Emissions Trading Research Articles

Towards Sustainable Strategies: Uncovering the Impact of Environmental Policies on Innovation Activities of Czech Firms

In recent years, there has been an increased emphasis on sustainable development worldwide, which has prompted governments to adopt environmental policies aimed at mitigating the adverse environmental impacts of economic activities. Among these strategies, the implementation of environmental policies has emerged as a key tool for promoting sustainable development. However, although these policies are created with good intentions, their impact on firms' innovation activities remains a matter of debate and research. The aim of this paper is to examine the impact of environmental policies on the innovation activities of Czech firms, with a particular focus on how these policies shape firms' strategies towards sustainable development. Given the growing emphasis on sustainability and environmental issues, it is necessary to examine how environmental policies can influence firms' overall innovation activities. 412 firms of different sizes were surveyed. And EU emissions trading and energy consumption emerged as the most influential variables with a positive impact.

Carbon market design and market sentiment

Concerns about systematic price distortions in the EU Emission Trading System (ETS) have risen in recent years. This paper shows how carbon-market design affects the impact of market sentiment, i.e. systematic deviations of price expectations from fundamentals by at least some market participants, on equilibrium prices. The Market Stability Reserve (MSR) of the EU ETS that adjusts supply based on past allowance banking undermines self-stabilization of the carbon market by discouraging rational intertemporal arbitrage. The MSR increases vulnerability of the EU ETS to market sentiments. Initially, the allowance price responds more to distorted expectations while the MSR (partially) prevents the distortion to spread across periods. Making the MSR more responsive to banking decisions increases the likelihood that distorted expectations turn out to be correct ex post. In contrast, a mechanism that adjust the cap based on the current allowance price does not face a trade off between stabilizing prices in the present and the future.

Multi-criteria analysis of EU paper-producing companies concerning emissions trading and economic aspects

Industrial firms in the EU have had to adapt over the past decades to face the increasing pressure of becoming more environmentally responsible. The European Union Emissions Trading Scheme (EU ETS) has played a crucial role in this process, and its impact on participating firms is a matter of debate for researchers, corporate managers, and policy makers alike. Unfortunately, there are only a minimum of models that assess the impact of the EU ETS on individual firms, especially in the context of overall firm performance and dependencies on other (economic and social) factors. For the paper industry, such a study is completely lacking. The authors use the well-established framework of the CSR model and the DC-PROMETHEE method to explore the ranking of paper producing firms in the EU. DC-PROMETHEE considers the effect of the dependencies between criteria that can potentially distort the results. The study revealed that both the EU ETS itself and the links between the evaluating criteria have an impact on the final CSR ranking of the paper producing companies.

Pioneering Emission Trading in Africa: An Architectural Design of a Blockchain-Powered Carbon Trading System

To achieve carbon neutrality by 2050 and reduce greenhouse gas (GHG) emissions to a range of 350–420 megatons of carbon dioxide equivalent, South Africa, the largest emitter of GHG in Africa, introduced a carbon taxation system in June 2019. However, within just 3 years, it has become evident that the system faces significant challenges, with less than 6% of the estimated tax returns reaching the government. This issue raises concerns about potential corruption and manipulation within the system. To address these challenges, this study presents a comprehensive framework for a carbon trading and taxation system leveraging blockchain technology (BCT). Designing this framework from the government’s perspective ensures efficient monitoring and oversight. Notably, the proposed system operates automatically, eliminating the need for third-party intermediaries. This study also identifies a crucial research gap and lays the foundation for future studies. It empirically implements the system as a decentralised application) using the Hedera and Solana blockchain networks. Complemented by JavaScript for the user interface. Python, through Django, was used to handle the server-side system implementation. Thus, this research aims to address the shortcomings of Africa’s current carbon taxation system through a novel, government-centric approach powered by BCT. The proposed system’s potential to enhance transparency and efficiency justifies further exploration in future studies.

Does the pilot trading of carbon emission rights cause domestic or international pollution transfer?

