Emission Trading Program Research Articles

Analysis of Influencing Factors on the Value of Carbon Assets in China Under the Background of Double Carbon — Take the Pilot Carbon Emission Trading Program in Guangdong Province as an Example

In recent years, with the rapid development of the global industrial economy, carbon dioxide emissions, the greenhouse effect, and other environmental problems have become increasingly obvious, the development of a low-carbon economy has become the goal pursued by all countries in the world, carbon market trading has also emerged and developed. With the continuous development of the carbon market, carbon assets are playing an increasingly important role for enterprises, and the assessment of carbon assets has greater potential for development prospects. However, at this stage, there are few studies on the value of carbon assets in the field of assessment, and the studies on the influencing factors of the value of carbon assets are more focused on the analysis of the price of carbon emission rights. This paper takes carbon asset trading as the background and carbon emission trading pilot in Guangdong Province as an example and selects five indicators from different fields to establish a linear regression model to analyze the influencing factors of carbon emission rights price.

Road map for sustainable and effective carbon pricing: bridging the gap of realities and ambitions.

An increase in policy ambition is needed to close the gaps related to climate change mitigation and those required to meet the targets of Paris Agreement. This article examines the contemporary situation of carbon pricing and suggests how carbon costs would help countries adopt comprehensive climate policies. This paper explores the carbon pricing imitative across different regions and the associated issues and proposes how to format holistic, ambitious approaches for effective implementation of carbon pricing. The carbon taxes and emission trading programs are the primary tools for implementation costs. Carbon taxes, fuel taxes, subsidies for fossil energy, and emission trading systems (ETSs) all contribute to these costs. Different countries have adopted different approaches to adopt and mitigate the adverse effect of carbon emissions, but coordinated and integrated efforts are needed. This paper emphasizes the effective carbon pricing and integrating role of finance departments in climate policy; new synergies can be developed to boost government agencies' ability to implement climate policy. Governments may increase their involvement in carbon pricing beyond direct carbon pricing if they implement efficient carbon pricing. Governments, international organizations, and civil society can all play a role in pushing for effective carbon prices to encourage more ambitious targets. Furthermore, the article stresses the need for open communication and a proper understanding of carbon pricing potential to implement climate policy.

The Impact of Emissions Trading Program on the Labor Demand of Enterprises: Evidence From China

The emissions trading program (ETP) is an effective means to fight environmental pollution. However, it may also spur the increase of enterprise costs, which affects employment and economic development. Adopting a difference-in-differences method and exploiting China’s emissions trading policy in 2007 as a quasi-natural experiment, we investigate the impact of the ETP on firms’ labor demand and the mechanism facilitating this effect. The results show that the ETP significantly reduces firms’ labor demand. The conclusion remains robust after using an instrumental variable to alleviate the possible endogeneity problem. Mechanism analysis indicates that the ETP reduces firms’ labor demand via increasing firms’ environmental expenditure and reducing profits. The heterogeneity analysis shows that the ETP significantly reduces the labor demand of SO2 emitting firms and heavy polluting firms, while having no significant impact on the labor demand of non-SO2 emitting firms and non-heavy polluting firms. This negative impact is more prominent for resource-based cities and old industrial base cities. This paper provides empirical evidence and policy implications for implementing the ETP in developing countries.

Imperfect Markets versus Imperfect Regulation: Reevaluation of an Emissions Trading Program: Reclaim

Imperfect Markets versus Imperfect Regulation: Reevaluation of an Emissions Trading Program: Reclaim

Impact of the Saitama Prefecture Target-Setting Emissions Trading Program on the adoption of low-carbon technology

This paper investigates the impacts of the Target-Setting Emissions Trading (TSET) Program launched by Saitama Prefecture in Japan in 2011 on the adoption of low-carbon technology. Using facility-level data on the manufacturing sector, the causal relationship between implementation of the program and investment in high-efficiency equipment is estimated. The results show that the TSET Program promoted the adoption of high-efficiency machines and devices for the first three years of the second compliance period, whereas the program did not spur investments in high-efficiency equipment during the first compliance period. These results suggest that the manufacturing facilities may have adopted relatively cheaper emissions reduction plans in the first compliance period such as improvements to equipment they already owned, whereas in the second compliance period, when the emissions targets became stricter, they allocated money and resources to introduce high-efficiency equipment. These findings indicate that the TSET Program succeeded in encouraging emissions reduction efforts by facilities in the manufacturing sector covered by the scheme, even though the program lacks penalties for noncompliance.

