Carbon Pricing and Emissions Trading

Carbon Pricing: Design, Experiences and Issues, edited by LarryKreiser, MikaelAndersen, BirgitteOlsen, StefanSpeck, JanetMilne and HopeAshiabor. Published by Edward Elgar Publishing, Cheltenham, UK, 2015, 256 pages. ISBN: 9781785360220, ₤75.

There’s a market growing in the United States, but unlike markets that trade in tangible commodities, this one trades in the absence of something no one wants: greenhouse gases in the atmosphere. Hundreds of companies make it possible for individuals, organizations, businesses, and even events such as rock music festivals to proclaim themselves carbon-neutral by paying someone else to reduce their emissions. Worried about your carbon footprint? No problem. For fees of US$2–50 per ton of “avoided emissions,” an offset provider will funnel your money into an activity or technology that keeps greenhouse gases out of the atmosphere. The question is, are offset buyers really getting what they paid for?

Carbon pricing and firms’ GHG emissions: Firm-level empirical evidence from East Asia

What explains the choice of corporate political strategy in environmental politics? Drawing on recent models of actor strategy formation in political economy, this article argues that basic material interests of firms are translated into strategies in the context of institutional environments. I advance a typological model that posits how distributional effects—positive versus negative—and perceived regulatory pressure—low versus high—interact in leading firms to adopt one of four ideal-type strategies: opposition, hedging, support, and non-participation. This article examines the model through the case of corporate strategies in the making of the European Union’s Emission Trading Scheme. The article contributes to theory-building on business strategy in environmental politics by offering a probabilistic explanatory model, and it flags hedging strategies as an increasingly prevalent form of business behavior.

Carbon markets devolve governance to external institutions and displace power from sovereign states. Major producers in these markets, notably China, have expressed concern about the adverse implications for national interests and sovereignty associated with selling off the rights to emit carbon emissions abroad. This article suggests that such concern has shaped the discursive context in which emission trading schemes have gained popularity in the country. Our discourse analysis shows that notions of market power are made manifest as a powerful storyline. In the Chinese language, “power,” “sovereignty,” and “rights” all use the same character. The storyline captures all these expressions and allows for a positive view about active engagement in carbon trading as a way to protect development rights and redeem carbon sovereignty. Thus, the contested policy of emissions trading becomes embedded in the more appealing narrative of national development and made politically attractive, despite unfavorable realities against it.

Blockchain solutions for carbon markets are nearing maturity

This paper explores how optimizing vessel speeds can help reduce carbon emissions in the maritime industry. Focusing on liner shipping routes between China and Europe, it examines how carbon pricing mechanisms, including carbon taxes and emissions trading under the European Union Emissions Trading Scheme (EU ETS), impact operational costs and emissions reduction. With the use of advanced optimization methods, such as the Non-dominated Sorting Genetic Algorithm-II (NSGA-II) and the Technique for Order of Preference by Similarity to an Ideal Solution (TOPSIS), this research explores the balance between adjusting vessel speeds and minimizing emissions. The findings show that shipping companies on the China–Europe route can reduce the financial strain of carbon pricing by carefully managing speeds and voyage times. This study compares two scenarios of carbon tax policy and carbon trading rights in terms of voyage costs and carbon emissions. The results of this comparison based on the given parameters indicate a reduction of 1124 tons of carbon emissions with the carbon tax policy scenario, while the carbon trading rights scenario allows for more voyages yearly (5.24 vs. 5.30). This demonstrates one policy being more economical, while the other is also more environmentally efficient. These insights support the development of strategies that align environmental goals with economic priorities, paving the way for more sustainable maritime operations. The study introduces its objectives and reviews relevant literature by presenting a detailed methodology, incorporating emissions modeling with clearly defined parameters. The analysis presents results that undergo sensitivity testing and limitations using MATLAB (R2022a version). The study concludes by discussing policy implications and recommendations for future research and practical advancement

Why carbon leakage matters and what can be done against it

Carbon trading volume and price forecasting in China using multiple machine learning models

Climate change, especially global warming caused by human activities presents serious global risks. Mitigating global warming by reducing greenhouse gas (GHG) emissions is a unique challenge facing our generation. In order to tackle this challenge, many measures are being developed, among which carbon trading is a popular one. In this paper, a new paradigm for the design of water distribution systems (WDSs) is being developed under a possible emission trading scheme. In this paradigm, minimisation of the costs of GHG emissions is incorporated into the optimisation of WDSs either as one part of the objective or as a second objective. A multi-objective genetic algorithm (MOGA) called WSMGA (water system multi-objective genetic algorithm) has been developed to solve this problem. The time value of both the system costs and the costs from GHG emissions has been taken into account by using present value analysis. Following the Stern Review Report there is controversy as to what discount rate should be used in present value analysis for mitigation of climate change, consequently two different discount rates have been used in this study. The impacts that the carbon prices used in the emission trading scheme have on the optimisation of WDSs have been explored for two hypothetical case studies. The optimisation results show that the different carbon prices used lead to different solutions in the single-objective optimisation formulation. In general, a network with larger pipes is chosen when a higher carbon price is used. In contrast, the carbon price used has no impact on the multi-objective optimisation results. However, different carbon prices lead to different amounts of savings in greenhouse gas costs resulting from the same amount of increase in system costs for the same ordered set of Paretooptimal solutions.

The Problem of Social Cost

Carbon Trading: Who Gets What, When, and How?

