Carbon Trading Programs Research Articles

Does Carbon Emissions Trading Policy Improve Inclusive Green Resilience in Cities? Evidence from China

With the impact of external globalization uncertainties and the pressure of internal national environmental policies and markets, maintaining inclusive green resilience while coordinating economic, environmental, and social systems is critical for achieving green and sustainable urban development. We define inclusive green resilience for cities in this research and build a system of inclusive green resilience indicators. The DID model and entropy approach were used to examine the impact of carbon trading policies on inclusive green resilience in 184 representative Chinese cities from 2008 to 2018, and PSM-DID was utilized for further validation. According to the findings of the study, carbon emissions pricing policies can considerably increase inclusive green resilience in cities. Mechanism verification demonstrates that carbon trading programs improve inclusive green resilience in cities through industrial restructuring, technical innovation capability, and employment benefits. According to the city heterogeneity study, the implementation of the carbon emissions trading system has a scale effect and significant urban functional differences, and its impact on inclusive green resilience of cities is greater in large and medium-sized cities and non- resource-based cities. This research offers a new way of thinking about inclusive green resilience as well as empirical data for future sustainable policy development.

Linking carbon markets with different initial conditions

Despite the global nature of climate change, carbon pricing is driven by regional and sectoral carbon taxes or trading programs, each with unique features and disparate marginal costs. Linking these fragmented regional or sectoral programs could improve environmental and economic outcomes, but differing initial conditions pose a challenge to linking. We explore the use of an allowance exchange rate, which denominates the compliance value of an emissions allowance differently in each program. In a theoretical model, we find that linking with an exchange rate in the politically plausible range—between the benchmark regimes of autarky and traditional 1:1 trading—may reduce abatement in one program but achieves greater aggregate emissions abatement than the amount achieved at each bookend. Linking in this range also yields lower total abatement costs and greater economic surplus in each program, compared to autarky. Thus, a linked trading system with allowance exchange rates can be expected to yield benefits for the environment and each regional economy. When program caps achieve inefficiently low abatement, it is socially optimal to link at an exchange rate that increases total abatement in the linked system, which occurs within the politically plausible range of exchange rates, not at 1:1. We illustrate these results, and identify additional outcomes of interest to policymakers, using a simulation model of electricity markets.

Evolutionary game equilibrium in the downstream carbon market: Evidence from the household size in China

AbstractCarbon trading downstream, as a key strategy for decreasing carbon emissions, has the potential to hasten the entire society's decarbonization. Taking the government, household, and carbon trading management center as stakeholders, this paper constructs a tripartite evolutionary game model, examines and stimulates evolutionary stability strategies, and then proposes some policy implications. Findings show that the downstream carbon market faces a complex evolutionary process. The promotion of the policy can be split into two periods: policy promotion and policy stability implementation. And proper household size management is a crucial and effective strategy to encourage downstream carbon trading programs and emission reduction.

China launches national carbon trading program

China launches national carbon trading program

Decarbonizing the Energy Mix: Carbon Pricing Implications and Path Forward

Debates are being had around the globe on how to reduce carbon emissions most efficiently and economically. Whether though a carbon tax or carbon trading program, or through wholesale market pricing schemes, carbon mitigation strategies for reducing carbon dioxide emissions in the electricity sector are gaining traction. With the aggressive fiscal and monetary policies and stimulus programs in place across the globe, attempting to soften a global economic downturn and speed the economic recovery from the COVID‐19 pandemic, governments and businesses alike are voicing concerns about pending large budget deficits and their potential to slow and prolong economy recovery. Governments around the world will be forced to reduce spending in coming years or find ways to raise revenues. The tax code is a very efficient and effective way to steer investments toward innovative and transformative capital projects, including projects that support decarbonization.

