Allocation Of Emissions Research Articles

Allocation or Skill? What is Driving Corporate Trading Performance in the EU ETS?

This study empirically analyzes factors related to companies’ profits from trading emission allowances in the European Union Emissions Trading System (EU ETS) for the period from 2005 to 2017 by combining information on trading activities with company characteristics of more than 6,000 companies. The factors considered include net position (i.e., free allocation of allowances minus emissions), strategic skills (i.e., banking of allowances, timing of trading, transaction frequency, use of intermediaries), skill-related structural factors (i.e., number of installations, sector affiliation), market pressure, year, and region effects. The results from estimating a Panel Heckman Selection Model suggest that companies’ profits from buying and selling emission allowances are related to a company’s net position, banking of allowances, timing of trading, and the number of installations. The findings further indicate that companies choose the number of banked allowances efficiently, that is, they take into account the opportunity costs of selling these allowances on the market. JEL Classification: Q48, Q54, Q58

Global Freight Transport Emissions Responsibility.

The transportation of freight by land, sea and air underpins the complex network of global trade in physical commodities. Greenhouse gas emissions from freight transportation are a significant component of global emissions and are predicted to grow in coming decades. However, the inclusion of freight transport in emissions accounts and environmental impact studies is often incomplete. Both data availability and difficulties in allocating freight emissions to specific commodity trades contributes to this. In this study, international freight movements by transport mode are estimated from the bottom-up by imputing global freight transport routes. Emissions are estimated from these freight movements and integrated with a global multiregional input-output model. This enables the calculation of carbon footprints that are complete with respect to freight emissions. We estimate that global freight transport emissions contributed 2.8 Gt CO2-equiv in 2012, or about 41% of total transport emissions. In general, freight footprints contribute about 9% to national emissions footprints. While trade in physical commodities (such as construction materials, food and fossil fuels) are associated with the largest embodied freight emissions, services (such as public administration, education and health) also require significant freight transport. Using a consumption-based allocation of freight transport emissions allows the decarbonisation of other sectors to be complementary to the decarbonisation of transport through reduction in demand, for example through material efficiency strategies. To drive decarbonisation in maritime transport it is critical to include bunker emissions in national emissions inventories, thereby completing the system boundary.

Uncovering divergences and potential gaps in local greenhouse gases emissions accounting and aggregation

Due to the contribution of cities to fight climate change, approaches and methodologies for GHG emissions inventories have multiplied; research is growing and numerous initiatives support local authorities in developing their local emissions inventories. The complexity of cities and the lack of data make necessary simplifications and assumptions in inventorying GHG emissions. Despite significant progresses in the compilation of inventories, there are still limitations and uncertainties on aggregation approaches. Therefore, it becomes crucial disclosing the methodologies underlying any emissions accounting frameworks, together with any simplifications and assumptions, with the aim to produce reliable support on local measures and data- driven decision-making in the form of a trustworthy emissions inventory. This study aims at identifying divergences and potential gaps in two approaches for GHG emission inventories at local level complementing the results of previous studies. It is intended as exemplificative of potential issues and limitations occurring in emissions accounting and aggregation. The two approaches are EDGAR (Emissions Database for Global Atmospheric Research), in place for the GHSL (Global Human Settlement Layer Urban Centre Database) (GHS-UCDB R2019A) and the BEI (Baseline Emission Inventory) approach developed within the Covenant of Mayors initiative. The main limitations uncovered here feature disagreements on spatial and time coverage, on the emissions sources and allocation and the types of emissions considered. Results show that despite the diverse approaches, data is comparable. Therefore, to identify and correct inconsistencies and to ensure the quality of emission inventories available to decision makers, analysis and consistent comparisons between results originating from different and independent methodologies are essential.

Environmental policies and stagnation in a two-country economy

Global warming poses a serious and acute threat to our planet. However, negotiations over the allocation of permissible carbon emissions often lead to conflicts of interest between developed and developing countries. Developing countries claim that global warming results from long-term pollution emissions by developed countries, while developed countries demand that developing countries should make adequate efforts to reduce carbon emissions. Both developed and developing countries generally agree that stricter emission limits will strain their economies due to the associated extra abatement costs. Using a two-country model with wealth preferences, we find that the impacts of a country’s emission limit on real consumption and pollution emissions in both countries vary depending on the combination of their business situations. If both countries achieve full employment, one country’s stricter emission limit decreases real consumption in both, as expected. However, if one country faces aggregate demand stagnation while the other achieves full employment, a stricter emission limit imposed by the stagnant country increases real consumption in both countries.

