Internalizing CO2-Equivalent Emissions Issued From Agricultural Activities

Arnaud Zlatko Dragicevic

doi:10.3389/fclim.2021.714334

Arnaud Zlatko Dragicevic

Open Access

https://doi.org/10.3389/fclim.2021.714334

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Abstract

The aim of this article is to consider the market-based instruments, such as the ETS system, for the internalization of the CO2-equivalent emissions issued from the agricultural sector. We use a hypothetical market valuation of the emissions and we extend the analysis to the optional pricing with double barriers. According to our results, the purpose of attaining the levels of carbon emissions recommended by the French public authorities, with a level of reductions down by 50.00% in 2030, could be successful would the terminal range of optional prices stand between 76.35 and 89.56 Eur.

Highlights

The sustainability of agricultural systems is a complex issue involving multiple factors that fit broadly within economic, social, and environmental areas (Talukder et al, 2020)
Microeconomic principles describe the objective of the economic actors as that of the maximization of their profits
Despite the costly internalization of environmental damages and frequent distortion of producers on their real costs (Weitzman, 1974), companies—whatever the sector under consideration—are no longer able to obviate the internalization of negative externalities; because the greenhouse gas (GHG) emissions, known as non-market public bads, have well and truly become environmentally and socially harmful

Summary

INTRODUCTION

The sustainability of agricultural systems is a complex issue involving multiple factors that fit broadly within economic, social, and environmental areas (Talukder et al, 2020). The interest of market mechanisms is to rely on the decentralized behavior of economic agents for internalizing the negative externalities such as the emissions of GHGs. For the public policies guidance, this approach is a means to undertake interventions that are coherent at a sector-based level. Polluters that achieve to reduce their emissions below the quota can sell their surplus allowances and can benefit from the sales revenues They will choose between abating an additional pollution unit, if the cost of doing it is lower than the carbon price, and paying the tax or buying an emission permit, if the marginal cost of depollution turns out to be costly.

BLACK–SCHOLES PRICING MODEL

SIMULATIONS

Findings

CONCLUSION