Cost benefits of forest restoration in a tropical grazing landscape: Thiaki rainforest restoration project

Global forest restoration is vital to mitigate climate change. Tropical forests are under the greatest threat from clearing while offering significant potential for restoration. Forest carbon credits through trading schemes have the potential to enable restoration, providing landholders with incentives to restore forests. Impediments to restoration are numerous, with one of the main ones being the unknown costs of forest restoration and uncertain returns from payment schemes, such as carbon trading programs. Many research and modeling papers on the potential of carbon markets to stimulate reforestation in agricultural landscapes rely on general estimates of reforestation. The reality, though, is that the benefits, returns, and break-even points of the reforestation costs and carbon price are highly sensitive to actual costs. Few papers actually investigate the real costs of farm-level restoration. Nearly all recent papers have used modeled scenarios in calculating Net Present Value (NPV), and so estimates of restoration cost and a return from carbon vary widely depending on modeled assumptions. Real data from a demonstration project in the Wet Tropics of Australia are provided in this paper. Three land use scenarios are compared: carbon only, cattle only, and a combination of carbon and cattle using on-ground data for restoration. Not surprisingly, scenarios of the highest carbon prices generate the highest net benefits in both carbon only and mixed carbon and cattle scenarios. A minimum carbon price of AUD$37 per ton of carbon dioxide equivalent is required to match income derived from cattle. The current policy environment that rewards the lowest cost abatement runs counter to Australia playing its role in the urgent need to limit global temperature rise to 2 degrees Celsius and preferably 1.5 degrees Celsius.

Carbon trading, co-pollutants, and environmental equity: Evidence from California's cap-and-trade program (2011-2015).

BackgroundPolicies to mitigate climate change by reducing greenhouse gas (GHG) emissions can yield public health benefits by also reducing emissions of hazardous co-pollutants, such as air toxics and particulate matter. Socioeconomically disadvantaged communities are typically disproportionately exposed to air pollutants, and therefore climate policy could also potentially reduce these environmental inequities. We sought to explore potential social disparities in GHG and co-pollutant emissions under an existing carbon trading program—the dominant approach to GHG regulation in the US and globally.Methods and findingsWe examined the relationship between multiple measures of neighborhood disadvantage and the location of GHG and co-pollutant emissions from facilities regulated under California’s cap-and-trade program—the world’s fourth largest operational carbon trading program. We examined temporal patterns in annual average emissions of GHGs, particulate matter (PM2.5), nitrogen oxides, sulfur oxides, volatile organic compounds, and air toxics before (January 1, 2011–December 31, 2012) and after (January 1, 2013–December 31, 2015) the initiation of carbon trading. We found that facilities regulated under California’s cap-and-trade program are disproportionately located in economically disadvantaged neighborhoods with higher proportions of residents of color, and that the quantities of co-pollutant emissions from these facilities were correlated with GHG emissions through time. Moreover, the majority (52%) of regulated facilities reported higher annual average local (in-state) GHG emissions since the initiation of trading. Neighborhoods that experienced increases in annual average GHG and co-pollutant emissions from regulated facilities nearby after trading began had higher proportions of people of color and poor, less educated, and linguistically isolated residents, compared to neighborhoods that experienced decreases in GHGs. These study results reflect preliminary emissions and social equity patterns of the first 3 years of California’s cap-and-trade program for which data are available. Due to data limitations, this analysis did not assess the emissions and equity implications of GHG reductions from transportation-related emission sources. Future emission patterns may shift, due to changes in industrial production decisions and policy initiatives that further incentivize local GHG and co-pollutant reductions in disadvantaged communities.ConclusionsTo our knowledge, this is the first study to examine social disparities in GHG and co-pollutant emissions under an existing carbon trading program. Our results indicate that, thus far, California’s cap-and-trade program has not yielded improvements in environmental equity with respect to health-damaging co-pollutant emissions. This could change, however, as the cap on GHG emissions is gradually lowered in the future. The incorporation of additional policy and regulatory elements that incentivize more local emission reductions in disadvantaged communities could enhance the local air quality and environmental equity benefits of California’s climate change mitigation efforts.

The undervalued contribution of mangrove protection in Mexico to carbon emission targets

AbstractMangrove deforestation threatens to release large stores of carbon from soils that are vulnerable to oxidation. Carbon stored in deep soils is not measured in national carbon inventories. Thus, policies on emission reductions have likely underestimated the contribution of mangrove deforestation to national emissions. Here, we estimate that emissions from deforestation and degradation of mangroves in Mexico are 31 times greater than the values used to determine national emission reduction targets for the Paris Agreement. Thus, Mexico has vastly undervaluated the potential of mangrove protection to reduce its emissions. Accounting for carbon emissions from mangrove soils should greatly increase the priority of mangrove forests to receive funding for protection under carbon trading programs.

