Carbon Price Research Articles

Public acceptability of carbon pricing: unravelling the impact of revenue recycling

ABSTRACT Carbon pricing has emerged as a prominent policy tool to mitigate climate change due to its proclaimed high efficiency and effectiveness. However, the successful and sustainable implementation of carbon pricing also depends on the public acceptability. This paper investigates how revenue recycling shapes public attitudes towards carbon pricing. A systematic literature review identified 48 relevant studies from 2004 to March 2023. Using qualitative content analysis I discern relevant factors and construct a typology of revenue recycling options. Subsequently, a consensus ordinal ranking of revenue recycling options, based on the empirical findings of the reviewed studies, synthesizes current knowledge. The results reveal that revenue recycling has a crucial impact on public acceptability. While environmental earmarking ranks highest, and reducing corporate taxes is the least preferred option, numerous other revenue recycling options lie between these two options. Moreover, the literature presents divergent findings regarding the level of public acceptability of specific revenue recycling options. The diversity of research contexts and designs introduces inherent limitations that may explain variations in rankings observed across different studies. Notably, I identify political trust related to and salience of revenue recycling as important factors affecting public acceptability of carbon pricing. Finally, this research offers a framework for policymakers seeking to design revenue recycling strategies that align with public preferences to implement carbon pricing.

Carbon Leakage Concept after Carbon Pricing & Green Deal Policies

As part of the European Green Deal, EU nations are required to decrease their carbon emissions by 55% by 2030 and reach carbon neutrality by 2050. The EU's emissions trading system is the cornerstone of this goal. In theory, rising carbon prices may cause carbon leakage, or the transfer of economic activity and related emissions from high-carbon economies to low-carbon economies. Losing market share to rivals in international rivalry might result in short-term international carbon leakage. In the long term, it can be accomplished by moving domestic businesses abroad. To date, a variety of tools, including offsets and free allowances granted under the ETS, have been used to support the carbon leakage risk of high-risk industries. This paper develops an international technique, the EU Emissions Trading Scheme (ETS) Phase IV consultation, to produce a sector-level risk assessment of carbon leakage in Türkiye. This methodology combines emissions intensity and trading intensity, two important indicators for assessing carbon leakage risk. Although the former is commonly employed as a measure of a company's exposure to carbon costs, the latter indicates its ability to pass on costs to customers without losing market share. According to the carbon risk study carried out in Türkiye for the aluminium, cement, paper, fertilizer, iron-steel, and ceramics sectors, cement has the highest risk, while paper carries the lowest risk

Application of Dynamic Weight Mixture Model Based on Dual Sliding Windows in Carbon Price Forecasting

Application of Dynamic Weight Mixture Model Based on Dual Sliding Windows in Carbon Price Forecasting

The geography of avoided deforestation and sustainable forest management offsets: the enduring question of additionality

ABSTRACT Avoided deforestation and sustainable forest management (AD/SFM) offset projects have developed piecemeal, lacking consensus standards and receiving only quite low carbon prices. The diverse forces project developers face have led to a complex geography of different offsetting standards and funding sources adopted by various projects. Combining and updating existing AD/SFM pilot project databases, we produce – to our knowledge – the largest publicly available dataset of such projects’ approximate locations, containing nearly 800 worldwide. Using Cox proportional hazards models, we analyze the geography of these AD/SFM offset projects to understand better how different pressures project developers face in this weakly consolidated field have shaped where projects are more and less likely to be undertaken. We find that, at a fifty-kilometre-per-side hexagonal resolution, both AD/SFM projects tend to be located in areas with high above-ground biomass and high IUCN Red List species richness. Additionally, AD projects tend to be located in areas with stronger deforestation drivers. There is also a clear geographic specialization, with over 85% of the SFM projects in our dataset located in the United States. In contrast, AD projects have generally been established in countries that have engaged with the United Nations Reducing Emissions from Deforestation and Forest Degradation (UN-REDD) Programme or the World Bank’s Forest Carbon Partnership Facility. While AD/SFM projects may not be avoiding emissions at levels estimated in existing offset systems, they might still have a role to play in climate and habitat protection.

Correction: Yun et al. A Novel Extended Higher-Order Moment Multi-Factor Framework for Forecasting the Carbon Price: Testing on the Multilayer Long Short-Term Memory Network. Sustainability 2020, 12, 1869

(1)The authors wish to delete the expression of “where ⊗ means the Kronecker product and ⊕ means the XOR logic operation” throughout the entire paper [...]