The implementation of a carbon emission trading pilot policy has a positive impact on sustainable development but may lead to pollution transfer by enterprises, thereby affecting sustainability. In this study, based on the panel data of Chinese-listed companies from 2007 to 2017, the carbon emission trading pilot policy was treated as a quasi-natural experiment and the Difference-in-Differences model was used to analyze whether these companies engaged in pollution transfer under the policy shock. The results indicated: first, carbon emission trading pilots lead to pollution transfer within mainland China but not across international borders; second, the power and aviation industries exhibited significant pollution transfer phenomena, and the policy also encouraged pollution transfer by non-green transformation enterprises; third, regional heterogeneity further showed that the central region showed no signs of pollution transfer and instead experienced pollution inflow, while the eastern region exhibited significant pollution transfer. Therefore, in designing policy, we should fully consider the phenomenon of enterprise pollution transfer, promote technological innovation, and ensure that carbon emission trading policies achieve emission reduction goals and promote sustainable development.

Optimal scheduling of a multi-energy complementary system simultaneously considering the trading of carbon emission and green certificate

This paper uses a multi-energy complementary system composed of thermal, wind, photovoltaic power generation, and electric energy storage units to participate in four market mechanisms and construct the optimal scheduling model of these trading mechanisms. These four mechanisms are carbon emission trading, green certificate trading, these two trading that are not joint, and joint. Under the latter two mechanisms, the excess carbon emissions of the system can be reduced to 9258t, and the utilization rate of renewable energy can reach 100 %. However, the operating costs under the fourth mechanism are 9695.80 $ lower than the third one because 5947 pieces of green certificates are converted into carbon emission rights. When the carbon price rises, the cost of the fourth mechanism increases slower than that of the third mechanism. The conversion volume of green certificates increases from 5947 to 10947, and the cost difference between the two increases to 67558.33 $. When green certificate prices rise, the cost under the fourth trading mechanism decreases faster. As that cost steadily declines, the carbon emission rights are converted into 907 green certificates, and the cost difference between this and the third mechanism increases to 4695.52 $.

Energy commodities spillover analysis for assessing the functioning of the European Union Emissions Trading System trade network of carbon allowances

The European Union Emissions Trading System (EU ETS) is designed to promote carbon reduction in a cost-effective and economically efficient manner. To meet their compliance requirements, participants within the EU ETS can either invest in carbon abatement, thereby improving their environmental performances, or purchase carbon allowances from the market. Our analysis aims to investigate the structural features of the EU ETS trade network of allowances and assess its robustness to spillovers propagated from energy commodities. We build the EU ETS trade network of allowances on a daily basis by leveraging a granular dataset comprising over 32k accounts that performed approximately 720k trades, involving more than 127 billion of allowances from 2005 to 2020. Importantly, our analysis is able to cover entirely the first three phases of the EU ETS, thus providing an updated view on the functioning of the EU ETS. We find that the EU ETS trade network of allowances is disassortative and characterized by very active nodes belonging to the energy sector. Moreover, we detect that energy commodity transmission channels can be substantial and may shape the way nodes transfer allowances, with the configuration of the EU ETS often being a net receiver of spillovers. These findings are robust even when we analyze extreme quantiles of the distribution to account for distressed periods. Our study shows how the functioning of the EU ETS can be influenced by spillovers imported from energy commodity markets. We discuss how investors can build portfolios that either hedge or amplify the impact of such spillovers, depending on their risk appetite. Given that energy commodities are significant inputs in the production processes of energy firms—who are highly active participants in the trade network of allowances—analyzing market responses to shocks in energy commodities is crucial for the effective implementation of the policy.

Evolutionary Game Analysis of Collaborative Prefabricated Buildings Development Behavior in China under Carbon Emissions Trading Schemes

Prefabricated buildings (PBs) are considered a green way to reduce energy consumption and carbon emissions in the construction industry due to their environmental and social benefits. However, PBs have obstacles such as high construction costs, immature technology, and insufficient policy incentives, and developers’ willingness to develop them needs to be higher. Therefore, it is necessary to explore how to motivate more developers to develop PBs. In this paper, we first discuss the impact of the carbon emissions trading scheme (ETS) on the construction industry and then consider the heterogeneity of construction developers, introduce a collaborative mechanism to establish a three-party evolutionary game model between the government and the heterogeneous developers, and explore the evolution of the three-party dynamic strategies through numerical simulation. The results show that developers’ initial development probability affects the system’s evolutionary trend, and the developer who obtains more low-carbon benefits plays a dominant role. Further analyses show that critical factors such as market profitability, synergistic benefits, and carbon tax price positively influence the development of PBs, and the influence of synergistic cooperation mechanisms should be especially emphasized. This study provides practical insights into the sustainable development of the construction industry and the government’s development of a suitable carbon portfolio policy for it. Including the construction industry in the ETS is recommended when carbon prices reach 110 RMB/t. At this point, the government can remove the subsidy for PBs, but the behaviors of the developers who participate in the ETS still need to be supervised.