How does emission trading reduce China's carbon intensity? An exploration using a decomposition and difference-in-differences approach

Emission trading is a market-driven method to more quickly reduce carbon intensity, and has been widely used in countries with significant carbon emissions. In 2013, the Chinese government established pilot carbon emission trading programs in seven provinces. However, there is incomplete research on the effect and influencing channels of emission trading on carbon intensity reduction. To explore these problems, this study conducted an empirical analysis, using a decomposition and difference-in-differences approach. The main conclusions are as follows: (1) Overall, China's emission trading pilots have driven a significant decline in the carbon intensity, resulting in an average annual decline of approximately 0.026 tons/10,000 yuan in the pilot provinces. (2) In the sample period, emission trading pilots had a sustained and stable effect on carbon intensity with no time lag. (3) Emission trading pilots reduce the carbon intensity by adjusting the industrial structure. In contrast, energy structure and energy intensity channels have not yet been realized.

A method for emission allowances allocation in air transportation systems from a system-of-systems perspective

Market-based mechanisms, especially emission trading schemes, are proposed as a means to control system-wide aviation emissions. Although auctioning has gained some recent popularity, free allocation of emission allowances is still favored by many to incentivize airlines’ participation in the outset of an emission trading program. However, current methods for free allocation – grandfathering method and benchmarking method – have their limitations, such as placing heavy workload on regulators and a lack of transparency and flexibility. To overcome some of the limitations, this paper proposes a multi-stakeholder dynamic optimization method from a system-of-systems perspective. The method delegates part of the regulators’ responsibility to airlines, and grants airlines flexibility to plan, negotiate, and request for emission allowances. The inclusion of the regulators’ allowance allocation decision-making and airlines’ fleet allocation decision-making ensures a holistic understanding of the problem. Specifically, the method combines transfer contract coordination mechanism and approximate dynamic programming to coordinate the allowance consumption between the participants. We apply the method to a ten-route air transportation network where two representative airlines compete for the allowances. The results demonstrate that the total network-wise profit from each airline’s independent decisions can approach the globally efficient solution in an ideal centralized case without violating the emission constraint.

Environmental production and productivity growth: evidence from european paper and pulp manufacturing

The production and manufacturing sector is one of the primary factors that affects the environment, which has been a very important topic of recent studies. Many approaches are employed to reduce the impact of production on the environment. More recently, carbon-abatement technology and activities have been introduced into the production processes to reduce carbon emissions, such as the implementation of emission trading programs in many industrial sectors, including the paper and pulp sector. Nevertheless, the costs of abatement activities will result in a certain level of sacrifice in productivity growth, when the inputs are reallocated from good output production to abatement activities to maintain bad output under the regulatory limit. However, how and the extent to which such technology will affect productivity remain unclear. Therefore, it is worth investigating the opportunity cost of introducing such technology. In this paper, we offer new empirical evidence by studying panel data on 17 EU member states from 1995 to 2006. Productivity changes are calculated using a data envelopment directional distance function with and without adapting the carbon-abatement technology in the paper and pulp production. The results support our concern about the potential opportunity cost of introducing carbon-abatement technology, which leads to a decline in productivity growth. In addition, industrial production is not operating efficiently; on average it moves further away from the efficient production frontier over time.

On the effectiveness of tradable performance-based standards

Two types of emission trading programs are allowed under the US federal Clean Power Plan (CPP): mass-based cap-and-trade (C&T) program, and the performance-based trading program. While a C&T sets a total emission cap for a region, a performance-based program under CPP relies on trading the emission rate credits (ERCs), which represent an equivalent MWh of energy generated or saved with zero associated CO2 emissions, to reduce emission costs. This paper examines the theoretical properties of the tradable performance-based policy and compares it to a C&T program. We distinguish two kinds of tradable performance-based policy: (1) a regional policy, under which all states are subject to a regional performance-based standard, and (2) a state-by-state policy, under which each state adopts its performance-based policy within a regional power market while trading of ERCs is allowed. Our findings indicate that under a state-by-state policy, power prices across states could be different even without any transmission congestion, reflecting varying stringency of tradable performance-based standards among states within an interconnected market. We also identify a counterintuitive result that even if ERCs trading is allowed under the state-by-state performance policy, the permit prices could diverge. Two models are simulated in our analysis: three-state and the Pennsylvania-Jersey-Maryland (PJM) regional power market. While the three-state example allows us to illustrate the theoretical properties of the policies, the PJM-based simulation allows us to gauge the performance of the policies. Our PJM analysis shows that a C&T policy is the most effective, while the comparison between a regional and state-by-state tradable performance policy is ambiguous.

