Evaluating the effects of environmental regulations on a closed-loop supply chain network: a variational inequality approach

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.

The environmental agenda is decisive in the formation of the world economy at the present stage. The need for a green transition is rarely questioned by scientists. However, there remains a wide range of opinions about which instruments are the most effective in achieving the set goals of reducing the carbon footprint. The most popular mechanisms today are the carbon market and carbon tax mechanisms. Aim of the research was using modeling, literature analysis, and deduction methods to compare the similarities and differences between the basic principles of applying a carbon tax and a carbon market mechanism, the authors of the article identify the advantages and disadvantages of both approaches. The results of the research showed that the carbon market mechanism has obvious advantages such as flexibility, cross-industry and crossterritory coverage, and relative benefits for companies compared to a carbon tax mechanism. At the same time, the carbon tax mechanism has the obvious advantage of low management costs and wide coverage, but, on the other hand, these advantages are offset by potential inefficiencies and high “cost” for companies. The analysis of the policies of large countries with large carbon emissions over the past 2-3 years shows that they are more likely to introduce elements of the carbon market to reduce emissions. Based on the theoretical analysis of the main characteristics of the carbon market and carbon tax, as well as their advantages and disadvantages, the authors urge not to be limited to one of the options, but to use both mechanisms simultaneously. In particular, the carbon market should be the main mechanism when the goal is to create more incentives to actively reduce carbon emissions, while carbon tax policies can be an additional measure to incentivize or “punish” those enterprises that exceed emission standards, also, the carbon tax will help to involve those industries that, for various reasons, cannot be represented on the carbon market.

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.

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

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

Global climate change has encouraged international and regional adoption of environmental policies aiming at reducing the generation of greenhouse gas emissions. Europe has taken the leadership in environmental regulations by introducing the European-Union Emissions Trading System (EU-ETS) in 2005 and other policies to mitigate carbon emissions and increase the efficiency of production processes. These environmental policies have significantly affected the production choices of the European energy and industrial sectors. In this paper, we consider a market where a set of players (firms) produce different commodities under a common environmental regulation that limits their emissions. Due to these environmental restrictions, the problem is treated as a generalized non-cooperative game where players have joint (environmental) constraints caused by the common and compulsory emission regulation. The problem is to find a natural mechanism for attaining the corresponding generalized equilibrium state. We suggest a share allocation method, which yields a suitable decomposition type procedure and replaces the initial problem with a sequence of non-cooperative games on Cartesian product sets. We also show that its implementation can be simplified essentially after the application of a regularized penalty method. In the case study, we take inspiration from the EU-ETS and we introduce an environmental regulation that restricts the carbon emissions of firms representing the energy, cement, and steel sectors respectively in Germany, France, Italy, and Spain. Our results confirm the important role played by energy sector in reducing carbon emissions.

The adoption of closed-loop supply chain (CLSC) network is one of the effective approaches to reduce carbon emissions. In current globalization, inherent uncertainty exists in business environment so there is a need to be design robust supply chains. This paper proposes a deterministic mixed integer linear programming (MILP) model integrating economics and carbon emission considerations including selection of production technologies and transportation mode as a part of CLSC network strategic and tactical decisions. The robust counterpart of the proposed deterministic model is developed based on three alternative uncertainty sets to represent the imprecise input parameters. The robust counterpart is used to study the supply chain performance by considering the two most globally practiced carbon regulatory policies; carbon tax policy and carbon trading policy. Numerical results show that total cost of the proposed robust optimization model under each uncertainty set is greater than the total cost of deterministic model. The additional cost is due to solution space of each uncertainty set to accommodate any uncertainty level. As uncertainty level increases the overall supply chain cost worsen. Moreover, the results suggest that carbon tax rate has direct relation with overall supply chain cost whereas having carbon market trading flexibility in carbon trading policy, this policy is more efficient policy as compared to carbon tax policy. Furthermore, the proposed robust optimization model is useful for mangers to achieve not only a robust supply chain network design which can withstand any possible uncertainty level but also significant reduction in carbon emissions by choosing suitable carbon-efficient policy.