Current trends in carbon emission trading: Theoretical perspectives, research methods and emerging themes

Since the inception of the EU carbon emissions trading market, it has experienced substantial growth. However, there is a shortage of comprehensive analysis on the policy implications of carbon emissions trading in the context of the low-carbon economy. The article utilizes bibliometric and content analytic methodologies to thoroughly examine the features and content of 116 relevant pieces of literature. Based on this analysis, a research model on the carbon emissions trading schemes is constructed. The study findings indicate a significant surge in the quantity of published material since 2021, with a predominant focus on terms related to the low carbon economy, such as environmental regulation and carbon emission. The research hotspots are related to transformation and upgrading and enterprise performance, etc. The research theory involves compliance cost theory, Porter's hypothesis theory, emissions trading theory and green innovation theory, empirical research is the main method of carbon emissions trading research. Emerging theme analyses are summarized in terms of the economic, environmental, technological and social effects of carbon trading. Finally, there are research conclusions and future research trends.

Do Market-Based Environmental Regulations Promote Green Development? A Quasi-Natural Experiment Based on Carbon Emissions Trading Pilot of China

ABSTRACT Using panel data of 30 Chinese provinces from 2008 to 2019, we utilized the Super-efficiency SBM-DEA model to estimate green development efficiency (GDE) and analyzed the impact of carbon emissions trading scheme (ETS) on GDE via the DID model. Our findings indicate that ETS significantly reduces carbon emissions and enhances GDE. Further analysis reveals a time lag and regional heterogeneity, with effects becoming more pronounced three years later, particularly in the developed eastern regions. Additionally, the mediating effect test suggests that green technology innovation (GTI), notably green patents, serves as a vital conduit for ETS to bolster GDE.

Impact of carbon emission trading on urban green innovation: empirical evidence from China’s carbon emission trading pilot policy

In the face of global climate change challenges, China’s implementation of the carbon emission trading (CET) pilot policy has provided new empirical research opportunities. Based on a dataset covering 281 Chinese cities from 2005 to 2021, this paper employs econometric models to conduct an in-depth analysis of the policy’s impact on urban green innovation (UGI). The findings indicate that the CET pilot policy has significantly promoted green innovation activities in affected cities, with positive effects observed both directly in pilot cities and indirectly in non-pilot cities through spatial spillover effects. In addition, the policy has been found to encourage technological investment and enhance public environmental awareness (PEA), further advancing green innovation. The paper also unveils comprehensive policy effects, indicating that the Big Data Comprehensive Test Zone policy and the New Energy Demonstration City policy work synergistically with the CET pilot policy in advancing green innovation. These findings provide valuable experiences and insights for designing environmental policy tools at the national level, promoting green development, and constructing climate change response strategies.

Research on the risk spillover effect of carbon emission trading market and various industry markets in China and the European Union

AbstractWidely concerns over the carbon emission problems have been aroused. Prior studies have documented the correlation between the carbon emission market and industries separately. This study compared the tail risks and risk spillover effect of the carbon emission and 11 industries markets in China and the European Union (EU) by using the multivariate multi‐quartile conditional autoregressive at‐risk model. Moreover, to evaluate the risk spillover of each market under extreme risk conditions in time domain and frequency domain, DY spillover index and BK spillover index were constructed via generalized forecast error variance decomposition and generalized causation spectrum, respectively. Findings are as follows: (1) The tail risks and fluctuation of the trend of Chinese industry markets reflects more higher and larger than those in the EU; (2) The EU suffers from smaller external shocks, while China has the opposite result and can recover relatively faster; (3) In China, energy, industrial, information technology, financial, real estate, consumer goods, carbon emissions, and discretionary consumption industries are risk spillover industries, while healthcare, materials, telecommunication services, and utilities industries are risk receiving industries. In contrast, the risk spillover industries in the EU remain consistent with those of the Chinese markets except for the materials, discretionary consumption, consumer goods, information technology and real estate industries. (4) On the short‐term, medium‐term and long‐term scales, the risk spillover of China's carbon emission trading market and various industries is basically consistent with that of the EU. These findings contribute to reducing greenhouse gas emissions and achieving the goal of carbon peak and carbon neutrality.