Technology Adoption in Emission Trading Programs with Market Power

In this paper we study the relationship between market power in emission permit markets and endogenous technology adoption. We find that the initial distribution of permits, in particular, the amount of permits initially given to the dominant firm, is crucial in determining over- or under-investment in relation to the benchmark model without market power. Specifically, if the dominant firm is initially endowed with more permits than the corresponding cost effective allocation, this results in under-investment by the dominant firm and over-investment by the competitive fringe, regardless of the specific amount of permits given to the latter firms. The results are reversed if the dominant firm is initially endowed with relatively few permits. Also, the presence of market power results in a divergence of both abatement and technology adoption levels with respect to the benchmark scenario of perfect competition, as long as technology adoption becomes more effective in reducing abatement costs.

EU closing in on reform of emission trading program

Ongoing talks to revamp the European Union’s greenhouse gas emission trading program are scheduled to resume on June 27 and may conclude later this year. The European Council and the European Parliament are hammering out a revision of the EU Emissions Trading System for 2021–30. The EU has agreed to crank back its greenhouse gas emissions by at least 40% by 2030 compared with 1990 levels. The trading system, launched in 2005, caps the amount of greenhouse gases that energy-intensive industries—including chemical manufacturers—as well as power plants and airlines may emit. Companies buy allowances to cover their emissions and can sell their excess allowances. The recent economic crisis helped lower demand for allowances, leading to a surplus and depressing their prices. The council, which includes heads of government who can commit member states to EU policies, and Parliament are working to reform the system. Their stated goal is to ensure

Pollution Emission Trading: A Possible Solution to China’s Enforcement Obstacles in Fighting Against Air Pollution?

China’s air pollution has become a major environmental concern for the Chinese government and the Chinese public. Although China has established a comprehensive legal framework for environmental protection, many obstacles impede the enforcement of environmental laws and regulations. In light of the Chinese government’s vigorous use of emission trading as a primary means of addressing the environmental problems in recent years, this paper identifies and explains the major economic, legal, political, social, and cultural impediments to enforcing the environmental regulation of China. The paper then engages in a comparative analysis of the emission trading programs of the United States and China, focusing on their different features and varied performance levels in terms of participation and compliance enforcement. The analysis reveals that China’s pollution emission trading programs are simply hybrids of traditional command-and-control and modern market-based approaches to environmental regulation – approaches that have been unable to help resolve long-standing enforcement problems. Nevertheless, such empirical findings do not lead to the conclusion that China should give up emission trading. The study shows that emission trading possesses advantageous features that can help relieve the economic, political, legal, social, and cultural impediments to enforcement faced by China. The paper thus proposes that the Chinese government should undertake further reforms to establish a real market for emission trading.

Opportunities for Decarbonizing Existing U.S. Coal-Fired Power Plants via CO2 Capture, Utilization and Storage.

This study employs a power plant modeling tool to explore the feasibility of reducing unit-level emission rates of CO2 by 30% by retrofitting carbon capture, utilization, and storage (CCUS) to existing U.S. coal-fired electric generating units (EGUs). Our goal is to identify feasible EGUs and their key attributes. The results indicate that for about 60 gigawatts of the existing coal-fired capacity, the implementation of partial CO2 capture appears feasible, though its cost is highly dependent on the unit characteristics and fuel prices. Auxiliary gas-fired boilers can be employed to power a carbon capture process without significant increases in the cost of electricity generation. A complementary CO2 emission trading program can provide additional economic incentives for the deployment of CCS with 90% CO2 capture. Selling and utilizing the captured CO2 product for enhanced oil recovery can further accelerate CCUS deployment and also help reinforce a CO2 emission trading market. These efforts would allow existing coal-fired EGUs to continue to provide a significant share of the U.S. electricity demand.

Terminating links between emission trading programs

Links between emission trading programs are not immutable, as highlighted by New Jersey׳s exit from the Regional Greenhouse Gas Initiative in 2011. This raises the question of what to do with existing permits that are banked for future use—choices that have consequences for market behavior in advance of, or upon speculation about, delinking. We consider two delinking policies. One differentiates banked permits by origin, the other treats banked permits the same. We describe the price behavior and relative cost-effectiveness of each policy. Treating permits differently generally leads to higher costs, and may lead to price divergence, even with only speculation about delinking.

Terminating Links between Emission Trading Programs

Links between emission trading programs are not immutable, as highlighted by New Jersey's exit from the Regional Greenhouse Gas Initiative. This raises the question of what to do with existing permits that are banked for future use -- choices that have consequences for market behavior in advance of, or upon speculation about, delinking. We consider two delinking policies. One differentiates banked permits by origin, the other treats banked permits the same. We describe the price behavior and relative cost-effectiveness of each policy. Treating permit differently generally leads to higher costs, and may lead to price divergence, even with only speculation about delinking.

