In particular, the impacts on a single company (regardless its geographical location), on a sector of industry (regardless the member countries), or on some subset of the involved companies with respect to non-EU competitors are often explored. However, through the eyes of national governments, it is vital for the countries to keep their national industrial sectors competitive not only against companies from countries outside the EU but also from other EU countries. This paper focuses on the influence of the EU ETS on the national steel sectors in the EU and their competitiveness. The hybrid PROMETHEE-DEA approach is used to assess how the price of emission allowance and grandfathering within the EU ETS impact the technical efficiency and competitiveness of these national sectors. The results of this study show that the volatile allowance price influences the efficiency and grandfathering affects the competitiveness of the EU national steel sectors. [ABSTRACT FROM AUTHOR]

Over the past 20 years, scholars have examined the role policy transfer has had on the development of environmental policies across the globe. The literature in this area has discussed everything from the movement of cap-and-trade policies to the movement of rain barrels. As the name 'policy transfer' implies, studies tend to focus on the successful movement of a policy or program. Part of the reason for this focus is that studies tend to neglect the role power and time play in the transfer process. To begin addressing this, the concepts of power most commonly associated with the three faces of power debate and ideas of political time, policy time and 'chronological' time (i.e. timing, tempo, time) can help explain a range of environmental transfers (or non-transfers) better than the existing literature. [ABSTRACT FROM AUTHOR]

Scholars of environmental market-based policy instruments (MBIs), such as cap-and-trade and biodiversity offsetting programs, have extensively documented MBI's market-like features, including the ways they incentivize producing environmental quality, risk subordinating nature protection to capital accumulation, and are supported by state-driven projects of market-building ('re-regulation'). A less emphasized dimension of MBIs is examined: the ways these institutions are founded upon a substantial thickening of state infrastructural power, which amounts to expanding state control over economic and environmental life in ways that outstrip processes of re-regulation. Appreciating the linkages between MBIs and expanding state control over environmental quality may help explain routine conservative resistance to these policy developments. Affinities between MBIs and regulatory thickening also call into question the degree to which MBIs should be thought of as 'liberalizing' policy instruments and suggests that, perhaps counterintuitively, the growth of MBIs may present new opportunities for expanding public control over environmental quality. [ABSTRACT FROM AUTHOR]

Despite concerns on their effectiveness and legitimacy, carbon markets are often presented as the main tool of climate policy. Developing countries are particularly eager to establish and interlink their carbon markets to benefit from global climate investment flows. Turkey is a belated but willing player in this endeavor. In tracing the ambivalent politics of establishing a carbon market in Turkey, we focus on the perceptions of different actors vis-à-vis carbon marketization attempts. Using policy documents, 22 expert interviews, and process tracing, we question the underlying assumptions on carbon markets in a country with unambitious climate targets. Our findings suggest that the making of carbon market in Turkey is not necessarily a rational, national interest-driven process but instead one promoted by the international organizations including World Bank and the EU. We conclude that this preference for market-based instruments defer public interest, favor more incremental policies, and ignore distributive justice concerns. [ABSTRACT FROM AUTHOR]

Environmental policies may have important consequences for firms' competitiveness or profitability. For the European Union Emissions Trading System (EU ETS) the empirical literature documents that significant emissions reductions have resulted from it. Surprisingly, however, the literature shows that there have been hardly any concurrent negative effects on firms' competitiveness during the first two phases of the scheme (2005-2012). We show that the main explanations for the absence of negative impacts on competitiveness are a large over-allocation of emissions allowances leading to a price drop and the ability of firms to pass costs onto consumers in some sectors. Cost pass-through combined with free allocation, in turn, partly generated windfall profits. In addition, the relatively low importance of energy costs indicated by their average share in the budgets of most manufacturing industries may have limited the impact of the EU ETS. Finally, small but significant stimulating effects on innovation have been found so far. Several factors suggest that over-allocation is likely to remain substantial in the upcoming periods of the scheme. Therefore, we expect to see no negative competitiveness effects from the EU ETS in Phases III and IV (2013-2030). Key policy insights Empirical literature on the EU ETS shows that there have been hardly any effects on firms' competitiveness or profitability. One main explanation is a large over-allocation of emissions allowances leading to a price drop. This reduced incentives for innovation. Moreover, firms were able to pass costs on to consumers in some sectors which partly generated windfall profits. Innovation effects have so far been small but positive. We expect to see no negative competitiveness effects on regulated firms in the near future suggesting that no further reliefs for regulated firms are required. [ABSTRACT FROM AUTHOR]

The Paris Agreement establishes provisions for using international carbon market mechanisms to achieve climate mitigation contributions. Environmental integrity is a key principle for using such mechanisms under the Agreement. This paper systematically identifies and categorizes issues and options to achieve environmental integrity, including how it could be defined, what influences it, and what approaches could mitigate environmental integrity risks. Here, environmental integrity is assumed to be ensured if the engagement in international transfers of carbon market units leads to the same or lower aggregated global emissions. Four factors are identified that influence environmental integrity: the accounting for international transfers; the quality of units generated, i.e. whether the mechanism ensures that the issuance or transfer of units leads to emission reductions in the transferring country; the ambition and scope of the mitigation target of the transferring country; and incentives or disincentives for future mitigation action, such as possible disincentives for transferring countries to define future mitigation targets less ambitiously or more narrowly in order to sell more units. It is recommended that policy-makers combine several approaches to address the significant risks to environmental integrity. Key policy insights Robust accounting is a key prerequisite for ensuring environmental integrity. The diversity of nationally determined contributions is an important challenge, in particular for avoiding double counting and for ensuring that the accounting for international transfers is representative for the mitigation efforts by Parties over time. Unit quality can, in theory, be ensured through appropriate design of carbon market mechanisms; in practice, existing mechanisms face considerable challenges in ensuring unit quality. Unit quality could be promoted through guidance under Paris Agreement Article 6, and reporting and review under Article 13. The ambition and scope of mitigation targets is key for the incentive for transferring countries to ensure unit quality because countries with ambitious and economy-wide targets would have to compensate for any transfer of units that lack quality. Encouraging countries to adopt ambitious and economy-wide NDC targets would therefore facilitate achieving environmental integrity. Restricting transfers in instances of high environmental integrity risk - through eligibility criteria or limits - could complement these approaches. [ABSTRACT FROM AUTHOR]