Two-Stage Robust Optimization of Integrated Energy Systems Considering Uncertainty in Carbon Source Load

Integrated Energy Systems (IESs) interconnect various energy networks to achieve coordinated planning and optimized operation among heterogeneous energy subsystems, making them a hot topic in current energy research. However, with the high integration of renewable energy sources, their fluctuation characteristics introduce uncertainties to the entire system, including the corresponding indirect carbon emissions from electricity. To address these issues, this paper constructs a two-stage, three-layer robust optimization operation model for IESs from day-ahead to intra-day. The model analyzes the uncertainties in carbon emission intensity at grid-connected nodes, as well as the uncertainty characteristics of photovoltaic, wind turbine, and cooling, heating, and electricity loads, expressed using polyhedral uncertainty sets. It standardizes the modeling of internal equipment in the IES, introduces carbon emission trading mechanisms, and constructs a low-carbon economic model, transforming the objective function and constraints into a compact form. The column-and-constraint generation algorithm is applied to transform the three-layer model into a single-layer main problem and a two-layer subproblem for iterative solution. The Karush–Kuhn–Tucker (KKT) condition is used to convert the two-layer subproblem into a linear programming model. A case study conducted on a park shows that while the introduction of uncertainty optimization increases system costs and carbon emissions compared to deterministic optimization, the scheduling strategy is more stable, significantly reducing the impact of uncertainties on the system. Moreover, the proposed strategy reduces total costs by 5.03% and carbon emissions by 1.25% compared to scenarios considering only source load uncertainty, fully verifying that the proposed method improves the economic and low-carbon performance of the system.

Analysis of the influencing factors of emission trading price in China

China established pilot carbon markets in 2013. In 2020, it set targets for carbon peaking in 2030 and carbon neutrality by 2050. China’s national carbon market officially commenced operations in 2021. Based on the national market and seven pilot markets, this study established the factors influencing carbon trading prices by examining market participants, macroeconomics, energy prices, carbon prices in other markets, etc. Asymmetrical development among the seven pilot cities, for which the study employed a mixed-effects model, was the primary factor impacting carbon prices. The carbon prices in the pilot cities cannot be extrapolated to the entire country. In the national carbon market, where the study employed a multiple regression lag model, the SSE index was positively correlated with carbon prices, whereas the Dow Jones index had no significant effect on carbon prices in terms of macroeconomics. Coal and natural gas prices were negatively correlated with carbon prices, whereas oil prices were positively correlated with energy prices. The EU market prices have a positive correlation with prices in other markets. The significance of this study is that it covers the largest national Emissions Trading System (ETS) in the world and allows for comparing the characteristics of the Chinese market with those of other ETS markets. Additional studies, including more sectors, should be conducted as China’s ETS coverage increases.

Carbon trading mechanism and industrial pollution behavior: A study based on regression discontinuity design analysis

This study investigates the impact of environmental regulations, specifically the carbon trading mechanism, on industrial pollution reduction. Framed within a comprehensive theoretical framework, the research hypotheses explore the influence of the carbon trading mechanism and its interaction with carbon emission trading scale on pollution reduction in industrial enterprises. The study employs Regression Discontinuity Design (RDD) and introduces control variables to provide a nuanced understanding of the relationships.Results indicate a significant impact of the carbon trading mechanism on pollution reduction. This study contributes to understanding the intricate relationships between policy implementation, trading scale, and industrial pollution reduction.

Carbon emission trading scheme and carbon performance: The role of carbon management system

This study investigates the effects of carbon emission trading schemes (ETSs) on corporate carbon performance, a critical area given the increasing global concern over climate change and the urgent need for effective emissions reduction mechanisms. Using a sample of listed companies in China and employing a difference-in-differences (DID) design, we find that firms participating in a pilot ETS show an improvement in carbon performance. This improvement is primarily attributed to greater low-carbon innovation outputs in the post-ETS period. Further analyses reveal the crucial role that ETSs play in enabling corporate carbon management systems to effectively enhance carbon performance. We also find that resource availability significantly influences the impact of ETSs, and participating firms generally experience economic benefits 3 years post-implementation. Finally, our results suggest that the positive effects of an ETS on carbon performance are replicable in national ETS contexts.