BackgroundSocietal pressures exist to reduce greenhouse gas (GHG) emissions from farm animals, especially in beef cattle. Both total GHG and GHG emissions per unit of product decrease as productivity increases. Limitations of previous studies on GHG emissions are that they generally describe feed intake inadequately, assess the consequences of selection on particular traits only, or examine consequences for only part of the production chain. Here, we examine GHG emissions for the whole production chain, with the estimated cost of carbon included as an extra cost on traits in the breeding objective of the production system.MethodsWe examined an example beef production system where economic merit was measured from weaning to slaughter. The estimated cost of the carbon dioxide equivalent (CO2-e) associated with feed intake change is included in the economic values calculated for the breeding objective traits and comes in addition to the cost of the feed associated with trait change. GHG emission effects on the production system are accumulated over the breeding objective traits, and the reduction in GHG emissions is evaluated, for different carbon prices, both for the individual animal and the production system.ResultsMultiple-trait selection in beef cattle can reduce total GHG and GHG emissions per unit of product while increasing economic performance if the cost of feed in the breeding objective is high. When carbon price was $10, $20, $30 and $40/ton CO2-e, selection decreased total GHG emissions by 1.1, 1.6, 2.1 and 2.6% per generation, respectively. When the cost of feed for the breeding objective was low, selection reduced total GHG emissions only if carbon price was high (~ $80/ton CO2-e). Ignoring the costs of GHG emissions when feed cost was low substantially increased emissions (e.g. 4.4% per generation or ~ 8.8% in 10 years).ConclusionsThe ability to reduce GHG emissions in beef cattle depends on the cost of feed in the breeding objective of the production system. Multiple-trait selection will reduce emissions, while improving economic performance, if the cost of feed in the breeding objective is high. If it is low, greater growth will be favoured, leading to an increase in GHG emissions that may be undesirable.

Carbon pricing is a recurrent theme in debates on climate policy. Discarded at the 2009COPin Copenhagen, it remained part of deliberations for a climate agreement in subsequent years. As there is still much misunderstanding about the many reasons to implement a global carbon price, ideological resistance against it prospers. Here, we present the main arguments for carbon pricing, to stimulate a fair and well‐informed discussion about it. These include considerations that have received little attention so far. We stress that a main reason to use carbon pricing is environmental effectiveness at a relatively low cost, which in turn contributes to enhance social and political acceptability of climate policy. This includes the property that corrected prices stimulate rapid environmental innovations. These arguments are underappreciated in the public debate, where pricing is frequently downplayed and the erroneous view that innovation policies are sufficient is widespread. Carbon pricing and technology policies are, though, largely complementary and thus are both needed for effective climate policy. We also comment on the complementarity of other instruments to carbon pricing. We further discuss distributional consequences of carbon pricing and present suggestions on how to address these. Other political economy issues that receive attention are lobbying, co‐benefits, international policy coordination, motivational crowding in/out, and long‐term commitment. The overview ends with reflections on implementing a global carbon price, whether through a carbon tax or emissions trading. The discussion goes beyond traditional arguments from environmental economics by including relevant insights from energy research and innovation studies as well.WIREs Clim Change2017, 8:e462. doi: 10.1002/wcc.462This article is categorized under:Climate Economics > Economics of Mitigation

Since carbon price volatility is critical to the risk management of the CO2 emissions trading market, research has focused on energy prices and macroeconomic drivers which cause changes in carbon prices and make the carbon market more volatile than other markets. However, they have ignored whether the impact of carbon price determinants changes when the carbon price is at different levels. To fill this gap, this paper applies a semiparametric quantile regression model to explore the effects of energy prices and macroeconomic drivers on carbon prices at different quantiles. The model combines the advantages of parameter estimation, nonparametric estimation and quantile regression to describe the nonlinear relationship between carbon price and its fundamentals, which do not need to make any assumptions about the random error. Carbon prices are high–tailed and exhibit higher kurtosis, the traditional models which tend to assume that data are normally distributed can’t perform well. Furthermore, the semiparametric model doesn’t need to assume that the data are normally distributed. Therefore, the semiparametric model can effectively model the data. Some new evidence from China’s emission trading scheme (ETS) pilots shows that energy prices and macroeconomic drivers have different effects on carbon prices at high or low quantiles. First, the negative impact of coal prices on carbon prices was greater at the lower quantile of carbon prices in the Shenzhen ETS pilot. However, the effects of coal prices were positive in the Beijing ETS pilot, which may be attributed to great demand for coal. Second, oil prices had greater negative effects on carbon prices at higher quantiles in Beijing and Hubei ETS pilots. This can be attributed to the fact that businesses use less oil when carbon prices are high. For the Shenzhen ETS pilot, the effects of oil prices were positive. Third, natural gas prices have a stronger effect on carbon prices as quantiles increased in the Beijing and Hubei ETS pilots. Lastly, the effects of macroeconomic drivers on carbon prices at low quantiles were stronger in the Shenzhen ETS pilots and higher at the medium quantiles in Beijing and Hubei ETS pilots. These findings suggest that the impact of determinants on the carbon prices at different levels is not constant. Ignoring this issue will lead to a missed warning about the risks of the carbon market. This study will be of positive significance for China’s emission trading scheme (ETS) pilots, in order to accurately monitor the effects of carbon prices determinants and effectively avoid carbon market risks.