Not carbon neutral: Assessing the net emissions impact of residues burned for bioenergy

Climate mitigation requires emissions to peak then decline within two decades, but many mitigation models include 100 EJ or more of bioenergy, ignoring emissions from biomass oxidation. Treatment of bioenergy as ‘low carbon’ or carbon neutral often assumes fuels are agricultural or forestry residues that will decompose and emit CO2 if not burned for energy. However, for ‘low carbon’ assumptions about residues to be reasonable, two conditions must be met: biomass must genuinely be material left over from some other process; and cumulative net emissions, the additional CO2 emitted by burning biomass compared to its alternative fate, must be low or negligible in a timeframe meaningful for climate mitigation. This study assesses biomass use and net emissions from the US bioenergy and wood pellet manufacturing sectors. It defines the ratio of cumulative net emissions to combustion, manufacturing and transport emissions as the net emissions impact (NEI), and evaluates the NEI at year 10 and beyond for a variety of scenarios. The analysis indicates the US industrial bioenergy sector mostly burns black liquor and has an NEI of 20% at year 10, while the NEI for plants burning forest residues ranges from 41%–95%. Wood pellets have a NEI of 55%–79% at year 10, with net CO2 emissions of 14–20 tonnes for every tonne of pellets; by year 40, the NEI is 26%–54%. Net emissions may be ten times higher at year 40 if whole trees are harvested for feedstock. Projected global pellet use would generate around 1% of world bioenergy with cumulative net emissions of 2 Gt of CO2 by 2050. Using the NEI to weight biogenic CO2 for inclusion in carbon trading programs and to qualify bioenergy for renewable energy subsidies would reduce emissions more effectively than the current assumption of carbon neutrality.

Assessing five pilot carbon trading programs in China from a perspective of efficiency analysis

In order to overcome the challenge of growing carbon emissions in China, the pilot carbon emissions trading systems (ETSs) serve as precursors of the national carbon ETS. Five province-level pilot ETSs in Beijing, Tianjin, Shanghai, Guangdong and Hubei are assessed from the view of carbon emission efficiency analysis in this study. Firstly, both the environmental production technology and the Malmquist index are adopted to evaluate the carbon emission efficiency of 28 provinces in China. Then, the regression significance analysis of carbon emission efficiency and the operational information evaluation for pilot ETSs are combined to develop an integrated approach for assessing five considered pilot ETSs. The Efficiency analysis of carbon emissions indicate that the effect of ETS in Beijing is significant, the effect of ETS in Tianjin is weak significant, and those of the other three pilot ETSs are not significant. Based on the operational information for pilot ETSs, the evaluating results of pilot ETSs in Beijing and Hubei are better than those of other pilot ETSs. This study highlights two main findings. First, the pilot ETS in Beijing has better performance than the other considered pilot ETSs, and its operational experience should be promoted throughout the country to improve the construction of national carbon ETS. Second, the successful cooperation between the ETSs in Beijing and Tianjin implies that the regional cooperation among neighbouring ETSs should be encouraged and further implemented to enhance the overall performance of the regional ETSs.

Carbon pricing, carbon sequestration and social discounting

This paper studies the optimal taxation of carbon emissions in a dynastic economy. When the welfare function places direct Pareto weights on unborn generations, the social discount rate is lower than the discount rate of the current generation. I show that this welfare criterion has important consequences for the structure of the optimal regulatory system. In particular, I show that: (i) the optimal carbon tax does not in general equal the social cost of carbon; (ii) a subsidy on oil reserves is sometimes optimal; and (iii) carbon trading programs should limit the award of carbon offset allowances

Analysis of Economic Incentive Policies for Improving a Low Carbon Society—Case Study of the Building Industry in China and Japan

In the process of promoting the development of a low carbon society, economic incentive policies play an important role. In order to see the effectiveness of implementing the economic incentive policies, we put forward two questions in this study: How effective are economic incentive policies in the building industry in China and Japan? What are the obstacles preventing these policies from being effectively applied and how to overcome them? Considering the energy consumption in the building industry accounts for a significant proportion in both China and Japan, economic incentive policies for promoting building energy saving in the two countries have been chosen as case studies. Policies discussed in this article are divided into national and city levels, in which the city level policy analysis mainly focused on the active Carbon Trading Programs. Methods of stakeholder investigation and literature review are applied in exploring the economic incentive polices' effects and constraints. Based on the outcomes of our research, policy recommendations for overcoming the barriers of economic incentive policies in the building industry are worked out.