Socioeconomic challenges and opportunities in renewable energy transition

The global transition to renewable energy is a multifaceted endeavor that entails profound socioeconomic transformations. This study aimed to explore the socioeconomic challenges and opportunities inherent in this transition. By leveraging a comprehensive review of existing literature and case studies, this research provides insights into the economic, social, technological, and policy dimensions of renewable energy adoption. The study employed a mixed-methods approach, combining qualitative analysis of policy frameworks with quantitative assessment of economic impacts. Key findings indicate that while renewable energy technologies, such as solar and wind, are increasingly cost-competitive, high initial capital costs and long payback periods remain significant barriers. Social and cultural resistance also poses challenges, particularly in communities with strong ties to traditional energy sources. Policy inconsistencies and regulatory uncertainties further complicate the adoption of renewable energy technologies. Conversely, the study highlights numerous opportunities. Renewable energy deployment can drive substantial job creation, stimulate local economies, and enhance energy security by diversifying energy sources. Technological advancements in energy storage and smart grids are crucial for integrating renewable energy into existing systems, thereby ensuring reliability and stability. Effective policy frameworks, such as feed-in tariffs and carbon pricing, are essential for fostering investment and innovation in the renewable energy sector. The study concludes that a holistic approach, integrating economic incentives, social engagement, and robust policy frameworks, is vital for overcoming challenges and maximizing the benefits of renewable energy. Recommendations for future research include exploring innovative financial instruments, advancing energy storage technologies, and enhancing public engagement to increase social acceptance of renewable energy projects. Keywords: Renewable Energy, Socioeconomic Challenges, Energy Policy, Technological Innovation, Energy Transition, Sustainable Development.

The contribution of ports to shipping decarbonization: An analysis of port incentive programmes and the executive role of port state control

In policy design, the contribution of ports to shipping decarbonization has been underestimated. Port incentive programmes have not contributed significantly to shipping decarbonization, and in the implementation of energy regulations, the role of the port state control has been exclusively limited to document control. This study aims to analyse the role of ports in shipping decarbonization by conducting an online survey and interviewing experts. We examine two proposals: first, a global incentive scheme focused solely on CO2 reduction, supported by the GHG Fund of the future IMO carbon pricing mechanism, acting as a rebate mechanism, and second, a voyage-based data collection and verification system. Experts have strongly supported the first proposal. The second proposal is technically feasible, since some verification firms and pioneer shipping companies have already started this practice. It is economically also feasible at a minor cost. A differentiated bunker levy based on these proposals is recommended at the end, in which ports play a significant role.

Industrialization, environmental externality, and climate mitigation strategies

This study proposes a 12-region global modeling framework that integrates industrialization into climate–economy interactions and applies it to explore national strategic interactions and long-term policy outcomes. In this regard, three policy regimes are considered: a non-cooperative Nash equilibrium and two cooperative regimes that maximize the weighted sum of regional welfare. Negishi weights, ensuring uniform carbon price, and equal weights are applied in cooperative setting. Based on the results, global unmitigated emissions will peak around 2040. Given the future industrialization process, developing countries will make greater mitigation efforts under all regimes, whereas the strategies of developed countries will only be affected under the uniform carbon price regime. In the two cooperative regimes, a clear separation of mitigation efforts is observed between developed and developing countries. Moreover, when accounting for industrialization, the global averaged carbon price should grow faster in the first half-century, followed by a period of slower growth. Sensitivity analysis implies that with the support from developed countries, accelerated industrialization in the developing world can help alleviate its environmental strain.

Designing a cost-effective policy mix for transition toward net-zero emissions: a case study of the mid-term plan by 2035 of Taiwan

This study explores the design of a cost-effective climate policy mix for transition toward net-zero emissions in the mid-term (by 2035). Its novelty lies in the methodological advancements through the development of a soft-linking procedure that integrates a top-down computable general equilibrium model with a bottom-up energy system model. The integrated assessment focuses on the climate policy mix under the framework of Taiwan’s Climate Change Response Act passed in 2023. The analysis shows that a policy mix combining investments in energy transition with user-pay hybrid pricing measures can facilitate cost-effective mitigation and enhance public acceptance. The proposed hybrid pricing includes cost-based electricity pricing and a two-step carbon pricing strategy that encourages early action (before 2030) for larger emitters. Finally, we demonstrate that accelerating the transition is crucial, as it reduces the economic costs of meeting emission targets by inducing further investments in energy efficiency improvement and lowering the carbon pricing levels required to close the abatement gap.

