Adjustment Mechanism Research Articles

Indonesia's contribution to global carbon flows: Which sectors are most responsible for the emissions embodied in trade?

Motivated by recent developments in global carbon policies, such as the carbon border adjustment mechanism (CBAM) in Europe and carbon pricing in Indonesia, this paper elaborates on CO2 emissions embodied in products entering and leaving Indonesia and identifies carbon-intensive sectors responsible for carbon leakage. This was performed by using global multi-regional input-output analysis and consumption-based accounting (CBA) - production-based accounting (PBA) ratio. In 2016, the annual CO2 emissions embodied in Indonesia's exports and imports were 114 and 95 Mt. CO2, respectively. Considering final demand only, these values reduce to 32 and 22 Mt. CO2 or 0.9 and 0.6 % of total CO2 emissions in global trade, respectively. The electrical and machinery sector makes up the most CO2 emissions in Indonesian exports. In terms of per USD, metal products and petroleum, chemical and non-metallic mineral products are among the most carbon-intensive sectors, thus likely to be affected by the CBAM policy. Furthermore, Indonesia's emissions under CBA were slightly lower than PBA, indicating that minor carbon leakage occurred in 2016, but this is subject to uncertainty. Assessing the relative CO2 emissions of various economic sectors is suitable for manufacturing goods whose processes are typically dominated by fossil combustion. However, this is not the case for the agriculture sector as its carbon footprint values are underestimated due to the exclusion of land use, land use change, and forestry emissions. Overall, our findings can serve as a baseline to further explore how a transition towards a low-carbon economy in Indonesia could improve global-trade carbon balances.

Bridges over troubled waters: Climate clubs, alliances, and partnerships as safeguards for effective international cooperation?

Driven by the motivation to raise the ambition level of climate action and to foster the transformation of economies, current climate policy discourse revolves around ways to improve cooperation between industrialized countries and emerging economies. We identify three broad types of initiatives—multilateral-cross sectoral, multilateral, sector specific, and climate and development partnerships—and assess them for potentials to deliver on such objectives with a specific focus on industry transformation. This paper provides new reflections on the institutionalization of international climate cooperation. Specifically, we demonstrate the urgent need to understand what values, norms, and underlying principles drive a cooperation in order to draw conclusions on how to best institutionalize climate cooperation rules.in-use. We conclude that an overemphasis on a CO2 price and on carbon border adjustment mechanisms, such as in the context of the initial proposals for a cross-sectoral climate club envisaged by G7 countries, would have contributed to a further polarization of the international landscape. We find, however, that multilateral, sectoral alliances play an important role for international goal setting and the convergence on standards, metrics, and benchmarks. Based on our analysis, we recommend strengthening multilateral, sector-specific partnerships. These can be focused on sectoral topics as a connector between countries, allowing for a strategically-aligned, increasingly deep collaboration. However, for any initiative to succeed, processes of international institutionalization will be needed in order to agree on rules for implementation based on aligned interests and equity. Building such institutions may well serve as a steppingstone toward more durable cooperation structures between developed economies and emerging economies. In sum, no existing cooperation approach is perfect, but three actions may be taken to move the agenda forward: First, reform of the carbon border adjustment mechanism and removing it from the center of climate club discussions, second, coupling sectoral alliances with climate and development partnerships, and three, designing them in a way to address fears of political influence seeking and superimposition of global north agendas on the global south.

Twenty-first century customs fraud: how to effectively enforce EU sustainability requirements on imports

Abstract Countries increasingly adopt measures to make their economy more sustainable. These measures range from pricing carbon and protecting forests to promoting renewable energy and banning forced labour. This article examines how countries can effectively enforce such sustainability requirements on imports. Based on two case studies—the EU Carbon Border Adjustment Mechanism (CBAM) and the EU Deforestation Regulation (EUDR)—and other developments in EU customs law and practice, this article shows that customs inspection of elements that cannot be physically detected in the imported product as such is neither unique nor new. Similar challenges arise when dealing with massive inflows of small e-commerce consignments or having to check the origin or value of products. Indeed, for customs enforcement more generally, the trend is one away from physical inspection of products on a transaction basis at the point of entry, toward verification and control of firms before and especially after release of the goods. To implement this ‘product-to-firm’ shift, four back-up features are, however, crucial, focusing on data, penalties/circumvention, cooperation, and resources.