Case study of a batch asphalt mix plant: Energy consumption and emission allocation based on primary data

Determining the environmental impact of asphalt mixtures is crucial for sustainable infrastructure development. A dominant factor in the ecological performance of the building material is the heating process in the dryer drum of an asphalt mix plant. Since it depends on various parameters, large scattering can be observed. While most Product Category Rules (PCRs) only consider the mean consumption over a whole production year in Module A3 according EN 15804, and consequently assign the same value to each ton asphalt mixture produced, the advantages of some asphalt mix designs remain unconsidered. Based on primary data of a batch asphalt mix plant, this case study investigated the impact of production amount, asphalt mixture temperature, number of dryer drum starts and the addition of reclaimed asphalt pavement (RAP) on the energy consumption of asphalt mixture production. By applying Linear Discriminant Analysis (LDA), it was demonstrated that it is not possible to precisely determine the energy consumption in the dryer drum based on the available data. Thus, further parameters are necessary for a fully-fledged prediction model. Nevertheless, the finding of this study showed the significant impact of the daily production volume, which results in 22 % less fuel consumption for high production volumes compared to low volumes. When the production temperature is lowered from 186 °C to 162 °C, further fuel savings of up to 9 % can be achieved. Considering the Global Warming Potential (GWP), the highest saving potential (27 %) in the drying and heating process can be achieved by operating the dryer exclusively with natural gas instead of heating oil.

Carbon emission allocation policy making in liner shipping: A novel approach toward equitable and efficient maritime sustainability

Maritime shipping, an integral component of global trade, accounts for nearly 3% of global carbon dioxide emissions and faces significant challenges in mitigating its carbon footprints. This study addresses the shortcomings of current carbon emission surcharges levied by shipping companies and the deficiencies of allocation methods utilized by the government, such as the inequity of uniform carbon emission charges across diverse origin–destination (od) pairs and the reliance on potentially inaccurate self-reported emissions data to assign carbon emission allowances. We propose a novel approach to carbon emission allocation per twenty-foot equivalent unit (TEU) container per od pair in liner shipping from the perspective of the government, aiming to enhance government oversight and minimize social costs. Leveraging a bi-level programming model, our research navigates the complex interplay between government regulatory objectives and shipping companies’ operational decisions, identifying a socially optimal carbon allocation policy. Our approach introduces three innovative carbon allocation methods that advance beyond the traditional metric that typically focuses solely on emissions and cargo volume. Our first two innovative methods integrate shipping distances into the carbon allocation process, specifically considering both the actual traveling distance and the shortest sailing distance. Furthermore, we propose the third innovative “harmonic distance,” which is a convex combination of the actual traveling distance and the shortest sailing distance. This measure effectively reflects both the operational realities and equity concerns associated with shipping services. Our findings reveal the effectiveness of utilizing the shortest sailing distance for carbon allocation per TEU per od pair, offering a straightforward, route-independent, and equitable solution. This approach diverges from current industrial practices, favoring a fairer emission allocation basis and balancing the interests of governments, shipping companies, and consumers. Through comprehensive experiments, we demonstrate the superiority of this method in minimizing total social costs and providing a viable path toward environmental sustainability and economic efficiency in liner shipping.

Incentive mechanism for allocating wastewater discharge responsibility based on cooperative game theory

Clarifying responsibility for wastewater discharges and enhancing reasonable allocation of wastewater emission permits are critical for controlling wastewater discharge in the context global sustainable development plans. The traditional wastewater allocation approach has several drawbacks, such as sub-regional "free-riding," imbalanced regional development and demand, and unfair allocation mechanism. This study developed a model based on cooperative game theory to allocate responsibility for wastewater discharge in China's Tuojiang River Basin. In this model, the level of impact of a watershed sub-region on the water environment is determined, according to which the wastewater discharge responsibility is assigned. The stronger the impact of upstream sub-regions on downstream wastewater discharge, the greater the responsibility for wastewater discharge. Furthermore, by implementing the wastewater cooperation model, sub-regions can monitor and incentivize each other, through which wastewater discharges can be reduced by 16.38%, compared to the baseline mechanism and overall discharges can be reduced by 5007.99 tons. This study provides recommendations for appropriate management authorities to improve the allocation of wastewater discharge responsibility at the watershed scale.