Reducing GHG emissions and mitigating climate change would require significant investments in renewable energy technologies. Foreign direct investments (FDI) in renewable energy (RE) have increased over the last years, contributing to the diffusion of RE globally. In the field of climate policy, there are multiple policy instruments aimed at attracting investments in renewable energy. This article aims to map the FDI flows globally including source and destination countries. Furthermore, the article investigates which policy instruments attract more FDI in RE sectors such as solar, wind and biomass, based on an econometric analysis of 137 Organisation for Economic Co-operation and Development (OECD) and non-OECD countries. The results show that Feed in Tariffs (FIT) followed by Fiscal Measures (FM), such as tax incentives and Renewable Portfolio Standards (RPS), are the most significant policy instrument that attract FDI in the RE sector globally. Regarding carbon pricing instruments, based on our analysis, carbon tax proved to be correlated with high attraction of FDI in OECD countries, whereas Emissions Trading Schemes (ETS) proved to be correlated with high attraction of FDI mainly in non-OECD countries. Key policy insights Feed in Tariffs is the most significant policy instrument that attracts FDI in the Renewable Energy sector globally. Fiscal Measures (FM), such as tax incentives, show a significant and positive impact on renewable energy projects by foreign investors, and particularly on solar energy. Carbon pricing instruments, such as carbon taxation and emissions trading, proved to attract FDI in OECD and non-OECD countries respectively. Public investments, such as government funds for renewable energy projects, proved not as attractive to foreign private investors, perhaps because public funds are not perceived as stable in the long run. [ABSTRACT FROM AUTHOR]

Seven emissions trading scheme (ETS) pilots have been established in China. They have introduced some unique methods to set emissions caps and allocate allowances, different from textbook models and their counterparts in the EU, California, and many other regions. This article provides a detailed introduction to the methods for cap setting and allowance allocation adopted by the pilots, and presents detailed comparisons of these methods. In terms of cap setting, the pilots adopt flexible caps that can be adjusted where necessary, which primarily depends on the outcomes of the bottom-up approach, namely aggregating the allowances allocated to participants. As for allowance allocation, the pilots not only adopt such methods as grandfathering and benchmarking, which are also widely applied in other existing schemes, but also some special methods that requireex postadjustment, such as those based on enterprises’ historical emissions intensity (including both physical quantity and added-value intensity) and current production/output. The factors influencing the design are further analysed, including the impacts of theory and experience from foreign systems, concerns about economic development, traditions regarding intensity targets and policy, constraints from data availability and preparation time, tight regulation of the electricity and heat generation sector, and concerns regarding price stability. The practice of pilots presents an improvement opportunity and a challenge for China to further balance the theoretical and practical requirements in ETS design in establishing its national system. Policy relevance China is piloting emissions trading in seven regions, as part of efforts to try to rely more on market-based instruments to achieve GHG emissions control targets. All seven pilots have been confronted with special issues in the design process when compared with existing foreign schemes. This article analyses in depth the special issues related to cap setting and allowance allocation and the approaches adopted to address these issues. Flexible cap setting through a bottom-up approach and different types of allocation methods with or withoutex postadjustment are adopted in the pilots. The flexible and innovative approaches the pilots have developed could provide useful experience for designing the nationwide ETS in China and promoting emissions trading policy in other parts of the world. [ABSTRACT FROM PUBLISHER]

In 2005, the world's largest Emissions Trading System (ETS) was introduced in the EU. Economic theory assumes high efficiency of such market-based instruments since companies have the flexibility to trade allowances. However, to date there is a lack of understanding on how companies have participated in the allowance markets. This article uses data on transfers of allowances between 2005 and the end of 2007, published by the EU in the Community Independent Transaction Log (CITL) after a five-year delay. We use cluster analysis to detect patterns in the data and differentiate transfer behaviour. We find that the vast majority of participants (7212 accounts) are rather passive in terms of transfers. Of these, more than half are hardly participating in the market at all, whereas one-third are accounts managed by another account belonging to the parent company. Opposed to that, 143 accounts show more active, but relatively diverse transfer behaviour. We also identify differences in sectoral representations, account types, and primary allocation across the seven clusters. While the passive accounts mostly belong to installations regulated under the EU ETS, the most active accounts are classified as ‘non-regulated account type'. Our findings have implications for policy makers in the EU as well as other countries that have or are setting up an ETS. The high number of companies not or hardly participating in the allowance market despite being regulated under the EU ETS puts the theoretical praised economic efficiency of this instrument in question. This finding also implies that policy makers should reconsider the entry thresholds for firms into an ETS. At the same time, some of the most active accounts belong to non-regulated firms, such as banks, which calls for better market oversight or potentially restrictions on ETS participation. Finally, we recommend that the timeliness and user-friendliness of CITL should be increased. [ABSTRACT FROM AUTHOR]

In 2013, China launched its domestic pilot emissions trading scheme (ETS) as a cost-effective strategy to reduce CO2emissions. Theoretically, the ETS can interact with the feed-in tariffs (FITs) applied to renewable energies (REN). This article presents a simple method to demonstrate how FITs can be adjusted based on the evolution of ETS carbon prices in order to provide a cost-effective climate policy package in China. First, by using provincial data and wind and solar power as examples, it calculates the implicit carbon prices that FITs generate in different Chinese provinces and finds that they are much higher than current carbon prices in the pilot ETS. This shows the necessity of using both instruments to guarantee current level incentives to develop REN for climate change purposes, at least in the short and medium terms. Second, by keeping the annual total carbon price level stable (the sum of the implicit FIT carbon price and the ETS carbon price), and taking into account the cost evolution of REN development, this article demonstrates, for the 2018–2020 period, that FIT should decrease at an annual rate of 3.04–4.63% (for wind) and 7.84–8.87% (for solar) based on different growth rates for progressive national ETS carbon prices. Policy relevance There are a number of studies and debates on the interactions between climate policies in Europe in particular, ETS and subsidies for REN. The key issue is that a climate policy package should be cost-efficient and the implementation of one policy should not jeopardise the performance of another. For a country like China, a considerable scale effect on climate target achievement and total cost savings could be produced by the careful design of the climate policy package. FIT and ETS, which are cost-efficient policies if implemented separately, will very probably constitute a major climate policy package in the future in China, which is aiming to limit the use of command-and-control policies. So far, there is some debate on how to reduce FIT for wind power in China due to development cost changes. But discussions are lacking on the linkage between FIT and ETS. This paper fills this gap. [ABSTRACT FROM AUTHOR]

