International Emissions Trading Research Articles

International emissions trading and the distribution of capital

This paper compares two regimes of tradable emission permits, a regime with international permit trade (IPT) and a regime with domestic permit trade (DPT). We focus on the effects of the distribution of firms between countries. Our model combines intra-industry trade with a monopolistically competitive industry. We find that a more equal distribution of firms between countries results in higher global pollution under the DPT regime, while under the IPT regime the global pollution is invariant with the distribution of firms. We also find that international permit trade can either increase or reduce global pollution, depending on the distribution of firms.

Study on the Influence of International Economic Law of Carbon Emission Trading on Environmental Sustainable Development

With the continuous development of global economic and trade activities, environmental problems have become an important factor restricting the sustainable development of all countries. How to realize the coordinated development of international trade and environmental protection has become a major issue facing the international community. Since China joined the WTO, its share of international trade has been increasing continuously. In order to deeply analyze the influence of international carbon emission trading policy on domestic carbon emissions, we use an input–output model and a GTAP analysis method to theoretically calculate the carbon emissions of the international trade of various departments in Shandong Province. At the same time, the implicit carbon emission index of various industries in 2022 is calculated through the direct energy consumption coefficient. The results show that there are significant differences in the impact of the carbon tariff system on different industries. In terms of the carbon emission index, the food processing industry showed a decrease of 18.99 Mt, while the implied carbon emission of the tobacco, textile and leather manufacturing industry reached 30.56 Mt due to the continuous expansion of trade scale. In contrast, the implied carbon emission level of the metal product processing industry reached 5.3 Mt, while the carbon emission of traditional trading industries such as coal mining was almost unaffected by international trade, and its carbon emission index reached the highest level of 5.89 in 2020. In terms of trade impact, high-trade industries such as the food processing industry are significantly affected by the carbon tariff policy, and their share has dropped from 5.89% to 3.95% in the past decade. The carbon emissions generated by GDP growth established by the GTAP model are more convincing. This model can directly reflect the energy efficiency of a region from the side. Based on the present situation of international trade, this paper analyzes the inequality of the current carbon tariff system, and puts forward some policies to optimize the energy structure to reduce carbon emissions and expand domestic demand to reduce the dependence on international trade. Through the GTAP model, we put forward policy suggestions to optimize the energy structure to reduce carbon emissions and the dependence on international trade by expanding domestic demand.

Clean Development Mechanism: Indian Step Sustainable Environment

The Kyoto Protocol established the Clean Development system (CDM), a cooperative system that might help developing nations achieve sustainable development by encouraging environmentally conscious investment from firms and governments in affluent nations. An overview of the CDM's history, composition, and project cycle is given in this publication, which also looks at the benefits and potential value for participating developing nations like India. The Ozone layer is being weakened by pollution brought on by an increasing population. On our earth, every species is in danger of being extinct. The primary conclusions are: With the aid of the Kyoto Protocol, three formal methods for global emission reduction were established: Joint Implementation (JI), Clean Development Mechanism (CDM), and International Emissions Trading (IET). It raises public awareness, and with the aid of certified emission reduction units, some environmental organizations developed the idea of carbon trading. The CDM offers both industrialized and developing nations a win-win scenario. Businesses in India such as Gujarat Fluoro Chemicals, Tata Steel, NTPC, ONGC, and others can obtain several facilities abroad by using CERs. Through the exchange of credits and reduction of GHG emissions, carbon trading and CER "claims" to avert the impending disaster. Therefore, it can be concluded that imposing carbon prices with refunds is an effective strategy to address the pre-existing issue. Since reducing greenhouse gas (GHG) emissions is a worldwide public good and the location of emission reductions has no bearing on the global stock of GHG, the CDM's premise is that reductions in emissions should be made where they can be done for the least amount of money. The findings shed light on potential difficulties in navigating market mechanisms in the future and show how the Carbon Offset Management (CDM) program has provided nearly 20 years of knowledge and expertise in the area of global carbon offset governance.

Domestic versus International Emissions Trading with Capital Mobility

Domestic versus International Emissions Trading with Capital Mobility

Clumsy solutions and climate change: A retrospective

AbstractIn 1989, Steve Rayner chided fellow anthropologists for “fiddling while the world warms.” This was the starting point of a decades‐long application to human‐made climate change of the cultural theory that he had developed with Mary Douglas and Michael Thompson. It culminated in a call to develop “clumsy” solutions for addressing the issue. Since then, the concept of clumsy solutions has been applied, praised, and criticised. To clarify its strengths and weaknesses, I first set out cultural theory and explain how the notion of clumsy solutions was derived from it. I then assess the extent to which this notion has increased our understanding of climate change governance. I do so by breaking up the application of this concept into seven predictions, concerning: (1) the major perspectives among stakeholders on how to resolve climate change; (2) the fate of the 1997 Kyoto Protocol; (3) the feasibility of international emissions trading; (4) the possibility of making renewable energy competitive; (5) the need for domestic governmental action to realize this possibility; (6) the effectiveness of a nonbinding global treaty to combat climate change; and (7) the need to explore adaptation, carbon capture, and geoengineering. I show that these predictions have stood the test of time. Finally, I discuss the roles that the concept of clumsy solutions can play in future climate change governance. This article is written in memory of Steve Rayner, one of the first social scientists to focus on climate change.This article is categorized under: Social Status of Climate Change Knowledge > Sociology/Anthropology of Climate Knowledge Climate, History, Society, Culture > Thought Leaders