The role of border carbon adjustments and subsidies in incentivising investment: comparing equivalence in the context of steel recycling and decarbonisation

The need to decarbonise has accelerated the quest to find solutions for sectors considered emissions-intensive and trade-exposed. Steel production is one such sector. Policymakers are responding with market-pull and technology-push mechanisms. Risks of carbon leakage have prompted consideration and implementation of border carbon mechanisms. Measures have drawn both positive and negative attention in internationally traded markets. This research quantifies the equivalence of differing measures to promote decarbonisation. It simulates the annual cost-saving equivalent and net present values of different mechanisms in a theoretical conversion to steelmaking with Electric Arc Furnace (EAF) technology from traditional steel production. It demonstrates that, under certain assumptions including removal of free allocation of emissions certificates, incentives per tonne of direct and indirect greenhouse gas emissions for carbon pricing and border carbon adjustments lie in the range EUR 18–76 whereas for cost-of-capital support measures it was EUR 24–41 per tCO2e. Whether firms act upon these incentives will depend on appetite for risk, availability of technology, feedstocks, choice they have in making changes and perceived sustainability of the assumptions made in investment analysis. There are implications for regulators, policy makers and managers as they prepare strategies to be competitive in an increasingly carbon-constrained environment.

Insights into the spatial distribution of global, national, and subnational greenhouse gas emissions in the Emissions Database for Global Atmospheric Research (EDGAR v8.0)

Abstract. To mitigate the impact of greenhouse gas (GHG) and air pollutant emissions, it is of utmost importance to understand where emissions occur. In the real world, atmospheric pollutants are produced by various human activities from point sources (e.g. power plants and industrial facilities) but also from diffuse sources (e.g. residential activities and agriculture). However, as tracking all these single sources of emissions is practically impossible, emission inventories are typically compiled using national-level statistics by sector, which are then downscaled at the grid-cell level using spatial information. In this work, we develop high-spatial-resolution proxies for use in downscaling the national emission totals for all world countries provided by the Emissions Database for Global Atmospheric Research (EDGAR). In particular, in this paper, we present the latest EDGAR v8.0 GHG, which provides readily available emission data at different levels of spatial granularity, obtained from a consistently developed GHG emission database. This has been achieved through the improvement and development of high-resolution spatial proxies that allow for a more precise allocation of emissions over the globe. A key novelty of this work is the potential to analyse subnational GHG emissions over the European territory and also over the United States, China, India, and other high-emitting countries. These data not only meet the needs of atmospheric modellers but can also inform policymakers working in the field of climate change mitigation. For example, the EDGAR GHG emissions at the NUTS 2 level (Nomenclature of Territorial Units for Statistics level 2) over Europe contribute to the development of EU cohesion policies, identifying the progress of each region towards achieving the carbon neutrality target and providing insights into the highest-emitting sectors. The data can be accessed at https://doi.org/10.2905/b54d8149-2864-4fb9-96b9-5fd3a020c224 specifically for EDGAR v8.0 (Crippa et al., 2023a) and https://doi.org/10.2905/D67EEDA8-C03E-4421-95D0-0ADC460B9658 for the subnational dataset (Crippa et al., 2023b).

Underestimation of Thermogenic Methane Emissions in New York City.