Modelling CO2emission allowance prices is important for pricing CO2emission allowance linked assets in the emissions trading scheme (ETS). Some statistical properties of CO2emission allowance prices have been discovered in the literature ignoring price jumps. By employing real data from the ETS, this research first detects the jump risk using a jump test and then verifies jump effects in modelling CO2emission allowance prices by comparing the in-sample and out-of-sample model performance. We suggest a model which can capture the statistical properties of autocorrelation, volatility clustering and jump effects is more appropriate for modelling CO2emission allowance prices. We establish a general framework for pricing CO2emission allowance options on futures contracts with these properties and find that the jump risk significantly affects the value of the CO2emission allowance option on futures contracts. More importantly, we demonstrate that the dynamic jump ARMA–GARCH model can provide more accurate valuations of the CO2emission allowance options on futures than other models in terms of pricing error. [ABSTRACT FROM AUTHOR]

The climate change policy design of the Lee Myung-bak administration was the outcome of interest group politics around the greenhouse gas and energy target management scheme, carbon taxes, and the emission-trading scheme. Using qualitative methods, this research examines powerful stakeholders and their interests at play in Korea’s climate change policymaking processes. It also links the political economy of climate change policy to the legacy of the ‘developmental state’ and examines environmental developmentalism in the design of the three climate change policies. The Lee administration strongly promoted environmental developmentalism, which created a new growth engine in an environmental field, while bolstering manufacturing businesses and excluding the views of environmental non-governmental organisations from the target-management and the emission-trading schemes. The Lee administration also sought to facilitate pro-business measures such as low taxes, which led it to reject a carbon tax. Therefore, environmental developmentalism was central to the politics of the Lee administration’s climate change policy design. [ABSTRACT FROM PUBLISHER]

The last ten years have seen the growth of linkages between many of the world's cap-and-trade systems for GHGs, both directly between systems, and indirectly via connections to credit systems such as the Clean Development Mechanism. If nations have tried to act in their own self-interest, this proliferation of linkages implies that for many nations, the expected benefits of linkage outweighed expected costs. In this article, we draw on the past decade of experience with carbon markets to examine why systems have demonstrated this revealed preference for linking. Linkage is a multi-faceted policy decision that can be used by political jurisdictions to achieve a variety of objectives, and we find qualitative evidence that many economic, political, and strategic factors – ranging from geographic proximity to integrity of emissions reductions – influence the decision to link. We also identify some potentially important effects of linkage, such as loss of control over domestic carbon policies, which do not appear to have deterred real-world decisions to link. Policy relevance These findings have implications for the future role that decentralized linkages may play in international climate policy architecture. The Kyoto Protocol has entered what is probably its final commitment period, covering only a small fraction of global GHG emissions. Under the Durban Platform for Enhanced Action, negotiators may now gravitate toward a hybrid system, combining top-down elements for establishing targets with bottom-up elements of pledge-and-review tied to national policies and actions. The incentives for linking these national policies are likely to continue to produce direct connections among regional, national, and sub-national cap-and-trade systems. The growing network of decentralized, direct linkages among these systems may turn out to be a key part of a future hybrid climate policy architecture. [ABSTRACT FROM AUTHOR]

Since the crash of carbon prices in phase II of the European Union Emissions Trading System (EU ETS), many have argued that the low price mirrors structural failures requiring intervention. A wide range of reform options have been suggested, including delegating the governance of the carbon market to an independent authority. This article analyses the debate by reconstructing the various arguments for or against reform. Three possible drivers of the price decline are investigated: (1) exogenous shocks; (2) insufficient credibility; and (3) market imperfections. It is argued that the extent to which a low price is problematic and warrants reform depends on the specific objectives associated with the EU ETS and the perception on the functioning of the market. A two-dimensional EU ETS Reform Space, comprising the degree of price certainty within the EU ETS and the level of delegation, is devised. Within the Reform Space, EU ETS reform options currently discussed are mapped. This descriptive structure offers a framework to clarify whether delegation responds to various concerns with respect to the EU ETS. Delegation might enhance flexibility under unforeseen circumstances, decrease policy uncertainty, and increase the credibility of long-term policy commitments. However, higher degrees of delegation face challenges including democratic legitimacy and political feasibility. Policy relevance In January 2014, the European Commission proposed a structural reform of the EU ETS characterized by a quantity triggered Market Stability Reserve, increasing flexibility in allowance supply. However, intense debate has revealed considerable differences in opinion regarding the need for and objectives of any adjustment mechanism. Other proposals, including various degrees of delegation to a rule-based adjustment mechanism or an independent authority as well as degrees of price certainty, were also suggested. This article offers a new framework, the EU ETS Reform Space, to compare reform options more systematically. This work therefore contributes to structuring the policy debate by providing a tool to better understand the merits and demerits of various reform proposals [ABSTRACT FROM PUBLISHER]

We use data from the World Input-Output Database to examine channels through which CO2emissions are embodied within, and imported into, the European production in 2005 and in 2009. We use an input–output price model to simulate the effect that a rise in the price of emissions trading system (ETS) allowances would have on the final price of goods. We find a reduction in emission intensity, which was greatest in those sectors regulated under ETS. Finally we examine the trade between China and the EU to study possible increases in carbon leakage. Results show that emissions embodied in imported intermediate goods have increased in all sectors. [ABSTRACT FROM AUTHOR]