Carbon Pricing and Intergenerational Fairness

Abstract John Broome and Duncan Foley have proposed an ingenious way to transfer benefits backwards in time, from people who are not here yet to people who will not be here in the future. Present people can crowd out conventional, and often brown, investments by issuing global climate bonds (GCBs). The debate about GCBs has focused on whether it is justified to use this financial instrument to allow future people to buy off present people for climate mitigation. In this article, I ask whether it is fair to use GCBs to share the cost of a global carbon price between present and future people. My answer is that it depends on the approach used to calculate the carbon price and, of course, on the normative claims underlying the different approaches. Specifically, I argue that the internalisation principle underlying the cost-benefit approach does not justify intergenerational cost-shifting if, as in most cases, the social cost of carbon is determined using, inter alia, a social discount rate. Instead, the conservative justifications underlying a cost-effective carbon price consistent with the Paris mitigation target allow for intergenerational cost-shifting, but only to the extent of the difference (if any) between the Paris-consistent and the Pareto-efficient carbon price.

Time varying characteristics of factors affecting carbon price in emission trading scheme in China: Evidence from SV-TVP-VAR approach

Analysis of the factors influencing the price of carbon emissions trading in China and its time-varying characteristics is essential for the smooth operation of the carbon trading system. We analyse the time-varying effects of public concern, degree of carbon regulation, crude oil price, international carbon price and interest rate level on China’s carbon price through SV-TVP-VAR model. Among them, the quantification of public concern and the degree of carbon emission regulation is based on microblog text and government decisions. The results show that all the factors influencing carbon price are significantly time-varying, with the shocks of each factor on carbon price rising before 2019 and turning significantly thereafter. The short-term shock effect of each factor is more significant compared to the medium- and long-term, and the effect almost disappears at a lag of six months. Thanks to public environmental awareness, low-carbon awareness and the progress of carbon market management mechanisms, public concern has had the most significant impact on carbon price since 2019. With the promulgation of relevant management measures for the carbon market, relevant regulations on carbon emission accounting, financing constraints, and carbon emission quota allocation for emission-controlled enterprises have become increasingly mature, and carbon price signals are more sensitive to market information. The above findings provide substantial empirical evidence for all stakeholders in the market, who need to recognize that the impact of non-structural factors on the price of carbon varies over time. Government intervention also serves as a key aspect of carbon emission control and requires the introduction of relevant constraints and incentives. In particular, emission-controlling firms need to focus on the policy direction of the carbon market, and focus on the impact of Internet public opinion on business production while reducing carbon allowance demand and energy dependence.

Carbon capture and storage at Malaysia power plants: Evaluation of its feasibility and requisite enablers

Rapidly growing GHG emissions are significantly altering the world climate, necessitating a global decarbonization efforts to avert irreversible catastrophic failure of the world ecosystem. Malaysia is pledging to achieve carbon neutrality by 2050 and has subsequently identified Carbon Capture and Storage (CCS) as one of the solutions for carbon removal from its energy sector by 2050. However, the implementation of CCS presents formidable challenges, encompassing both technical and commercial complexities, especially for a nation like Malaysia, which has limited experience in large-scale CCS deployment. This study evaluates the feasibility of CCS implementation in Malaysia's fossil fuel power plants by conducting a comprehensive techno-economic assessment, taking into considerations the prevailing energy landscape of the country. This assessment is very crucial to demonstrate the feasibility of this plan within the timeframe, considering the limited research have been done to assess a national-scale implementation, as well as to provide the important insights for future policy implication to promote CCS adoption. The CCS scenarios are assessed through an analytical approach, and comparative analyses are conducted between alternative paths. The result shows that a large-scale implementation of CCS at Malaysia's fossil fuel power plant to achieve net-zero emission by 2050 are feasible given a strong enforcement on emission policy and establishment of CCS legal framework. CCS can potentially reduce 60% of Malaysia's energy sector total emissions, and a solar-supported CCS helps to reduce it further. Levelized Cost of Electricity analysis reveals that the implementation of CCS leads to only a minimal increase between pre- and post-CCS LCOE when carbon price is considered. A SWOT-PESTLE analysis was also conducted to identify gaps in regulatory framework, financial and social aspects. It can be concluded that CCS is a techno-economically viable solution, however Malaysia's readiness for CCS implementation is still at a very novice stage, and aggressive actions are needed to enable a successful full-scale implementation.