Recent studies have shown that methane emissions are underestimated by inventories in many US urban areas. This has important implications for climate change mitigation policy at the city, state, and national levels. Uncertainty in both the spatial distribution and sectoral allocation of urban emissions can limit the ability of policy makers to develop appropriately focused emission reduction strategies. Top-down emission estimates based on atmospheric greenhouse gas measurements can help to improve inventories and inform policy decisions. This study presents a new high-resolution (0.02 × 0.02°) methane emission inventory for New York City and its surrounding area, constructed using the latest activity data, emission factors, and spatial proxies. The new high-resolution inventory estimates of methane emissions for the New York-Newark urban area are 1.3 times larger than those for the gridded Environmental Protection Agency inventory. We used aircraft mole fraction measurements from nine research flights to optimize the high-resolution inventory emissions within a Bayesian inversion. These sectorally optimized emissions show that the high-resolution inventory still significantly underestimates methane emissions within the New York-Newark urban area, primarily because it underestimates emissions from thermogenic sources (by a factor of 2.3). This suggests that there remains a gap in our process-based understanding of urban methane emissions.

Social equity in international environmental agreements

The aim of this paper is to investigate the problem of designing and building International Environmental Agreements (IEAs) taking into account some normative properties. We consider n asymmetric countries of the world, each one generating a quantity of pollutant emissions from the production of goods and services. We assume that individual emissions yield private benefits and negative externalities affecting all countries. To determine its own level of pollution, each state conducts a cost-benefit analysis. The absence of a supranational entity imposing emissions reduction makes IEAs based on voluntary participation. Examining the standard static non-cooperative game-theoretical model of coalition formation, we discover that the resulting emissions allocations might not be equitable à la Foley. It means that there might exist at least one player preferring to implement some other agent’s strategic plan instead of to play her own strategy. With the goal of studying whether equity, at least among coalesced countries, may be a criterion leading to social improvement, we introduce a new optimization rule. We require that members of an environmental coalition have to solve the maximization problem subject to the constraint imposing that they do not envy each other. Analyzing the particular case of two-player games, we get that, when countries are, in a sense, not too different from each other, our new mechanism endogenously induces social equity. By imposing a suitable total emission cap, the same results extend to all those games where our and standard solutions coexist and are different.

Carbon emission allowances and green development efficiency

This study delves into the nexus between the efficiency of carbon emission allocation and the efficiency of green development within the context of innovative city construction. Leveraging data from 283 prefecture-level cities and corresponding provincial-level panel data spanning the period from 2005 to 2019 in mainland China, the research employs the zero-sum gain DEA model to compute provincial carbon emission allocation efficiency and allocate allowances. Furthermore, it utilizes the all-factor non-radial directional distance function and the SBM-DEA model to gauge the green development efficiency of prefecture-level cities. The double-difference method is applied to evaluate the impact of innovative city construction on regional green development efficiency. The results indicate that an imbalance between carbon emission allocation efficiency and emission quotas detrimentally affects urban green development. However, technological progress, factor accumulation, and the institutional environment associated with innovative city building mitigate this negative impact. Heterogeneity analysis reveals a differentiated effect of innovative city building on regional green development efficiency. This paper not only explores the concept of achieving an equitable distribution of carbon emission allowances but also examines how innovative city building influences regional green development. By establishing connections between urban policies, the equitable distribution of carbon emission allowances, and regional green development, it introduces a new perspective for promoting high-quality development at the regional level.

Life cycle carbon analysis of packaging products containing nonwood residues: A case study on linerboard and corrugating medium

Circularity is creating momentum toward utilizing waste feedstock in a myriad of applications. The paper industry is not an exception to this trend, and packaging products made from agricultural or agro-industrial residues are receiving more attention now than ever. Additionally, negative consumer perceptions of tree felling are accelerating the acceptance of these fibers. Nevertheless, adopting these residues raises the issue of whether they constitute a better alternative to fight climate change than wood. Answering this question is imperative to ensure that pledges to reduce carbon footprints across the industry are fulfilled. This paper aims to estimate the carbon footprint of corrugating medium and linerboard containing wheat straw and sugarcane bagasse pulp compared to analogous wood-based materials. The goal was also to understand how methodological decisions to allocate emissions to nonwood residues can affect the results. This study includes a life cycle carbon analysis spanning from cradle to grave, which comprises stages for residue production, pulping, paper-making, waste management, and corresponding transportation. For the proposed case study, the results suggest that straw- and bagasse-based medium and linerboard can present a higher carbon footprint than products made from virgin and recycled wood fibers. The main driver is the production of nonwood chemimechanical pulp. In addition, the lower capacity of nonwood residues to be recycled increases the overall impact. Finally, decisions around emissions allocation highly influence the results. This study helps mitigate part of the uncertainty around the environmental sustainability of corrugating medium and linerboard made from the selected nonwood residues.