One of the stated aims of the EU ETS is to promote investment in clean, low-carbon technologies. Against this background, this paper aims to provide an original analysis of how the EU ETS has impacted on corporate investment decisions and whether it does so at a level adequate to reach the long-term political targets required for a decarbonization of the European economy. In this paper, the authors provide empirical evidence for this question by analyzing corporate reactions to the EU ETS for Belgian EU ETS sites. Despite the fact that most managers use prices that are much higher than spot prices in their appraisal reports, expected prices are still far too low to mobilize additional financing for new investments in lower carbon modes of production. [ABSTRACT FROM AUTHOR]

The European Union Emissions Trading System (EU ETS) is in dire straits. Prone to design problems and suffering from the effects of the economic crises the scheme is criticised for its poor achievements. In this paper we will analyse some of the features of this situation from an ethical perspective. The major part is dedicated to the complications within each phase of the EU ETS and to the recent developments it has undergone. We will briefly discuss the remedies suggested by prominent commentators. Furthermore, any policy tool to tackle climate change should be evaluated in view of the profound equity issues that are inherent to the climate problem. We will evaluate the EU ETS according to two justice-based criteria, related to effectiveness and the distribution of the duties involved in climate change, respectively. We will conclude that the EU ETS, in its current form, clearly lacks fairness on both criteria. However, the biggest problem is the unwillingness of EU leaders to mend, what could be, a commendable climate policy tool. To that extent, we argue, those leaders are acting unjustly. [ABSTRACT FROM PUBLISHER]

As the number of instruments applied in the area of energy and climate policy is rising, the issue of policy interaction needs to be explored further. This article analyses the interdependencies between the EU Emissions Trading Scheme (EU ETS) and the German feed-in tariffs (FITs) for renewable electricity in a quantitative manner using a bottom-up energy system model. Flexible modelling approaches are presented for both instruments, with which all impacts on the energy system can be evaluated endogenously. It is shown that national climate policy measures can have an effect on the supranational emissions trading system by increasing emission reduction in the German electricity sector by up to 79 MtCO2in 2030. As a result, emission certificate prices decline by between 1.9 €/tCO2and 6.1 €/tCO2and the burden sharing between participating countries changes, but no additional emission reduction is achieved at the European level. This also implies, however, that the cost efficiency of such a cap-and-trade system is distorted, with additional costs of the FIT system of up to €320 billion compared with lower costs for ETS emission certificates of between €44 billion and €57 billion (cumulated over the period 2013–2020). Policy relevance In order to fulfil ambitious emission reduction targets a large variety of climate policy instruments are being implemented in Europe. While some, like the EU ETS, directly address CO2emissions, others aim to promote specific low-carbon technologies. The quantitative analysis of the interactions between the EU ETS and the German FIT scheme for renewable sources in electricity generation presented in this article helps to understand the importance of such interaction effects. Even though justifications can be found for the implementation of both types of instrument, the impact of the widespread use of support mechanisms for renewable electricity in Europe needs to be taken into account when fixing the reduction targets for the EU ETS in order to ensure a credible long-term investment signal. [ABSTRACT FROM PUBLISHER]

This article explores the incentives and challenges for Chinese business companies in participating in carbon emissions trading schemes (ETSs). Based on extensive interviews with the business managers and government officers who are currently involved in the ongoing policy experiments of pilot ETS programmes across China, the article identifies factors that either motivate or discourage companies in participating in carbon trading activities. It argues that different business groups, i.e. capped enterprises, uncapped enterprises, and carbon intermediaries, are affected by these factors to significantly different extents in terms of formulating their specific carbon strategies. It also illustrates some factors, such as a lack of stakeholder pressure and fragmented political interests, which have a distinctive Chinese character and are believed will have a fundamental impact on the quality and efficiency of Chinese ETSs in the future. Policy relevance At the outset, the successful implementation of any ETS depends critically on the active involvement of business actors across various industries. Hence, having an understanding of the business incentives and obstacles in participating in carbon trading is crucial, as these factors will ultimately determine the size and quality of the carbon market, and the total volume and integrity of the GHG emissions to be traded. This article also illustrates the common factors that affect business appetite for carbon trading throughout the world, as well as the factors that are unique to the Chinese political and economic context to constrain business in the market. Finally, a presentation of the business attitude towards the ETS experiment indicates the most worrying aspects of the policy design regarding carbon trading in China. As the construction and implementation of the ETS is a long-term undertaking, such investigation deserves attention from both policy makers and business leaders alike. [ABSTRACT FROM PUBLISHER]

Cap and trade systems have been pursued as a primary strategy for addressing climate change but have received surprisingly little analysis from a justice perspective. Using a multivalent justice framework that includes the dimensions of distribution, recognition, and representation, this article examines the development of the Western Climate Initiative (WCI), the largest multijurisdictional North American attempt to create a greenhouse gas (GHG) cap and trade system. Decisions involving five components of creating the system are interrogated: participation metrics, stakeholder consultations, methods of policy analysis, market boundaries, and policy guidelines. This analysis yields two sets of observations. First, the article documents how market-oriented regulation contracted understandings of climate change policy. Decisions taken to facilitate the commodification and marketization of GHGs narrowed the understanding of justice with the WCI to the concept of “fair play” among market participants. Second, the article argues that using a multivalent approach to justice facilitates the observation of how a relatively shallow understanding of justice was shaped in this particular context. It also concludes, however, by considering the limitations of this approach to justice, in particular the dimension of representation, when faced with multiscalar and ambiguous policy contexts such as those inherent to climate policy. [ABSTRACT FROM PUBLISHER]

The European Union's Emissions Trading Scheme (EU ETS) is so far the largest emissions trading system in the world. A rigorousex postempirical analysis of the scheme is presented. The effect of the scheme on firms' investment decisions in carbon-reducing technologies is analysed by using detailed firm-level data from Swedish industry. Based on difference-in-difference estimation as well as a before–after difference estimation, the results reveal that the EU ETS has not had a significant effect on firms’ decisions to invest in carbon-mitigating technologies. However, although the EU ETS appears to have no direct effect on investments, it is too early to dismiss the system. Consideration is given to how the EU ETS can realize its potential to become an effective tool in the EU climate and energy policy portfolio. [ABSTRACT FROM PUBLISHER]

The process of calculating market clearing prices for cap and trade environmental pollution policies dealing with both air and water pollution remains problematic. The permit trading processes are designed to mimic the cost minimisation outcome. In the paper we design the market process for allocating permits to achieve the same type of behaviour we observe for each decision maker in the overall cost minimisation model. We aim to develop a modelling system that would be easy and efficient to operate. We use the method which is known as a computer-assisted ‘smart market’ and has been used in a number of electric energy pricing situations. This approach has also been proposed and applied to some types of environmental quality and resource management policies. In the paper the theoretical structure of the ‘smart market’ model is provided. After the review of different models that have been used to represent permit trading situations, the smart market model structure based on the shadow prices is developed. [ABSTRACT FROM AUTHOR]

The article shares reflections about the climate change program of California. Topics discussed include the state's goal to reduce its greenhouse gas emissions under the 2006 Global Warming Solutions Act, the state's launch of a market-based cap-and-trade program, and the view that the federal government should follow California's model in terms of its climate change policy.