Quantifying carbon sequestration of various green roof and ornamental landscape systems

Interest in reducing carbon emissions and carbon trading programs has been increasing. In order to calculate the carbon benefits of landscapes, we must first understand how they sequester and store carbon. Carbon dynamics have been extensively studied in natural and agricultural landscapes, and urban and community forests. Relatively little is known about carbon sequestration in ornamental landscapes. This study compared the carbon content of nine in ground and three green roof landscape systems of varying complexity to determine their carbon sequestration potential. Soil or substrate samples were analyzed prior to planting in 2009 and soil/substrate, below- and above-ground biomass were analyzed at the end of the 2010 and 2011 growing seasons. Landscape systems containing more woody plants, such shrubs (65.67, 78.75, and 62.91kgm−2) and herbaceous perennials and grasses (68.75 and 67.70kgm−2 for the in-ground and green roofs, respectively) had higher carbon content than other landscape systems. The native prairie mix (28.57kgm−2) also had high carbon content, because of the high volume of plant biomass. The vegetable and herb garden and vegetable green roof contained a moderate amount of carbon (54.18 and 11.03kgm−2, respectively). The Sedum and prairie green roofs contained less carbon than their counterpart in-ground landscape systems, suggesting that although green roofs do sequester a small amount of carbon, greater benefit can be achieved in ground level landscape systems. Ornamental landscapes have good potential for carbon sequestration but management practices can affect their net carbon sequestration and the permanence of the carbon sequestered.

TRACE GAS EMISSIONS FROM NURSERY CROP PRODUCTION USING DIFFERENT FERTILIZATION METHODS©

Research on agriculture’s role in mitigation of greenhouse gas (GHG) emissions has been conducted in row crop, forestry, and animal production systems, but there has been little focus on contributions from specialty industries such as horticulture. Our objective was to determine efflux patterns of CO2, CH4, and N2O associated with three different fertilization methods (dibble, incorporated, and topdressed) commonly used in nursery container production. Dibbling fertilizer reduced CO2 emissions when compared to incorporation or topdressing. Dibbling and topdressing reduced N2O emissions (68 and 70%, respectively) when compared to the incorporated treatment. These data begin to provide evidence of mitigation strategies which can be implemented in container plant production to help growers adapt to possible future legislation, improve the environmental impact from the industry, and benefit financially from potential carbon trading or offset programs.

Using Section 111 of the Clean Air Act for Cap-and-Trade of Greenhouse Gas Emissions: Obstacles and Solutions

EPA is moving forward with section 111 regulation of greenhouse gases. The next step could be creating a cap and trade system for the electrical utility industry, using “standard of performance” as the statutory foundation. Past litigation on EPA’s proposed mercury cap-and-trade program provides insights about potential challenges to a carbon trading program. This paper describes those insights and discusses how EPA could define a standard of performance for greenhouse gas emissions in terms of a national cap and then allow regulated facilities to use allowances to cover their greenhouse gas emissions. This paper also looks to the specifics of the proposed California cap-and-trade program, in order to demonstrate how EPA could allow states to use their participation in regional cap-and-trade programs to comply with section 111(d) requirements for existing sources.