Calculation method of carbon flow distribution in load-intensive regional energy centers

With the development of the economy, people’s demand for green energy has increased significantly. However, the traditional single fossil energy supply system cannot meet the needs of low-carbon. Therefore, this study employs energy hub to establish a multi-energy flow network that enables the integration of carbon flow within the network. Additionally, by utilizing the multi-energy flow trend, a carbon flow tracking method is adopted to achieve real-time carbon flow calculation. Results show that this network calculates the electricity cost of 20043 yuan, gas cost of 67253 yuan, and carbon emission cost of 3152 yuan. Compared with the traditional energy flow system, gas cost is reduced by 4.3% and 1.7%, electricity cost by 21.3% and 15.0%, and carbon emission cost by 8.7% and 6.6%. The two-way sharing carbon flow calculation model calculates that the user side and power supply side of the node each bear half of the network loss, proving two-way sharing effectiveness. Test results on IEEE5 machine 14-node system show that the calculation method can accurately find high-emission and low-emission areas, making the carbon emission allocation between power generation and user more fair and reasonable. This research can effectively reduce emissions cost, accurately calculate emissions flow in real time, and facilitate reasonable emission reduction planning.

Allocation of CO2 emission target in China under the “1 + N” policy: Considering natural carbon sinks and wind-solar-hydropower endowments

The CO2 emission control targets (CET) allocation faces the unavoidable issues of “energy equity” and “carbon sink equity”, which are complicated by changing regional characteristics. By combining regional characteristics assessment, energy consumption status in the “1 + N” policy, and Data Envelopment Analysis (DEA) modeling, two schemes for China's net CET allocation in 2020–2030 are implied to reveal the impacts of regional carbon sinks and renewable energy endowments differences on the allocation. The results indicate that: firstly, significant regional differences are inevitably intrinsic within China's renewable energy endowments and carbon sinks to substantially affect the equity of carbon emission allocation in 2020–2030; secondly Provinces with high fossil energy reliance, such as Hebei, Shandong, Shanxi, and Inner Mongolia, are generally facing continuous pressure to reduce CO2 emissions during the 14th FYP and 15th FYP; thirdly, as a regional ecological advantage, carbon sinks are an essential source of additional carbon budgets for provinces, as in Sichuan and Yunnan. As a dominating impact factor of carbon sinks on CET allocation, terrestrial carbon sinks are much higher than ocean carbon sinks with clear provincial attribution; fourthly, in our allocation scheme, the exploitation of renewable energy endowments directly affects the provincial carbon budget and can promote low carbon energy supply; finally, the foundation to build the CET allocation mechanism, China's carbon market needs to be improved. This study helps policymakers understand and balance the equity issues in CET allocation due to regional differences in renewable energy endowments and carbon sinks.

An innovative environmental regulation tool for regional air pollution based on DEA-RFR

Environmental regulation tools are one of the conventional means for pollution control in various countries. For large-scale urbanization regions, reasonable pre-allocation of pollutant emission amount for each area is an effective regulation to improve air quality. Treating pollutant emission quota as a resource element, a comprehensive input-output model has been established based on Data Envelopment Analysis (DEA) method, to evaluate the rationality of pollutant emission allocation and provide adjustment scheme, thus developing an environmental regulation tool. The index system includes factors of economy, environment, energy consumption, demographic and land-use as input indicators, regional GDP and environmental air quality index as output indicators. The regulation tool is applied to the current air pollutant emission management in Henan Province, China. The results show that 7 cities need to further adjust the allocation scheme, among which, Anyang, Xinxiang, Nanyang and Shangqiu are suggested to reduce the emission allocation quotas; Puyang and Zhumadian are suggested to increase the emission allocation quotas; Pingdingshan shall seek optimization paths through collaborative improvement. Further, to verify the effectiveness of the tool, by joint using Random Forest Regression (RFR), a DEA efficiency reassessment is conducted on the obtained new allocation scheme of Nanyang City. The results show that the efficiency of the new allocation scheme has reached optimal. This study provides a practical and effective regulation tool for regional management of pollutant emission, to balance economic growth and environmental protection.