Assessing the economic and environmental sustainability of bio-olefins: The case of 1,3-butadiene production from bioethanol

There is a growing interest in the production of biobutadiene from bioethanol, but it is not possible to conclude from the literature which conversion process, either by one or two reaction steps, is preferred since there is a lack of works comparing their economic and environmental performances. The aim of this work is to perform that comparison so it can serve as a guide for decision making by future investors as well as set future research needs that can improve the technology. Assuming production in Brazil from sugarcane ethanol, technoeconomic and lifecycle assessments were performed from process simulations, and the reliability of the results was studied with uncertainty analyses. The comparison reveals that the one-step process should be preferred because of its better economic and environmental performance. Biobutadiene from ethanol is not cost competitive against naphtha-derived butadiene (probability of positive net present value is 11–17% for one-step process scenarios and 5% for the two-step process scenarios) but producing biobutadiene from ethanol in Brazil leads to significant reductions in emissions of CO2 compared to naphtha-derived butadiene (102–103% and 7.6–52.4% for one- and two-step process scenarios, respectively). A critical issue for the cost competitiveness of biobutadiene is that the CO2 saved can be sold in an international carbon emission trading market. In that case, the one-step processes would be much more favored. Future research is needed concerning the development of highly selective two-step catalysts operating in less energy-demanding conditions so that two-step processes can compete with one-step processes.

Asymmetry, International Emission Trading and International Environmental Agreement with Participation Game

Asymmetry, International Emission Trading and International Environmental Agreement with Participation Game

Trade, Transportation, and the Environment: Welfare Effects of Emissions Reduction and International Emissions Trading

ABSTRACT This article examines the environmental regulations of international transport in a two-country model with the international transport sector in each country. International transport generates pollution which is treated as a pure public bad. First, we show that a country may benefit from voluntarily imposing a strict environmental regulation despite this regulation having the effect of shrinking the international transport sector. Second, we find that permit trading between the international transport sectors of two countries benefits an international-transport-importing country, while permit trading may harm an international-transport-exporting country even if it receives all of the direct gains from permit trading.

Adam Berman, European Policy Director of the International Emissions Trading Association (IETA)

Trade law, Environment, EU law, Trade dispute, Arbitration, Dispute settlement, WTO, Export restrictions, Article XX, preferential trade agreement, timber

Exploring the asymmetries between trade and consumption-based carbon emissions: evidence from NPARDL approach.

Global warming is one of the most serious environmental problems that the world faces today. Millions of human lives are at risk, hence the subject has gained enormous attention within academia and the research arena. Literature shows that the primary cause of global climate change or global warming is carbon (CO2) emissions. In the literature, a number of studies have investigated the factors affecting the overall level of carbon emission. However, in recent years, consumption-based carbon emissions have occupied the center stage in research related to international trade and environmental concerns. The recently emerged idea of carbon emissions based on consumption differs from conventional accounting (i.e., carbon emissions based on production) in that it highlights the importance of international trade in national carbon emissions. Unlike the previous studies that examined the symmetric effect of international trade on consumption-based carbon emission, the present study examines the asymmetric effect of international trade on consumption-based carbon emissions of emerging economies. To get empirical estimates, the study applies a Nonlinear Panel Autoregressive Distributive Lag (NPARDL) approach. The estimates show that both in the short and long run, a positive shock in exports significantly reduces consumption-based carbon emissions in developing economies. Whereas, a negative shock in exports has an insignificant impact on carbon emissions. For imports, the results show that, over time, positive shocks in imports significantly increase consumption-based carbon emissions, while the impact of negative shocks is insignificant. Finally, it is recommended for the policymakers to target the export industries for relevant policy interventions, which are less polluting but crucial for economic growth.

Game analysis on constructing the model of an international carbon emissions trading model

Constructing a model for international carbon emissions trading is an effective method to curb global warming through a market mechanism. Although the international carbon emissions market generates substantial profits, the relevant trading mechanism has been far from perfect. The perfect mechanism for international carbon emissions trading should be a revealing preference game. In other words, only if all players in this game truly show their information and preferences can the Nash outcome be Pareto efficient and fair. China should actively participate in the international carbon emissions trading game; promote efficiency, justice, rationality, and the quality of being manipulation-free in the carbon emissions market; and play a more important role in perfecting the international carbon emissions trading mechanism.