Research has shown that industrial firms and organisations engaged in lobbying during the making and revision of the European Union Emissions Trading System (EU ETS). However, little is known on how they went about lobbying. This article provides insight into industrial lobbying during the revision of the EU ETS by focusing on six industrial firms from Sweden and Norway, examining how and where they lobbied, and whether their lobbying was shaped by originating from an EU member state or not. The article finds that EU membership did influence how and where firms lobbied. Compared to Swedish firms, Norwegian firms lobbied less alone, via national associations and national institutions, and this limited Norwegian firms’ ability to lobby at the European level. [ABSTRACT FROM PUBLISHER]

This article seeks to refine the joint decision trap model by introducing additional time-based exit mechanisms. The procrastination of decisions, temporary derogation, and transitory compensation enable European Union (EU) member states to escape gridlock by distributing the costs and benefits of a decision over the time axis. In addition, time-based mechanisms not only help to overcome stalemate in policy-making, they also lock member states into a policy regime that may gradually be strengthened once delayed measures take effect. We demonstrate the workings of time-based strategies for the case of the EU's Emission Trading System (EU ETS). Given the diversity of EU member states' interests, the evolution of a mandatory and increasingly ambitious EU ETS presents a puzzle for EU scholars. While established exit mechanisms do not provide conclusive explanations for the case of the EU ETS, we argue that time-based strategies were key to move the EU's policy on emission trading forward. [ABSTRACT FROM AUTHOR]

The contribution that no-lose target schemes for non-Annex I (NAI) countries could make to achieve the 2°C target is explored by accounting for the incentives of 18 NAI countries’ participation in no-lose target schemes. Using various scenarios, it is shown that implementing uniform no-lose targets as part of the burden-sharing will not lead to global emissions levels compatible with the 2°C target, because uniform no-lose targets will only be beneficial to a few NAI countries. Employing more lenient uniform no-lose targets or individual no-lose targets for large emitters could increase participation by NAI countries and decrease global emissions, global compliance costs, rents by NAI countries, and compliance costs for Annex I (AI) countries. However, the resulting global emissions levels will not be compatible with attaining the 2°C target. Achieving this target will require more stringent emissions targets for AI countries and more lenient no-lose targets for NAI countries. As such, no-lose targets should account for 20% to 47% of global emissions reductions, while due to emissions trading around two-thirds of global emissions reductions should be realized in NAI countries. Indeed, an effective solution may only require no-lose targets for five to seven of the largest NAI countries. Policy relevance No-lose targets are one of a number of instruments discussed under the United Nations Framework Convention on Climate Change New Market Mechanism to integrate NAI countries in global emissions reduction efforts. In contrast to binding reduction targets, which apply penalties if a target is not met, no-lose targets provide incentives for meeting a target, e.g. in the form of excess emissions certificates that can be sold on the global carbon market. The presented simulations show that no-lose targets can result in contributions from NAI countries to global emissions reduction efforts. However, the simulations also show that the necessary incentives for no-lose targets need to be adjusted. AI countries require more ambitious targets and NAI countries require less ambitious no-lose targets than proposed by the Intergovernmental Panel on Climate Change report. Effective no-lose targets may only be required for five to seven of the largest NAI countries. [ABSTRACT FROM AUTHOR]

The distributional choices of the EU in three policy phases, spanning 20 years, are examined: the negotiations on emissions reduction targets for the EU15 under the first commitment period of the Kyoto Protocol, the negotiation of National Allocation Plans for Phase II of the EU Emissions Trading Scheme (ETS) between 2008 and 2012, and the formulation of the 2008 Climate and Energy Package for the period 2013–2020. A flexible and pragmatic framework, consisting of the normative principles of capacity, responsibility, equality, and need, is used to elucidate the indicators and policies used in deciding how the EU Member States are to share the cost of meeting climate policy objectives. The analysis extends the literature by applying a common analytical framework across the three different policy phases and provides a structured basis for the assessment of what the EU and other jurisdictions can learn from them. Policy relevance Distributing the cost of climate policy is a key policy concern, both at the domestic and international level. The EU has more than 20 years of policy experience with such distributional choices and is also preparing the next steps of its policy, where distributional choices will again be central. A framework is developed to assess the modalities and rationale for EU distributional choices in order to inform the future climate policy of the EU and other jurisdictions. [ABSTRACT FROM PUBLISHER]