What’s Scope 2 good for?

Abstract The Greenhouse Gas Protocol’s Scope 2 has long been pivotal in addressing electricity's role in emissions, yet its effectiveness in emissions accounting is limited. This paper critiques Scope 2 for its inadequate allocation of electricity-derived emissions and for supporting misleading emissions reduction claims through market-based transactions. The paper investigates alternatives like 24/7 Carbon Free Electricity and Emissions First, noting their improvements over Scope 2, but also their failure to fully address grid embodied emissions. The concept of carbon solvency is introduced as a superior model, compelling firms to align long-term emissions liabilities with carbon removal assets, thus enabling more accurate emissions accounting and investment decisions for grid decarbonization. This approach fosters clearer decision-making, particularly in electricity generation methods with variable upstream emissions, such as hydrogen and biofuels. By redefining net zero within a rigorous, auditable framework, we propose a shift from current practices towards a more accountable and environmentally impactful model.

Exploring the Impacts of Carbon Pricing on Canada’s Electricity Sector

Canadian provinces are required to regulate their power sectors using carbon pricing systems that meet national minimum stringency standards, which are set by the federal government. A diverse set of systems has emerged as a result. However, there has been limited assessment of how different pricing mechanisms impact the evolution of Canada’s electricity system. To address this gap, we use an electricity system planning model called COPPER and a scenario-based approach to assess if, and to what extent, different policy regimes impact power sector greenhouse gas emissions and costs. Our results show that carbon pricing systems currently in place lead to significant carbon reductions over the long term, provided that free emissions allocations are reduced. However, the cost-optimal pathway for the power sector differs across provinces depending on the carbon pricing mechanism. Some provinces achieve least-cost emissions reductions by switching from high-carbon technologies to renewables, while others are better served by replacing high-carbon technologies with low-carbon fossil fuel alternatives. Further, provinces that implement cap-and-trade systems may affect the transitions of interconnected jurisdictions. Power sector climate policy design should reflect the heterogeneity of available assets, resources, and neighbouring approaches.

Internalisation of externalities in the Spanish power generation sector. Impact of the national plan of allocation of emissions in the cost of generation.

The electric generation produces damages (externalities or environmental costs) that are not contemplated in the costs of this activity. A way to include these damages in the cost is based on the emission rights. In these instruments the total amount of allowed contamination is fixed. It is assigned to the polluting agents by means of emission permissions, creating a market of these, in which the agents can exchange them based on their interests. In 2005, Spain undertook the National Plan of Allocation of Emission Rights 2005-2007 (PNA 2005-2007). This plan has established an emission limit to the electrical sector and it has been translated in the allocation of emission rights. If this emissions limit is surpassed they must acquire rights that cover the exceeded. Thus, the companies must reduce their emissions without increasing their costs. What mix of generation is have to be implement in order to minimize the emissions, avoiding to charge the emission rights in the total generation cost?. If it is impossible to cover the demand without this extra cost, how to diminish it? These questions can be responded using optimization methods.

Encoding Carbon Emission Flow in Energy Management: A Compact Constraint Learning Approach

Decarbonizing the energy supply is essential and urgent to mitigate the increasingly visible climate change. Its basis is identifying emission responsibility during power allocation by the carbon emission flow (CEF) model. However, the main challenge of CEF application is the intractable nonlinear relationship between carbon emission and power allocation. So this paper leverages the high approximation capability and the mixed-integer linear programming (MILP) representability of the deep neural networks to tackle the complex CEF model in carbon-electricity coordinated optimization. The compact constraint learning approach is proposed to learn the mapping from power injection to bus emission with sparse neural networks (SNNs). Then the trained SNNs are transformed equivalently as MILP constraints in the downstream optimization. In light of the “high emission with high price” principle, the blocked carbon price mechanism is designed to price emissions from the demand side. Based on the constraint learning and mechanism design, this paper proposes the carbon-aware energy management model in the tractable MILP form to unlock the carbon reduction potential from the demand side. The case study verifies the approximation accuracy and sparsity of SNN with fewer parameters for accelerating optimization solution and reduction effectiveness of demand-side capability for mitigating emission.