Carbon Pricing, Carbon Dividends and Cooperation: Experimental Evidence

We investigated whether carbon taxes with and without carbon dividends improve cooperative behavior to mitigate simulated climate change. We implemented a randomized controlled trial on a large sample of the U.S. general population (N=2,116). Played in real-time in groups of four, we tested three carbon-pricing treatments and a baseline condition within a modified threshold public goods game of loss avoidance. We found that a carbon tax coupled with carbon dividends reduces carbon-emitting group consumption relative to a baseline condition with no tax, and relative to a carbon tax only. A carbon tax coupled with carbon dividends paid out to below-average polluters (asymmetric dividend) worked best, with 94% of groups remaining below a critical consumption (emission) threshold. We also found that experiencing the asymmetric dividend condition positively affected perceptions of carbon pricing with carbon dividends.

Pajak Karbon dan Dilema Pembangunan Ekonomi Indonesia: Pembelajaran dari Negara Lain

Indonesia issued a regulation on carbon tax through article 13 of Law No. 7 on the Harmonization of Tax Regulations (HPP) in 2021 following the number of countries that have implemented carbon pricing mechanisms in facing the challenge of climate change. In addition to the policy formulation process full of pros and cons, the policy was actually postponed until 2015. Learning from the experience of other countries, the implementation of carbon taxes does not always succeed in reducing emissions or household budgets. The facts show that economic development and environmental control often do not occur at the same time. Additional rules, government commitment and cooperation from every relevant stakeholder are needed as well as supervision from the community in the implementation of article 13 of the HPP Law.

A hybrid model for predicting the carbon price in Beijing: a pilot low-carbon city in China

Beijing is one of the earliest pilot low-carbon cities in China. It was one of the first cities in China to establish a pilot carbon market to achieve this goal. As an emerging market, China’s carbon pricing mechanism is not yet complete. In this context, it is crucial for market managers and companies to predict carbon prices. This study uses a Prophet-EEMD-LSTM model to predict the carbon price in the Beijing carbon market, which significantly improves prediction performance. The advantage of this hybrid model is that it considers the particularities of carbon prices including trends, cyclical changes, and volatility. Considering that the carbon market has multiple complex characteristics, the carbon price is decomposed into multiple simple sequences using the Prophet and EEMD models. These simple sequences were predicted using an LSTM model. The hybrid model outperformed both econometric and single-machine learning models in terms of carbon price prediction. Based on the findings of this study, market managers and companies can take appropriate measures to prevent carbon price risks. These findings are conducive to the smooth operation of the carbon market, thereby providing sustainable support and guidance for the development of low-carbon cities.

Achieving net-zero U.S. ammonia: Technology and policy options and their emissions, investment, and cost tradeoffs

Ammonia production is responsible for around 35% of the CO2 emissions associated with the global chemical sector. In this study, a bottom-up model with high technical and economic resolution is implemented to assess potential least-cost pathways to achieve a net-zero U.S. ammonia industry by 2050. Results indicate that natural gas reformers equipped with carbon capture technologies may play a key role in decarbonizing U.S. ammonia production in the near term, while water electrolysis will be required in the long term to achieve net-zero emissions. Technical improvements and cost reductions in electrolyzers and lower-cost renewable electricity will be needed to accelerate the adoption of water electrolysis. Furthermore, two key policy interventions were investigated (carbon pricing and production tax credits) and were found to hold significant potential for accelerating low-carbon ammonia production technologies and for further reducing the cumulative carbon emissions. The methodology and analyses presented in this study provide important insights into available transition pathways to decarbonized U.S. ammonia production, providing fundamental insights for policy makers on required actions and investments to achieve the net-zero emissions targets.

The levelized cost of carbon abatement (LCCA) in substituting conventional ammonia production with power-to-ammonia for fertilizer, hydrogen and export

The production of ammonia using the conventional Haber-Bosch technique produces significant CO2 emissions, largely owed to the fossil fuel-based hydrogen production. To reduce these emissions, low-carbon ammonia production with hydrogen from water electrolysis (i.e., power-to-ammonia, P2A) is being developed. This study compares P2A with the methane-fed Haber-Bosch process by performing a time-based levelized cost of carbon abatement (LCCA) analysis, considering technology development and adoption, and the mismatch between production capacity and ammonia demand over time. The LCCA results quantify the cost and potential carbon reduction simultaneously and provide the cost to reduce one unit of CO2-eq emissions using P2A. Various scenarios in multiple sectors are considered in different regions in Canada from 2027 to 2050, such as low-carbon fertilizer, ammonia as a hydrogen carrier for domestic use and energy export, and their dynamics over-time were studied and compared. Results show that under the base case with conservative assumptions, the LCCA is higher than the proposed carbon price in Canada, except when low-carbon ammonia demand is low, e.g., domestic hydrogen use. Yet sensitivity analyses suggest that the LCCA can approach the carbon price with technical improvements and increased adoption over time. The electricity generation mix also has great impacts on the LCCA. Regions with abundant low-carbon electricity sources, e.g., Quebec, Prince Edward Island, Nova Scotia, Manitoba, and British Columbia can benefit from P2A on both environmental and economic perspectives. Some of these regions are connected to the coast, so there is also great potential for ammonia-shipping corridors in both the Atlantic and Pacific Oceans.