The prospects of the Clean Development Mechanism (CDM) and for carbon income, up to and beyond 2012, in the industrial sectors of Iran and five other Asian countries are investigated. The attractiveness and suitability of each host country, the status of their industrial sectors (based on four post-2012 scenarios), and the post-2012 potential of the CDM (or similar carbon projects) in these sectors are all examined. A multi-criteria analysis of Iran, Saudi Arabia, the UAE, Qatar, China, and India, based on seven sets of criteria (institutional, regulatory, economic, political, social, CDM experience, and energy production/consumption), is conducted, and the post-2012 potential carbon incomes of each country – based on CO2e emissions of industrial processes – are calculated. Finally, the Iranian industrial sector and the impact of deregulation of energy prices are examined. The post-2012 potential savings in the Iranian industrial sector are calculated based on energy savings, carbon income, and environmental savings. The results indicate that there is strong demand for investment and new technology in this sector to combat several-fold energy price increases. Moreover, high-priced carbon credits could play a meaningful role in post-2012 energy policies in this sector. Policy relevance This research is the first study to quantify the carbon market potentials in the industrial sectors of the selected Organization of the Petroleum Exporting Countries (OPEC) members. The Kyoto Protocol is considered by most OPEC countries to be a mixed bag of threats and opportunities and they have shown ambivalence towards it, mainly due to the threat a reduction of fossil fuel consumption poses to their economies. On the other hand, energy efficiency is a desirable goal for their industrial sectors. Iran, as an OPEC member country with vast energy resources, has mostly ignored the CDM during the first commitment period of the Kyoto Protocol and has performed poorly on CDM implementation. However, the current deregulation of energy prices in Iran, with profound cuts in energy subsidies, would definitely alter the perspective of its industrial decision makers on the post-2012 carbon potentials. [ABSTRACT FROM PUBLISHER]

Although it is likely that the political–economic coalition required for implementing a federal cap-and-trade programme for GHGs in the US is now sufficiently strong, the structural impediments that have prevented its legislative passage remain impressively durable and can be expected to continue to lay waste to congressional proposals for the foreseeable future. Indeed, given the complex history of environmental policy gridlock in Washington since the early 1980s, any expectations that a cap-and-trade programme could have been realistically achieved through the traditional legislative passage in Congress are fundamentally misplaced. Building on previous research, it is argued that – as with most other forms of environmental policy in the US over the past three decades – a national carbon market is more plausible given alternative policy pathways, which if taken are capable of circumventing the Federal Congress altogether. In particular, the interaction between litigation against the federal government and the ‘rulemaking’ authority possessed by the Executive Branch provides the potential space for the current administration to unilaterally establish a model rule for a national carbon-trading programme. Policy relevance This article aims to contribute to American climate policy debates by re-thinking the policy mechanisms most capable of establishing a national carbon market in the US. By taking into account the array of structural factors that have prevented the legislative passage of such a programme in federal Congress, a range of alternative policy ‘pathways’ is considered that have historically allowed progressive environmental policies to endure in Washington (despite increased Congressional gridlock over the past few decades). Two specific alternative strategies and the relationship between them are assessed: the use of litigation to impose legal obligations on federal agencies to regulate effluents, and the use of executive authority to define the nature and scope of environmental regulation. The administration's current potential to unilaterally develop a model-rule for a cap-and-trade programme under the Clean Air Act is emphasized, and the political implications of such a strategy are considered. [ABSTRACT FROM PUBLISHER]

Greenhouse gas (GHG) reduction projects implemented at European Union Member States in non-Emissions Trading Scheme (ETS) sectors are referred to as domestic offset (DO) projects. The aim of this article is the presentation of DO projects implementation modalities, their interactions with subsidy programs and the analysis of impacts on their financial profile. This article argues that although DOs would not bring EU Member States closer to their Kyoto Protocol targets, they could enhance the roll-out of new low-carbon technologies which would result in extra energy and GHG reduction gains on top of the carbon credits that link DOs to the EU ETS. [ABSTRACT FROM AUTHOR]

Norwegian climate policy has been marked by several shifts with regard to adopted targets and measures to reduce emissions of greenhouse gases. Three knowledge-based discourses – respectively a tax discourse, a quota discourse and a technology discourse – have been influential throughout. By tracing the development of Norwegian climate policy from 1989 until 2008, it is shown, however, that while significant in early phases of policymaking, the discourses lose influence in the phase when policy solutions are designed and implemented. Those ideas and ambitions that characterise the ruling discourses in Norwegian climate policy are not necessarily materialised in actual policy. [ABSTRACT FROM AUTHOR]

In April 2010, Prime Minister Kevin Rudd announced the deferral of his flagship climate-change policy, the Carbon Pollution Reduction Scheme, after it twice failed to gain the support of the Australian Senate. The decision contributed to the curtailment of Rudd's premiership and confirmed climate change as one of the most toxic issues in Australian politics. Although deficits in policy design and structural obstacles caused by Australia's carbon-intensive economy were major obstacles for the Carbon Pollution Reduction Scheme, it could have passed into legislation had more effective political strategies been used to counter political opposition. A policy network framework is used to explore these political obstacles and how alternative political strategies may help to counter political obstacles to and public concern about new climate policies. In conclusion, the wider merits of policy network and political strategy approaches for the analysis of national climate politics are considered. [ABSTRACT FROM AUTHOR]

To investigate the ‘promiscuous history’ of the efficiency of emissions trading markets, I draw from Actor Network Theory and specifically the work of Bruno Latour, highlighting how the commonly made claim to efficiency was constructed as a ‘fact’. I trace the processes, beginning in the early 1970s, that constructed first the inefficiency of command-and-control regulation through the distinction between the means and the ends of regulation, and the conversion of the specific 1970 Clean Air Act regulations into the archetypal form of command-and-control. Alongside this, the efficiency of emissions trading was constructed through the provision of empirical, modeling evidence and the re-construction of the Environmental Protection Agency's early Emissions Trading System as an ‘ad hoc’ implementation of ‘pure’ economic theory. In this way specific regulatory forms were translated into a seemingly universal economic narrative, and emissions trading was stabilised as a regulatory technology applicable to multiple environmental pollutants. [ABSTRACT FROM PUBLISHER]

Successive New Zealand governments have failed to adopt effective climate change policies. A positive, albeit limited, step was taken with the New Zealand Emissions Trading Scheme in 2008, a scheme founded on a framework of comprehensive coverage, applying to all sectors of the economy and all Kyoto gases, addressing the challenge of creating an emissions trading scheme tailored for a country characterised by large forest sinks and substantial agricultural emissions. Amendments in 2009 created significant changes in the way the scheme operates. These included delaying the entry of key sectors, moving to an ‘intensity' based approach, to the free allocation of emissions units and implementing a ‘transition period’. The development of New Zealand's climate change policy highlights the difficulties of a unique emissions profile and strong political interests, particularly the influence of a powerful agriculture sector. [ABSTRACT FROM PUBLISHER]