Carbon pricing is about the explicit pricing of greenhouse gas (GHG) emissions, of which carbon dioxide is the most important. GHG emissions, which are normally measured in tonnes of carbon dioxide equivalent units, are responsible for global warming and hence the greatest environmental externality of our age. Carbon pricing is a mechanism for making society account for the external damage caused by carbon emissions in economic decision making. There are two main ways of pricing carbon dioxide emissions, either via a carbon tax or via the introduction of an emissions trading scheme whereby those emitting carbon into the atmosphere are required to surrender permits which reflect the quantity of emissions they are responsible for. These emission permits are tradeable and hence command a price and, in some respects, operate in a similar way to a carbon tax. Thus, we will discuss both carbon pricing and emissions trading, as the literature on both is closely related. Emissions trading exists for certain other pollutants (such as sulphur dioxide) and we will discuss some of the literature related to this. However, most of the literature on emissions trading relates to carbon dioxide emissions, as these are by far the most valuable traded emissions globally. The literature on carbon pricing and emissions trading is wide ranging and constantly being updated with new analyses. Much of the literature is written by economists who are seeking to apply market-based approaches to the solution of environmental problems. The article starts by looking at the general context in which carbon pricing and emissions trading sits before discussing introductory texts which relate to the subject and going on to introduce the relevant classic literature in environmental economics. It then proceeds to more applied literature, beginning with discussions of early examples of emissions trading and carbon taxation, before continuing to studies of the impact of carbon pricing and emissions trading and those which explain the nature of the schemes we observe. The article continues with literature which looks at the Europe Union Emissions Trading Scheme (EU ETS) for GHGs and other important carbon pricing schemes. It then moves on to the literature on the prospects for a global carbon price, on interactions with other climate policies, on distributional concerns about the imposition of a price on carbon. Finally, it concludes with an introduction to relevant official publications and sources of data on carbon emissions and carbon prices.

How to avoid history repeating itself: the case for an EU Emissions Trading System (EU ETS) price floor revisited

The basic aim of this article is to examine the benefits and threats for consumers and the environment resulting from the introduction of the Carbon Border Adjustment Mechanism (hereinafter: CBAM) and Single Use Plastic (hereinafter: SUP) in the European Union. Due to the too short period of validity of the analyzed regulations, this goal can only be achieved at the level of assessment of the law in force, i.e. by comparing the assumptions of the “originators” of the analyzed regulations with the method of their implementation into Polish regulations, also comparing it with currently biding regulations, such as the CO2 emissions trading mechanism (EU ETS). Climate protection is primarily about reducing the negative impact of human activity on the atmosphere. This impact mainly involves excessive emissions of greenhouse gases into the air in the course of technological processes, such as burning coal to generate electricity. Climate change is a global problem that requires global solutions. As the EU increases its climate ambitions and as less stringent climate policies prevail in many non-EU countries, there is a risk of so-called carbon leakage. Carbon leakage occurs when EU-based companies move carbon-intensive production abroad to countries with less stringent climate policies than in the EU, or when EU products are replaced by imported products with higher carbon emissions. The EU CO2 Emissions Trading System (EU ETS) was launched in 2005. Nearly two decades later, were are witnessing the implementation of a solution that has the potential to Based Price Adjustment Mechanism (CBAM) heralds a breakthrough tool for imposing a fair price on the carbon emitted in the production of carbon-intensive goods that enter the EU, and for encouraging cleaner industrial production in non-EU countries. The phasing-in of CBAM is aligned with the phasing out of free allocation under the EU Emissions Trading Scheme (ETS) to support the decarbonisation of EU industry. Nevertheless, a key question should be asked whether CBAM actually shapes a coherent systemic framework for CO2 and whether it does not raise significant doubts regarding its compliance with international agreements binding on the European Union and its economic sense. Moreover, from 1 January 2024, a new fee for single-use plastic products will apply in Poland. The so-called “plastic tax” is another step towards reducing environmental pollution. It aims to encourage consumers to use reusable products and reduce the amount of plastic waste. The article uses the dogmatic-legal method, taking into account current literature and applicable legal regulations.