COMPRENSIÓN DEL MERCADO ENERGÉTICO ESPAÑOL 2022 CON UN ANÁLISIS DE LOS DATOS OFICIALES

The energy situation that occurred in the Spanish electricity and natural gas markets in 2022 implies the concept of a global crisis. This entails a significant increase in the prices of electricity and natural gas. Historically, the relationship between these two concepts has always been substantial, as demonstrated in the conducted study. This article aims to analyze whether this relationship between both markets has continued to be strong in the past year, 2022, and to assess the factors that may have distorted the results. To achieve this, publicly available data recorded by various operators in the electricity and natural gas markets have been meticulously analyzed and reviewed from a statistical-mathematical perspective. The study investigates the implications of the rising prices of electricity and natural gas, as well as the measures taken by the Spanish Government in June 2022. Furthermore, it is essential to consider that in 2022, several anomalous factors occurred, such as the Russia-Ukraine war and the Spanish market intervention resulting from the price increases, suggesting a different market behavior. The primary conclusion drawn from the analysis of the published data is that the high prices in 2022 can be attributed not solely to the high prices of natural gas, as indicated in the media. This will be elaborated upon throughout this study. Key Words: Gas Cap Adjustment Mechanism, Massive Consumption of natural gas and exports of electricity in 2022. Correlation between OMIE and MIBGAS.

Nefis: A network coding based flexible device-to-device video streaming scheme

Wireless device-to-device (D2D) communication has empowered efficient and convenient video sharing among neighboring devices. However, the mobility and diversity of user devices, combined with dynamically shifting channel conditions, make these processes susceptible to environmental interference. In this paper, we introduce an adaptive network coding scheme tailored for D2D raw source video streaming in the scalable video coding (SVC) format. Video frames are partitioned into equal-sized fragments and encoded into streaming packets with the addition of certain redundancy. To address the observed deficiency where decoding throughput of coded video frames is generally lower than that of the encoding operation on mobile device platforms, we introduce a parallel decoding algorithm based on LU decomposition. Furthermore, we propose a flexible adjustment mechanism, named Nefis, which dynamically adapts the network coding redundancy and stream resolution based on the statistical model established to predict current network conditions and video streaming quality. Implementation on Android platform demonstrates that Nefis reduce redundancy in bandwidth usage during streaming process and enhance resilience to network dynamics. Experimental results also conclusively demonstrate the feasibility and advantages of network coding technology in D2D streaming applications. Nevertheless, achieving these advantages requires carefully designed encoding and decoding mechanisms.

Demographics and FDI: lessons from China’s one-child policy

Abstract Following the introduction of the one-child policy in China, the capital-labor ratio of China increased relative to that of India, while FDI/GDP inflows to China versus India simultaneously declined. These observations are explained in the context of a simple neoclassical overlapping generations paradigm. The adjustment mechanism works as follows: the reduction in the growth rate of the (urban) labor force due to the one-child policy increases the capital per worker inherited from the previous generation. The resulting increase in China’s domestic capital-labor ratio thus "crowds out" the need for foreign direct investment (FDI) in China relative to India. Our paper is a contribution to the nascent literature exploring demographic transitions and their effects on FDI flows.

Environmental policy stringency and carbon leakages: a case for carbon border adjustment mechanism in the European Union

AbstractThis study examines the link between the strictness of environmental policies and carbon leakage in the European Union (EU). It utilizes an econometric model to analyse how carbon leakage is influenced by environmental policies and other factors. A comprehensive dataset spanning from 1995 to 2020 for 20 EU member nations is employed. This study is ground-breaking, as it is the first to comprehensively assess the effect of aggregated environmental policies on carbon leakages in the EU. This study employs a range of econometric techniques to ensure the reliability of its findings, including the continuously updated fully modified approach, bias-adjusted ordinary least squares method, and bootstrap panel causality testing. The findings confirm that stringent environmental policies cause greater carbon leakage by increasing the quantity of foreign carbon emissions embodied in EU’s domestic final demand. Specifically, carbon leakage increases within the range 0.051–0.111% as environmental policy stringency rises by 1%. This outcome confirms that direct carbon leakage occurs through the international trade channel as domestic carbon emissions reduction is continuously being offset by greater emissions abroad. Country-specific reactions captured through causality tests further reveal that the predictive powers between environmental policy stringency and carbon leakage is widespread among the sampled EU countries. Thus, our conclusion is that stringent environmental policies put the region at a disadvantage in the international markets. The main recommendation therefore is that ample justification exists for the introduction of carbon border adjustment mechanism, as the positives associated with its imposition are likely to outweigh the negatives.