Linking a cap-and-trade with an offset mechanism has many theoretical advantages: it reduces compliance costs, extends the price signal outside the cap-and-trade, and triggers technology transfer. However, it is feared that such linking will induce outsourcing of emissions reduction at a low price and undermine the price incentive in the cap-and-trade. The EU Emissions Trading Scheme (EU ETS) is the first full-scale example of a cap-and-trade system linked to project-based mechanisms such that offsets have effectively been used by industrial installations. This article is an ex post analysis of EU ETS data for the years 2008 and 2009, and the characteristics of the link and its efficiency are evaluated. Although offsets have been much used, their use is concentrated and not very intense or frequent, which allays the fear that offsets will flood the market. Although the majority of surrendered CERs effectively come from the largest and oldest projects, the credits surrendered are similar to those available on the market. Possible factors that contribute towards inefficiency are the rules for using offsets, transaction costs affecting the participation of small installations, awareness and openness to market-based instruments, and uncertainties regarding CERs offer and demand from other markets. However, the impact on EUA equilibrium price still needs to be quantified. [ABSTRACT FROM PUBLISHER]

The article discusses an innovative policy approach to climate change mitigation in Great Britain, called personal carbon trading (PCT), in which emission rights are allocated to individuals. According to the authors, despite the many variations of the PCT scheme, there are two main components they all share, including the lack of an option to opt out once an individual becomes part of a scheme and the distribution of an annual, equal per capita carbon emissions allowance for personal use without a fee. Topic include a discussion of the rationale behind a cap-and-trade policy approach in the context of climate mitigation policies, a summary of the status of PCT policy and research in Great Britain, and implications of the personal carbon allowances (PCA) scheme on individuals.

This article considers the integrity of the emerging emissions allowance markets for greenhouse gases (GHG) under the international emissions trading system created by the Kyoto Protocol and the parallel European Union Emissions Trading Scheme. In particular, we suggest that accepted definitions of emissions baselines, initial allocation of emission credits, verification of “additionality” for GHG reduction beyond what would have occurred without trading, assuring permanence for offset-generating projects, preventing leakage of emissions-generating activities from protected project areas, monitoring, and reporting requirements are problematic. As with previous reforms that also rely on market allocation and expansion of private property rights, GHG trading deflects change in the social relations of production required for more sustainable production while commodifying access to the atmosphere and nature's ability to recycle carbon. Alternatives to this modern-day GHG indulgence system are considered, especially an upstream carbon tax, designed to force change in energy procurement and use. Although we found that most of the conditions required for the efficient operation of the international GHG markets are not being met thus far, further changes in the trading systems are being made. [ABSTRACT FROM AUTHOR]

Recent debates have drawn attention to the legitimacy challenges faced by new forms of global governance. Privatised governance in particular has come under considerable scrutiny. This paper attempts to contribute to this debate through an analysis of the widespread critiques of climate governance that focus on its 'marketized' or 'privatized' character. Such critiques fundamentally attempt to delegitimise dominant governance mechanisms which can be collectively known as the 'global carbon market'. The paper argues that to understand the political dynamics of legitimacy surrounding these forms of governance we need to take into account the recurrent tension within capitalism between accumulation and legitimation. This focus enables us to understand the legitimacy problems surrounding climate governance. First, it draws attention to the character of the discourses which are critical of marketized climate governance, which attack it precisely because of the forms of accumulation it enables. Second, many of these governance projects have themselves been developed in part precisely in order to overcome legitimacy crises inherent in capital accumulation, and specifically in the current context in relation to the dominance of finance within contemporary capitalism. Finally, it suggests that one of the strategies of firms involved in such governance is to attempt to overcome this legitimacy-accumulation tension in the way that automobility did in the Fordist era. Climate governance practices should be understood as a pursuit of this sort of coherence which might give rise to an 'ecological regime of accumulation' that aims to forestall more radical critiques that argue that capitalism and sustainability are inimical. [ABSTRACT FROM AUTHOR]

Political feasibility (or infeasibility) is often associated with target-group support (or opposition) of specific policy alternatives. We argue that target-groups' capacity to influence the spectrum of politically feasible policy options tends to be higher when (1) target groups control resources needed by decision-makers, that (2) are agenda-setters and/or veto players in the decision-making process. In the 2008 revision of the European Union Emissions Trading Scheme (EU ETS) exemptions from the basic principle of full auctioning of greenhouse gas (GHG) emissions allowances can all be traced to target-group interest representation by single veto players or blocking minorities in the European Council and the Council of Ministers. Our analysis indicates that target groups succeeded in constraining the spectrum of politically feasible policy options to the extent that their positions were unified and threats to shut down or relocate activity were perceived to be relevant, severe and credible. Our findings confirm both the significance and the limits of portfolio assignment in the Commission. Even with Directorate General (DG) Environment in an agenda-setting role, target groups acquired exemptions through their relations with veto players in the Council. [ABSTRACT FROM AUTHOR]

An upstream trading scheme is described that could operate alongside the EU Emissions Trading Scheme (EU ETS). In this proposed scheme, fossil fuel producers (or suppliers) surrender allowances for the carbon contained in their fuel sales. Since the administrative costs are relatively low, such a scheme could provide a simpler, cheaper and more practical alternative to personal carbon trading, while at the same time delivering comparable economic and environmental benefits. The incentive effect for downstream consumers would be similar to a carbon tax. However, instead of a fixed and visible tax rate, the carbon price would be variable and largely hidden within the price of fuel. Consideration is given to the distributional impacts of the scheme and the potential benefits of linking to the EU ETS - including improved liquidity, reduced price volatility and reduced scope for exercising market power. It is argued that an upstream scheme is likely to have greater political acceptability, while at the same time delivering comparable performance in terms of economic efficiency, environmental effectiveness and social equity. [ABSTRACT FROM AUTHOR]