Techno-economic assessment and carbon pricing analysis for economic feasibility of epoxidized sucrose soyate: A biobased thermoset resin

The substantial environmental issues associated with plastic production have prompted researchers to accelerate the development of environmentally friendly biobased alternatives to reduce reliance on petroleum-based resources and mitigate emissions. Epoxidized Sucrose Soyate (ESS), a high-performance biobased epoxy resin obtained from soybean oil and sucrose, has shown promising potential in polymers and coatings applications. The success of ESS performance necessitates further investigations into its industrial-scale production and viability as an environmentally sustainable alternative to conventional petroleum-based resins. This study consists of a comprehensive techno-economic analysis (TEA) and cradle-to-gate life cycle assessment (LCA) to evaluate the technical, economic, and environmental feasibility of industrial-scale ESS production. The minimum selling price (MSP) of ESS at various production scales was estimated which offers insights into cost optimization. The MSP for 0.1, 1.0, and 10 ton/h processing capacity of sucrose soyate was calculated to be $9.57, $6.74, and $6.62 per kg of ESS, respectively. Relative to a comparable petroleum-based epoxy resin with similar functionality, such as bisphenol A diglycidyl ether (with a price range of $1.8 to $5.2 per kg), larger scales of ESS production have the potential to compete economically. The LCA results demonstrated the superior environmental performance of ESS, especially in the global warming potential category, indicating its potential as a compelling sustainable choice for replacing petroleum-based resins. This combined TEA and LCA study demonstrated the economic viability and environmental benefits of ESS, highlighting its promise as a sustainable alternative for industrial applications.

THE FINANCIAL IMPACT OF CARBON EMISSIONS ON POWER UTILITIES UNDER CLIMATE SCENARIOS

Power utilities, especially those that generate electricity by burning fossil fuels, produce significant amounts of carbon emissions. Mitigation of [Formula: see text]-equivalent ([Formula: see text]) emissions can be achieved by replacing power plants with renewable power installations and by adopting carbon-sequestration technologies. Physical upgrades are expensive, but carbon taxes, or the purchase of certificates and allowances on a voluntary carbon market, can be costly, too. Carbon costs may increasingly become a threatening liability for power utilities, eating into profits and undermining the financial viability of emission-intensive electricity generation. Thus, we consider an asset-and-liability, structural firm model to investigate the creditworthiness of a generic power utility. The utility’s assets dynamics are driven by the financial returns generated from the sold electricity for a set tariff which is modeled by a simple stochastic process. The liabilities not only depend on fuel, running, and depreciation costs, but also on the costs of [Formula: see text] emissions. As a case study, we consider Eskom, the South African power utility. We show the evolution of Eskom’s default probability under various fuel mix plans and technologies (as per SA’s Integrated Resources Plan (IRP) 2019), and under the Network for Greening the Financial System (NGFS) carbon price scenarios. The obtained results and insights present a trying path ahead, especially for carbon-intensive power utilities.

Green industrial policy can strengthen carbon pricing but not replace it

Carbon pricing has received prominent support as the key policy to reduce greenhouse gas emissions. Yet, in the context of heightened geopolitical tensions and risks of supply chain disruptions, policy makers are increasingly resorting to green industrial policies to support the deployment of clean energy technologies. This Perspective discusses whether this development represents a paradigm shift in the design of climate policies and assesses arguments for and against carbon pricing and green industrial policies. Our analysis addresses implications for economic efficiency, security of supply, distributional concerns and political economy issues. We find that green industrial policies can support carbon pricing by lowering market barriers for clean technology diffusion and strengthening political support for climate policy. Yet, we also emphasize that a carbon price should be an essential element in any effective climate mitigation policy mix and the key is to find the optimal policy mix for carbon pricing and green industrial policies for the unique context of each location. In the EU, green industrial policy should mainly be employed to complement carbon pricing and deal with additional market barriers. In the US, by contrast, green industrial policy could be used strategically to try to build political support for and reduce resistance to a carbon price.