An Oligopoly Game of CDR Strategy Deployment in a Steady-State Net-Zero Emission Climate Regime

In this paper, we propose a simple oligopoly game model to represent the interactions between coalitions of countries in deploying carbon dioxide removal (CDR) strategies in a steady-state net-zero emission climate regime that could take place by the end of the twenty-first century. The emission quotas and CDR activities obtained in the solution of this steady-state model could then be used as a target for end-of-period conditions in a dynamic integrated assessment analysis studying the transition to 2100. More precisely, we analyze a steady-state situation where m coalitions exist and behave as m players in a game of supplying emission rights on an international emission trading system. The quotas supplied by a coalition must correspond to the amount of CO2 captured through CDR activities in the corresponding world region. We use an extension of the computable general equilibrium model GEMINI-E3 to calibrate the payoff functions and compute an equilibrium solution in the noncooperative game.

HOW CARBON MARKET COOPERATION CHANGES THE ENERGY SYSTEMS IN NORTHEAST ASIA

This paper explores the impact of international emissions trading (IET) among Korea, China, and Japan, three countries that would form the largest potential carbon market in the world. The Nationally Determined Contribution for each country forms the basis of scenario analyses using GCAM (Global Change Assessment Model). As expected, China emerges as the sole net seller of emissions permits while Korea and Japan are the net purchasers of emission permits produced by China. All participants enjoy gains from emissions trading. The implementation of IET changes the power systems of Korea and Japan by favoring increased conventional fossil fuel usage over renewable power technologies or attached carbon capture and storage (CCS) technologies, while China’s power system moves in the opposite direction, by boosting the deployment of renewables and CCS-attached technologies. Considering the counterproductive incentives for Korea and Japan to consume more carbon-intensive energy sources, each country should consider such issues carefully before officially adopting IET as the pillar of climate policy.

The role of the tax system in a greener future

Ahead of the commencement of action against climate change in 2020 under the Paris Agreement, COP24 saw nations come together to design the rule book for global emissions reductions. Australia also reinforced its commitment to the Paris Agreement and its emission reduction targets. Critical to this is the design of the rules for international trade in emissions permits or credits, which were due to be agreed in Madrid as part of the COP25 in December 2019. However, the participants failed to come to any consensus, getting caught up in technical issues such as the rules for carbon market mechanisms. Instead we wait for an intersessional meeting in Bonn in June 2020 and COP26 in Glasgow in November 2020. The tax policy approach and framework adopted in relation to the energy transition, including for example the introduction and tax treatment of any carbon price or emissions trading scheme, has the potential to either support or distort the ultimate objectives of the transition. So, what does the transition to a greener future mean for the tax mix and how it will it impact the revenues of government? What role does tax play in the energy transition? What are the current rules in Australia and how do they compare to other fiscal regimes globally? How can existing rules in Australia be adapted to best support the effective design of carbon pricing policies? What reforms are necessary?

The legitimation of contested carbon markets after Paris – empirical insights from market stakeholders

ABSTRACTAfter the Paris Agreement the global carbon offset markets face regulatory uncertainty and new legitimation challenges. This paper examines the discursive legitimation of the carbon markets between 2015 and 2018 and is based on 37 qualitative interviews with market stakeholders. The results show that the carbon markets remain contested and require new ideas and concepts to construct legitimacy. Some stakeholders consider moving beyond carbon offsetting, mainly due to new risks of double counting. Others continue to portray carbon offsetting as a ‘false solution’. Nevertheless, the trust in carbon markets as an appropriate way to address climate change remains high. Therefore, new forms of international emission trading are likely to evolve under Article 6 of the Paris Agreement.

International emissions trading in a political economy

AbstractWe examine whether the international emissions trading (IET) scheme can reduce global emissions in a political economy framework. Countries act noncooperatively when choosing the tradable emission permits and the environmental tax. The formulation of environmental policies is influenced by interest groups. Our results show that the effect of IET on global emissions depends crucially on which policies are influenced by lobbying activities. In the case where only environmental taxes are influenced by lobbying, IET tends to reduce global emissions when the capitalists’ political power is strong and, surprisingly, when the environmentalists’ political power is weak.