An Introduction to California's Greenhouse Gas Emission Trading Program

Even though climate change will require a global solution, the efforts of individual nations and sub-national governmental units have become increasingly important for demonstrating leadership in creating effective regulatory programs and possible solutions. California’s Global Warming Solutions Act of 2006, also referred to as A.B. 32, and the associated greenhouse gas emission trading program are one set of such efforts. With A.B. 32, the state of California has created one of the most comprehensive and complex climate change programs in the world – a legally binding set of mandates for the state government to reduce greenhouse gas (GHG) emissions to 1990 levels by the year 2020 that is implemented in part by a highly sophisticated GHG trading system. Although a number of years have already passed since A.B. 32’s first enactment, the highest-profile regulatory action, the emission trading program, also referred to as a cap-and-trade system, became effective only recently. This short essay is designed to provide an introduction to the basic aspects of the California Global Warming Solutions Act as well as the GHG Emission Trading Program. In particular, the essay will touch on the scope of the emission trading program’s carbon cap and what sources are covered, the cap decline by 2020, carbon allowances and offset-credits as well as related allowance banking issues, reporting and compliance processes, and linkage with other emission trading systems.

Policy Interactions and Underperforming Emission Trading Markets in China

Emission trading is considered to be cost-effective environmental economic instrument for pollution control. However, the ex post analysis of emission trading program found that cost savings have been smaller and the trades fewer than might have been expected at the outset of the program. Besides policy design issues, pre-existing environmental regulations were considered to have a significant impact on the performance of the emission trading market in China. Taking the Jiangsu sulfur dioxide (SO2) market as a case study, this research examined the impact of policy interactions on the performance of the emission trading market. The results showed that cost savings associated with the Jiangsu SO2 emission trading market in the absence of any policy interactions were CNY 549 million or 12.5% of total pollution control costs. However, policy interactions generally had significant impacts on the emission trading system; the lone exception was current pollution levy system. When the model accounted for all four kinds of policy interactions, the total pollution control cost savings from the emission trading market fell to CNY 39.7 million or 1.36% of total pollution control costs. The impact of policy interactions would reduce 92.8% of cost savings brought by emission trading program.

A ton is not always a ton: A road-test of landfill, manure, and afforestation/reforestation offset protocols in the U.S. carbon market

Abstract The outcome of recent international climate negotiations suggests we are headed toward a more fragmented carbon market, with multiple emission trading and offset programs operating in parallel. To effectively harmonize and link across programs, it will be important to ensure that across offset programs and protocols that a “ton is a ton”. In this article, we consider how sample offsets projects in the U.S. carbon market are treated across protocols from five programs: the Clean Development Mechanism, Climate Action Reserve, Chicago Climate Exchange, Regional Greenhouse Gas Initiative, and the U.S. EPA's former program, Climate Leaders. We find that differences among protocols for landfill methane, manure management, and afforestation/reforestation project types in accounting boundary definitions, baseline setting methods, measurement rules, emission factors, and discounts lead to differences in offsets credited that are often significant (e.g. greater than 50%). We suggest opportunities for modification and harmonization of protocols that can improve offset quality and credibility and enhance prospects for future linking of trading units and systems.

Designing the Regulatory Framework of an Emissions Trading Programme in China: Lessons from Tianjin

The goal of this article is to examine the underlying considerations of designing and establishing the regulatory framework of an emissions trading program in China after the National Development and Reform Commission initiated the emissions trading pilots in seven provinces and cities in 2011. The article provides the policy development context and discusses the findings through empirical work on the design features of an emissions trading program in Tianjin. The underlying considerations and constraints are analyzed as followed to set the basis for further research into the regulatory design of an emissions trading program in China.

The Welfare Effects of Allowance Banking in Emissions Trading Programs

Permitting allowance banking in emissions trading programs can reduce expected compliance costs by giving capped firms flexibility to adjust the time path of abatement and to hedge against future uncertainty. Recent literature suggests that this compliance cost dividend is significant (Fell and Morgenstern Environ Resour Econ 47:275–297, 2010). Allowance banking may yield an environmental dividend (a) if the growth rate of marginal damages from emissions is less than the discount rate and (b) if emissions are lower in the short run as firms bank permits for use in later periods. A discrete, stochastic dynamic programming model is considered to simulate the two dividends of allowance banking in the context of the most recent Federal United States greenhouse gas cap-and-trade legislation. Simulation results show that under a range of parameter values, the environmental dividend has the same order of magnitude as the compliance cost dividend. Under the central set of parameters, allowance banking increases expected present value of benefits by about $$350$$ million dollars per year of the program. The environmental dividend, however, is completely eliminated if capped firms can borrow permits from future periods without limit.