Reconceptualizing time and space: employee voices from the nonvoluntary work from home context

Purpose This paper aims to explore how employees reconceptualized their time and space to order and structure their lives in an unprecedented scenario of nonvoluntary work from home. Design/methodology/approach Set in the context of lockdowns due to the pandemic scenario, the study uses a constructivist approach to collect data through in-depth online interviews to understand how employees coped with the challenges emanating in a nonvoluntary work from home situation. The respondents were purposively selected to reflect a diverse pool in terms of gender, familial responsibilities and age/tenure. Findings The findings present temporal and spatial themes that provide several insights into how employees made sense of time and space as resources to navigate their challenging work-home roles. Research limitations/implications In the present study, the authors found that when boundaries get violated, it does not necessarily manifest in the form of dissatisfaction with one or the other domain. The respondents in the current study show-cased adjustment mechanism to cope with the boundary permeability that happened. They adopted ways in which they could safe-guard their multiple identities in the situation they found themselves in, do justice to the salient roles in their lives, emerge as more empathetic humans and look forward to a brighter and more hopeful future. This opens-up a possibility of studying the theory behind human behavior in crisis-like situations and the degree of acceptance that people show when they find themselves in undesirable-unalterable situations. Practical implications A mental reorientation is required on the part of both employees and employers to navigate smoothly in this new “normal” and find more sustainable solutions to the problem if the remote working or hybrid mode of working becomes mainstay. Clear demarcations between work and nonwork time are a key element to ensure proper work schedules for remote workers. Offline meetings and get-togethers can be organized on a periodic basis to facilitate employee interaction and engagement. Participation of employees in key decisions becomes more important in such situations as it makes employees feel more connected with their work space. Originality/value To the best of the authors’ knowledge, the study is original as it is set in a completely unprecedented situation of lockdowns (during the pandemic) that affected the lives of everyone in some way or the other. The findings of the study are unique and insightful, as they help understand the sense-making mechanism adopted by people to successfully navigate through the crisis.

Pricing behavior of clean energy stocks? Some trading implications

Mispricing and price adjustment to shocks are common features of stocks, which arise due to various types of shocks. Understanding mispricing and price adjustment mechanism can guide trading strategy design. Our hypothesis is that clean energy stocks are characterised by mispricing and that there are unique stocks in the sense that they move first when exposed to shocks. We employ a price discovery model to rank clean energy stock indices in terms of those that adjust to prices faster than those that do not. We then identify mispricing in those stocks using a market risk factor model. Utilizing time-series data on 11 clean energy stock indices, we propose eight trading strategies, and show that they offer annualized returns in the −5.37% to 61.10% range. Six of the eight strategies offer profits close to 15% or more, beating the buy and hold strategy. Trading strategies devised on mispricing suggest that two of the clean energy stocks can potentially beat the buy-and-hold strategy, offering annualized returns in excess of 13%. Because our results guide investors towards making profits from trading clean energy stocks, the implication is that the trading strategies can enhance the green finance market.

Carbon border adjustment mechanism challenges and implications: The case of Visegrád countries

Stricter climate policies across the European Union are enhancing the phenomenon of free riding by nonacting countries, which translates into carbon leakage and loss of competitiveness. This paper investigates the trade, economic and environmental implications of the future implementation of a carbon border adjustment mechanism (CBAM) in Visegrád countries as EU member states. We exploit trade data to estimate price and income elasticities for emission-intensive trade-exposed (EITE) goods imported from non-EU trading partners to Visegrád countries. Based on these estimates, which are combined with the average carbon intensity of the EU's proposed list of EITE goods, we simulate the implications of six different configurations of restrictiveness of the CBAM imposed on imports from non-EU countries. We find that a high price elasticity and carbon intensity tend to significantly decrease import demand for EITE goods under the CBAM. Moreover, future CBAM implementation will yield a relatively small adverse impact on economic growth in Visegrád countries and a small decrease in total carbon emissions in non-EU countries.

Correct Understanding and Action on the Transitional Period of EU Carbon Border adjustment Mechanism (CBAM)

Carbon border adjustment mechanism (CBAM) of the European Union has started from October 2023 and the transitional period of it would be from October 2023 to December 2025. CBAM is the first carbon border tax in the world and domestic companies are having difficulties in responding to CBAM among inaccurate information. Thus, this paper is written to deliver accurate information about CBAM based on the EU regulations or documents published by the EU. It is written that CBAM overview, how to respond to the transitional period, and the main concepts and data preparation of CBAM. Domestic companies are classified according to import system in the EU as Type 1, Type 2, and Type 3. The action for each type is presented, and preparation of CBAM report or emissions data communication template is described. Through this paper, it is expected that domestic companies would respond appropriately to CBAM during the transition period and contribute to the export of CBAM goods to the EU.