A Geographic Approach to Sectoral Carbon Inventory: Examining the Balance Between Consumption-Based Emissions and Land-Use Carbon Sequestration in Florida

Carbon accounting is an important analytical task that provides baseline information to assist in establishing emissions targets, developing market-based carbon trading programs, and facilitating sustainable carbon management at the regional to international scales. Although a substantial amount of research has focused on carbon emissions inventory, limited studies have been conducted to estimate consumption-based emissions and their spatial distribution in relation to vegetation carbon sinks. In this article, we develop a new approach to model the spatially detailed consumption-based carbon emissions from the household energy and transportation sectors. Emissions were in turn integrated with vegetation carbon sequestration rates that were modeled through biophysical remote sensing techniques. This enables carbon balance analysis at detailed geographic locations. To illustrate our approach for carbon balance analysis, we present a case study in Florida. Results indicate that, in 2001, Florida was able to self-assimilate residential carbon emissions from energy and transportation fuel consumption. Estimates indicate that net carbon sources (i.e., household emissions exceeding vegetation carbon assimilation) are associated with urban and suburban densities and net sinks with exurban and rural densities. In sum, the research approach can be extended to household energy consumption and carbon assessment for other geographies at alternative scales.

On the Need to Redesign the CDM Carbon Trading Program

On the Need to Redesign the CDM Carbon Trading Program

Indicators of Carbon Storage in U.S. Ecosystems: Baseline for Terrestrial Carbon Accounting

Policymakers, program managers, and landowners need information about net terrestrial carbon sequestration in forests, croplands, grasslands, and shrublands to understand the cumulative effects of carbon trading programs, expanding biofuels production, and changing environmental conditions in addition to agricultural and forestry uses. Objective information systems that establish credible baselines and track changes in carbon storage can provide the accountability needed for carbon trading programs to achieve durable carbon sequestration and for biofuels initiatives to reduce net greenhouse gas emissions. A multi-sector stakeholder design process was used to produce a new indicator for the 2008 State of the Nation's Ecosystems report that presents metrics of carbon storage for major ecosystem types, specifically change in the amount of carbon gained or lost over time and the amount of carbon stored per unit area (carbon density). These metrics have been developed for national scale use, but are suitable for adaptation to multiple scales such as individual farm and forest parcels, carbon offset markets and integrated national and international assessments. To acquire the data necessary for a complete understanding of how much, and where, carbon is gained or lost by U.S. ecosystems, expansion and integration of monitoring programs will be required.

Municipal Mobility Manager

This paper analyzes five different options for incorporating the transportation sector into a carbon cap-and-trade program. An upstream system at the refinery or importer level would be administratively simple but would lead to minimal reductions in transportation emissions as a result of inelastic demand for driving. In effect, emissions reductions would be “exported” to the electricity generation and industrial sectors. A downstream system at the household level would lead to similar changes in emissions but would raise major administrative and privacy issues. Greater changes in behavior might result from a vehicle manufacturer–based scheme, but there are complex administrative issues. Tailpipe standards appear to be achieving the same result. An offset system would provide financial incentives for a wider range of abatement measures, including those undertaken by local governments such as smart growth zoning, parking pricing, and transit improvements. Empirical experience with the Clean Development Mechanism, however, suggests that transportation offsets, particularly those reliant on travel behavior changes, face significant hurdles in proving “additionality” and documenting emissions savings. This paper therefore proposes a “municipal mobility manager” trading design, under which local governments would assume responsibility for transportation emissions. This would give them the same financial incentives to implement abatement measures as under an offset scheme but would avoid the methodological and administrative challenges. The paper also argues that any design for including transportation in a carbon trading program will be beneficial because it would avoid the tendency to overallocate allowances to other sectors and force more realism in the expected emissions reductions from transportation.

Distributional Effects of Carbon Allowance Trading: How Government Decisions Determine Winners and Losers

If the U.S. should limit carbon dioxide emissions, an allowance trading policy may offer one method of achieving that goal in a cost-effective manner. The distributional effects of such a program could be large, far in excess of the actual cost to the economy. This paper examines how two key decisions that the government would need to make in designing a carbon trading program would determine those distributional effects. Those decisions are how to allocate the allowances and how to use the revenue that the government would receive under alternative allocation strategies. Distributional effects are estimated for both domestic and international trading programs. We distribute deadweight losses due to policy-induced declines in both carbon consumption and factor supplies. Further, we separate the distributional effects associated with government carbon consumption from private sector carbon consumption. Finally, we highlight the problems in measuring distributional effects that are caused by poor data on households' consumption and income.