Applying the international esco concept to energy saving projects in the energy production sector in northwest Russia

The economy of the Russian Federation and its growth rate currently depend greatly on thecountry's fuel and energy industry and actual development of the business. To maintain theenergy production at least at the present level, capacity must be increased by several gigawattsannually. This sets up an extensive need for investments. One effective solution to theproblem is the realization of energy saving investments, which have very high potential inRussia.The EU project FRESCO (I 0/2003-12/2005), administered by Lappeenranta University ofTechnology, studies the possibilities to promote Finnish energy business in Northwest Russia.The project examines the ESCO concept that is proposed and anticipated to be a potentialfinance tool in energy saving projects in the target area. The international ESCO businessaims at finding solutions to the following problems: the lack of investments, undevelopedtechnology in use, ineffective energy systems, bureaucracy and risks.Potential and feasible ESCO project targets in energy production include a new pre-furnacefor utilization of bio fuels, a new economizer and a boiler automation upgrade. In the nearfuture - when markets exist - the ESCO concept could also be a finance tool in utilizing wastein energy production. For example bio waste from sawmills has significant potential as fuelfor local boilers.Through energy efficiency projects, greenhouse gas em1ss10ns can also be reduced. Theinternational climate policy brings in its own possibilities to finance energy investments andclimate projects. Russia ratified the Kyoto Protocol in February 2005 and can therefore takepart in international emissions trading in 2008 if the country observes the provisions of theProtocol concerning emission reduction units. Alternatives for carbon finance options couldbe, in addition to international emissions trading, Joint Implementation projects and GISprojects, in which so called "hot air" is utilized.

Recognition and analysis of potential risks in China's carbon emission trading markets

China formally launched the carbon trading pilots in seven provinces and cities in 2013. Based on the operating situations of international carbon emission trading markets and that in China, this study compares and analyzes the potential risks in the European Union Emission Trading Scheme, California's cap-and-trade system, and the seven regional carbon trading pilots in China. It mainly recognizes market operation risks, risks of uncertain policy expectation, and risks of uncertain mechanism designs existing in China's carbon trading pilots. The carbon market risks are not good for the formation of rational price signals, making it difficult to guide enterprises on how to make low-carbon technology investments. Such risks also affect the effectiveness and functions of carbon markets, which can lead to the non-achievement of national emission reduction goals. China has launched the national carbon emission trading scheme on December 19, 2017. While building the national carbon trading scheme, it is important to fully refer to the experiences of international carbon markets and China's carbon trading pilots apart from strengthening the recognition, control, and supervision of carbon market risks. Doing so can promote the healthy development of China's national carbon trading scheme.

Labor Market Distortions and Welfare-Decreasing International Emissions Trading

International emissions trading (IET) has been widely recognized as a preferred approach for tackling the climate change because it would equalize marginal abatement costs and generates gains for all participants. However, this argument is heavily premised on the notion of partial equilibrium and ignores general equilibrium effects of IET. Using a multi-region, multi-sector CGE model, this paper analyzes effects of IET with focus on labor market distortions. We construct four separate models with several different labor market specifications: i) a model without labor market distortions; ii) a model with tax-interaction effects in the labor market; iii) a model with a minimum wage; and iv) the final model is one in which a wage curve determines wages. We use these models to analyze how the effects of IET change according to model specification.The main results from the analysis are as follows. First, if there are no labor market distortions, IET benefits all countries. Second, even in the context of models with labor market distortions, importers of emissions permits are highly likely to benefit. Conversely, we show that the possibility of a welfare loss from IET is not as small for exporters of permits. In the case of the minimum wage and wage curve models, we find in particular that the exporters of emissions permits are likely to be disadvantaged. However, this also depends on the region in question. For example, China is likely to suffer under IET, whereas Russia, also an exporter, is likely to benefit. We also make clear that if policies are employed to correct (i.e. reduce) labor market distortions when emissions regulation is introduced, all participants will benefit from IET in almost all cases. It is generally recognized that IET is a desirable policy that benefits all participating regions. However, we show that an analysis that does not take account of such labor market distortions will likely overestimate the benefits of IET for permit exporters.

Labor Market Distortions and Welfare-Decreasing International Emissions Trading

Using a multi-region, multi-sector computable general equilibrium model, this paper analyzes the effects of international emissions trading (IET) with a focus on labor market distortions. We construct four separate models with several different labor market specifications: (1) a model without labor market distortions; (2) a model with taxinteraction effects in the labor market; (3) a model with a minimum wage; and (4) a model in which a wage curve determines wages. We use these models to analyze how the effects of IET change according to model specification. The main results from the analysis are as follows. First, we found that IET generates gains for all participants in the model without labor market distortions. Second, even in the models with labor market distortions, importers of emissions permits are highly likely to benefit. Conversely, we show that the possibility of a welfare loss from IET is not as small for exporters of permits. In particular, in the minimum wage and wage curve models, we found that the exporters of emissions permits are likely to be disadvantaged. However, this also depends on the region in question. For example, China is likely to suffer under IET, whereas Russia is likely to benefit. Finally, if we implement policies to alleviate labor market distortion simultaneously with emissions regulation, all regions receive benefit from IET.