ABSTRACT. The main goal of the paper is to provide the first ex-post analysis of the EU ETS in year 2013 in the Czech Republic, based on the analysis of the key EU ETS sector - combustion processes. Regarding the methodology, the empirical research was used as a one part, as a second part the Mamdani fuzzy rule-based system. Since the EUA market price was low in year 2013, the Czech companies within the combustion processes group had weak motivation to trade with the EUAs. However, the revenues obtained from the EUA auctions in year 2013 were higher than revenues obtained from the environmental taxes. Moreover, auctioned EUAs had the similar characteristics as the environmental taxes. We can say that the EUA behaved as an additional carbon tax - in case that the company exceeded the level of emission limit represented by free emission allowances.Keywords: emission trading; environmental taxation; EU ETS; Czech Republic.JEL Classification : H23, H3, Q48, Q58IntroductionGenerally, emission allowances trading, also called as cap and trade program, originally started up in the USA and currently it is frequently used throughout the world. National or sub-national emission trading systems are already operating in Australia, the European Union, Japan, New Zealand, Switzerland and the United States, and are planned in Canada, China and South Korea (European Commission, 2013). Besides trading with emissions (mainly CO2, NOx, SO2), there are also tradable fish quota or trading in waste sector, water protection sector and land protection sector.The European Union established a scheme for CO2 and other greenhouse gases' emission allowances trading, the EU Emissions Trading System (EU ETS). The initial EU ETS was based on Directive 2003/87/EC, which established a fundamentally decentralized system for the pilot phase of emissions trading (2005 to 2007) and the Kyoto Protocol commitment phase (2008 to 2012). The key instruments were the National Allocation Plans (NAPs) (Wettestad et al., 2012). In year 2013, based on new Directive 2009/29/EC, the EU ETS came into Phase III (2013 to 2020), the post-Kyoto commitment period.The EU ETS is substantially larger and by far more complex than the pioneering US Sulphur Allowance System (Conrad et al., 2012). The EU ETS covers more than 11,000 power stations and manufacturing plants in the 28 EU member states as well as Iceland, Liechtenstein and Norway. Aviation operators flying within and between most of these countries are also covered. In total, around 45% of total EU emissions are limited by the EU ETS (European Commission, 2013). The EU ETS covers both European Emissions Allowances - EUAs (since 2005) and European Aviation Allowances - EUAAs (since 2012). The market price of the allowances is determined by supply and demand at the exchange. Both in the first and in the second trading period, the EU emission allowances were traded mostly on the BlueNext trading exchange. In the third trading period, there is one significant big exchange, where the auctions can be organized - European Energy Exchange EEX (EEX, 2015).The regulatory framework of the EU ETS was largely unchanged for the first two trading periods of its operation (2005 - 2012); however the beginning of the third trading period in 2013 brings changes in common rules, published as Directive 2009/29/EC, which should strengthen the system. Since the EU emission allowances were previously grandfathered - for free (Wettestad et al., 2012), from year 2013 the significant yield of the emission allowances is auctioned. Grandfathering was widely criticized, mostly because it introduced significant distortions to the EU ETS (Falbo et al., 2013). Auctioning is the most transparent method of allocating allowances and puts into practice the polluter pays principle (Vicha, 2011; European Commission, 2013). Sectorial differentiation was also introduced, with (initially) far more auctioning of allowances for energy producers than energy-intensive industries. …

In this study, nondominated sorting genetic algorithm II (NSGA-II) was used to minimize the cost and carbon emissions of a liquefied natural gas (LNG) dual-fuel ship for a given route. This study considered the regulations of emission control areas (ECA) and the European Union (EU) Emissions Trading System (ETS) to determine the optimal speed and LNG/oil ratio for the ship. NSGA-II used the arrival time at each port and the LNG usage ratio for each voyage leg as its genes. The time window for arrival, the fuel cost, and potential EU carbon emission regulations were used to estimate the cost of the considered voyage. Moreover, fuel consumption was determined using historical data that were divided by period, machinery, and voyage leg. The results indicated that the optimal speed and fuel ratio could be determined under any given fuel and carbon price profile by using NSGA-II. Finally, the effects of regulations and carbon price differences on the optimal speed and fuel ratio were investigated. The cost minimization solution was susceptible to being affected by the regulations of ECAs and the EU ETS. The speed profile of the cost minimization solution was found to have a tendency to travel at faster-than-average speeds outside ECAs and non-EU regions, and travel slower in ECAs and EU regions. Meanwhile, the selection of fuel type showed that 100% traditional fuel oil in all regions, but with sufficiently high EU carbon permit cost, tends to use 100% LNG in EU regions.

Why carbon leakage matters and what can be done against it

Carbon pricing in the EU: Evaluation of different EU ETS reform options

Policy-making under uncertainty: Commentary upon the European Union Emissions Trading Scheme