This article explores whether emissions trading is morally defensible To do so it examines three different kinds of moral consideration Which might be used to judge emissions trading. The first kind makes what I term an 'ethical' objection, and holds that utilising market instruments to combat climate change is inherently objectionable. I examine three versions if this 'ethical' argument but find none persuasive. The remainder of the article considers two additional moral considerations, both of which appeal to principles of justice. Drawing on these it argues that emissions trading can be morally defensible but only it it meets these two demanding moral criteria. First, the costs of emissions trading should be shared equitably. The paper examines what this might mean and criticises the leading account of what constitutes a just distribution of emissions Second, emissions trading must make an appropriate contribution to climate mitigation. A number of ways in which current emissions trading schemes signally fail to meet this second criterion are then noted. The article concludes that emissions trading schemes could in principle be morally defensible but only if new schemes are introduced or existing schemes are radically redesigned in line with the principles outlined in the article. [ABSTRACT FROM AUTHOR]

The theory and analysis of regulation provides an understanding of climate change regulation and its limitations leading to the identification of political strategies to improve such regulation by orientating it more towards public interest objectives. Public interest and private interest theories of regulation are considered together with regime theory, which understands regulatory regimes as dynamic interactions of a variety of forces that can be altered by external pressure. One possible pressure is governmental action to increase regime transparency. UK and EU climate change regulation is used to consider whether increased transparency, in particular focused around a carbon price-based instrument with quantified emissions reductions, can shift the climate regime towards meeting the public interest. This runs up against difficulties of sociocultural plurality and the one-dimensional nature of the price mechanism. More successful strategy requires a price-based instrument coupled to transparent complementary policies and regulations that address sociocultural pluralities. [ABSTRACT FROM AUTHOR]

Australia is establishing an economy-wide emissions trading scheme, with a detailed proposal tabled by government in December 2008 and a scheme start planned for 2011. The proposal is for unilateral linking through the Clean Development Mechanism and Joint Implementation, but no initial bilateral linkages. Concerns about permit prices rising too high are prominent, and are reflected in a ban on permit sales and a price cap provision. This article evaluates the proposed Australian scheme with regard to international emissions trading and linkages. Different scenarios for the Australian permit price under unilateral linking are considered. Options for bilateral linking with the European Union and New Zealand schemes are evaluated. We argue that Australia should dismantle the obstacles to linking, including the proposed price cap, and move towards bilateral linking with suitable schemes. [ABSTRACT FROM AUTHOR]

The current emissions trading debates in the EU and the USA were examined and the prospects for creating a transatlantic carbon market were analysed. A future US Emissions Trading Scheme (US ETS) may be designed very differently from the EU ETS, raising questions of compatibility. Crucial differences relate to the stringency of targets, the recognition of offsets, and price control mechanisms. These differences flow directly from the different policy and economic perspectives on emissions trading and climate policy in the USA and the EU. The two sides should therefore seek a way forward that reconciles potentially different climate policies. For example, the USA and the EU should consider an effort to harmonize carbon prices, and US legislation could phase out cost-containment mechanisms after some time period. Finally, both US and EU policies should have mechanisms that allow periodic recalibration, which would allow each to adjust to new technology, react to developing-country climate policies, and learn from each other. In the longer term, this would allow both sides to strive for greater policy convergence, either through linked trading systems, harmonized prices, or a transition from harmonized prices to linkage. [ABSTRACT FROM AUTHOR]

A framework was devised for policy-makers to assess direct bilateral cap-and-trade linkages. A systematic analysis of the economic, political and regulatory implications indicates potential benefits along with a number of potentially negative side effects. Theoretically, economic benefits are expected from quasi-static short-term and dynamic efficiency gains. However, a careful review of these arguments indicates that, due to the presence of market distortions or terms-of-trade effects, international emissions trading may not be welfare-enhancing for all countries. Political benefits are derived from the reinforced commitment to international climate policy and the elimination of competitiveness concerns among linking partners, but this must be weighed against the possible incentive to adjust national caps in anticipation of linking. Regulatory disadvantages may arise from the linked system's inconsistency with original domestic policy objectives, and from the partial de facto cession of discretionary control over the domestic emissions trading system. Finally, as an illustration, a link between the EU ETS and a prospective US trading system is assessed, and the major trade-offs identified. [ABSTRACT FROM AUTHOR]

Germany's National Allocation Plans (NAP I and NAP II) for implementing the EU Emissions Trading Scheme (EU ETS) are critically analysed. Emissions trading has created a new scarcity, and grandfathering constitutes a subsidy that is used to reach additional policy goals related to energy and distribution policy. With respect to energy policy, the objective was to protect the German coal industry; but in terms of distribution policy the hidden agenda was to allocate as many emissions allowances as possible to the industries involved. The whole discussion is based on the false premise that a generous, or at least 'needs-based', allocation of costless emissions allowances increases an industry's competitiveness. As a consequence, NAP I is overburdened with several complex special rules and exemptions which distort the incentive effect of emissions trading, thus making climate change mitigation in Germany more costly than necessary. The attempted continuation of this policy, in particular with regard to new installations and an over-generous cap, has led to the European Commission's rejection of these rules in the German NAP II in November 2006. Despite significant improvements since then, some important shortfalls remain. Unfortunately, the economic literature available on this topic refers to highly stylized models of allocation rules and neglects the concrete details of the German NAP II. This article tries to close this gap in the literature by analysing the most distorting rules as well as the most important and arguments of the misguided debate on competitiveness. [ABSTRACT FROM AUTHOR]

Emissions trading schemes (ETS) coexist with other environmental and energy policies, such as renewable energy promotion schemes. The potential synergies and conflicts between these policies are worth analysing. Spain is used as a case study to illustrate the theoretical, practical and quantitative interactions. The existence of national policies which affect CO2 emissions and interact with the EU ETS may lead to conflicts, which could make it more difficult to reach the objectives of emissions reductions, local sustainability benefits, dynamic efficiency and moderate consumer costs. The coordination of efforts to mitigate these conflicts is difficult and may have limited effectiveness, since the instruments employed have multiple objectives and different territorial scopes. However, the coexistence of the EU ETS with other instruments can be justified if the latter can provide social benefits or tackle problems that the former cannot provide or solve (such as 'local' and 'dynamic efficiency' benefits). The results of an interaction between an ETS and renewable electricity promotion schemes depend on the type of RES-E (electricity from renewable energy sources) support scheme being used and on the specific design features of the instrument implemented. [ABSTRACT FROM AUTHOR]