Does Speculation Matter in the Carbon Pricing Framework? Insights from the EU Emissions Trading System

To align with the global goal of keeping temperature below [Formula: see text]C, a market-based initiative, “Emissions Trading System” (ETS), has been developed to mitigate climate change. However, while the carbon allowances traded at the ETS are mostly held and traded by polluting companies, financial actors engage in “speculation”, activities that might be detrimental to the functioning of the ETS have also invested in the ETS. By drawing from the big data archive of Google Trends, we construct a news-based speculation index to proxy for the role of speculation in the dynamics of carbon pricing. Given our preliminary finding of inherent volatility and the mixed-frequency nature of the dataset, we employ the GARCH-MIDAS econometric technique to test the hypothesis that an all-inclusive framework that reflects the emission compliance and emissions non-compliance dynamics of the ETS is the most accurate approach to modeling carbon prices. We show that higher speculation in the ETS fosters higher long-term volatility in carbon prices, that speculation is a good predictor of carbon prices, and that its positive impact on carbon price returns makes the ETS an attractive investment opportunity. We provide a data-driven framework upon which the growing debate about whether the behavior of the non-compliance emission actors in the ETS endangers or benefits the functioning of the ETS can be evaluated empirically.

Moderating effect of corporate financialization on the impact of climate policy on corporate green innovation: Evidence from China

With intensifying global climate change, humanity is confronted with unparalleled environmental challenges and risks. This study employs the staggered difference-in-difference model to examine the relationship between climate policy and green innovation in the corporate financialization context. Using Chinese-listed company data from 2008 to 2020, our analysis reveals a favorable correlation between China’s carbon emission trading policy (CCTP) and advancements in green innovation. Furthermore, we find that the level of corporate financialization moderates this correlation, diminishing the driving effect of CCTP on green innovation. Additionally, results of heterogeneity analysis show that this moderating consequence is more evident in non-state-owned and low-digitization enterprises compared with state-owned and high-digitization ones. Our findings contribute to the existing literature by clarifying the interaction between CCTP, green innovation, and corporate financialization. Our research provides valuable insights for policymakers and stakeholders seeking to strengthen climate policies and encourages green innovation in different types of businesses.

How effective is the carbon pricing implementation in ASEAN Member States to reduce regional emissions

Abstract At the Conference of the Parties of the UNFCCC (COP 27), the ASEAN Member States (AMS) reaffirmed their commitment to the Paris Agreement by pledging to achieve net zero or carbon neutrality targets by 2050. According to the 7th ASEAN Energy Outlook (AEO7) study, ASEAN’s GHG emission will rise 3.7-fold to 6,704 MtCO2-eq in 2050 from 1,815 Mt in 2020. This will require all AMS to scale up their efforts to reach their greenhouse gas (GHG) emission target, and one of them is by introducing carbon pricing to smoothen the transition by encouraging more renewable energy use. Currently, some AMS have already introduced or proposed carbon pricing. Singapore has introduced carbon tax implementation since 2019. Indonesia has been stepping up its commitment to enforce both carbon tax and emission trading system (ETS) by introducing numerous supporting policies. Malaysia, Thailand, and Vietnam are anticipating launching ETS as their latest climate action plan. A question on how effective carbon pricing implementation to reduce regional emission may come up and this paper shed lights to answer this question through expert interviews and literature reviews. The findings indicate that carbon pricing may reduce emissions, especially from power generation and manufacturing industry, and support the transition to a low-carbon economy, helping the region reach carbon neutrality or net zero targets by 2050.

Does compensating firms for indirect carbon costs work? Evidence from Finnish manufacturing

The EU ETS indirect cost compensation subsidy was given out in the 2010s to compensate firms for increased electricity costs caused by the EU Emission Trading System, with the aim to support the competitiveness of producers in the EU. This paper studies the effects of the compensation subsidy on firm performance empirically with production plant level data from Finland. There is no clear evidence that the electricity costs have in fact been higher during the subsidy period, and the way that the subsidy was designed was not efficient. Perhaps for these reasons, the results find no indication of improved firm performance for the subsidy recipients.