Current State and Prospects for Developing Carbon Integration in the Eurasian Space

The processes of decarbonisation of the world economy, expressed among other things in the increasing use by states of carbon pricing mechanisms and the strengthening of the role of green protectionism in international trade, create certain challenges for the competitiveness of the economies of the Eurasian Economic Union (EAEU) countries, setting them the task of harmonizing national approaches within the framework of the climate agenda and subsequent carbon integration. This article, based on a comprehensive analysis of the economic and legal aspects of national and supranational climate regulation, examines factors that can contribute to the development of such integration in the Eurasian space, and identifies existing and potential challenges that could have an impact on it. We propose a definition of carbon integration as one of the areas of climate integration, analyzed the current conditions for its development, and identified potential measures for its further improvement and regulation in the EAEU. The authors come to the conclusion that, despite such factors as the initial stage of climate integration in the Eurasian space, the existing differences in the climate regulation regimes of the countries of the association (manifested among other things in the heterogeneity of the development of institutional and legal frameworks for the application of carbon pricing mechanisms), the scale of the consequences of introducing the European CBAM (Carbon Border Adjustment Mechanism) for the national economies of the countries under consideration, opportunities and conditions for investing in green projects and greening of production, carbon integration remains one of the necessary conditions for the successful development of trade and economic relations of the EAEU member states at both regional and global levels.

The impact of Carbon Border Adjustment Mechanism on trade in the Russia‐Ukraine war context

AbstractThe Carbon Border Adjustment Mechanism (CBAM) is an impending mechanism that imposes a price on emissions embodied in products imported to the European Union (EU). It is expected to impact international trade substantially. Meanwhile, the Russia‐Ukraine war has been ongoing since March 2022, and resources are being redistributed accordingly. This study simulates the potential impact of CBAM on trade in the Russia‐Ukraine war context by employing the Computable General Equilibrium models. The simulation results show that the CBAM will significantly affect selected countries, and the impact will vary across countries and industries. In the context of the Russia‐Ukraine war, the influence on trade will be considerable.

Leveraging natural language processing techniques to explore the potential impact of the EU’s Carbon Border Adjustment Mechanism (CBAM)

Debates on controversial policies often stimulate extensive discourse, which is difficult to interpret objectively. Political science scholars have begun to use new textual data analysis tools to illuminate policy debates, yet these techniques have been little leveraged in the international business literature. We use a combination of natural language processing, network analysis and trade data to shed light on a high-profile policy debate—the EU’s recently enacted Carbon Border Adjustment Mechanism (CBAM). We leverage these novel techniques to analyze business inputs to the EU’s public consultation, differentiating between different types of organizations (companies, trade associations, non-EU actors) and nature of impact (direct, indirect, potential). Although there are similarities in key concerns, there are also differences, both across sectors and between collective and individual actors. Key findings include the fact that collective actors and indirectly affected sectors tended to be less concerned about the negative impacts of the new measure on international relations than individual firms and those directly affected. Firms’ home country also impacted on their positions, with EU-headquartered and foreign-owned companies clustering separately. Our research highlights the potential of natural language processing techniques to help better understand the positions of business in contentious debates and inform policy making.

Pension reforms in Hungary: have they gone too far?

AbstractAs a result of unfavorable demographic processes, the pension systems in the Central and Eastern European (CEE) EU countries face significant challenges, which has made the implementation of reforms inevitable in the last decade. Relying on economic theory, this paper analyses the effects of the Hungarian pension reforms in comparison with those of other CEE countries, and discusses the consequences from the point of view of social policy and the sustainability of the pension schemes. We explore the reasons why the reforms in Hungary ultimately did not improve sustainability but rather contributed to dismantling the social care system. Therefore, the Hungarian case provides useful lessons for other countries, and at the same time underlines the importance of automatic adjustment mechanisms. The study pays particular attention to the theoretical analysis of pension indexation because its accurate quantitative effects are far from being sufficiently clarified in the literature, although it is vital for a thoughtful evaluation of pension reforms.

The development, changes and responses of the European Union carbon border adjustment mechanism in the context of global energy transition

Energy production and consumption is the primary source of global carbon emissions. In order to achieve the goal of Intended Nationally Determined Contributions (INDCs) in the Paris Agreement, countries around the world have set off an upsurge of energy transition. The EU has ambitious INDCs. The Energy crisis has made it accelerate the energy transition, thus promoting the development of its circular economy. However, the EU focuses on carbon leakage during this process. To address this issue and maintain the competitiveness of EU industries during the transition, the EU proposed the Carbon Border Adjustment Mechanism (CBAM). The EU proposed the background and development process of the CBAM, and organized the core content of the tripartite plan and final bill of the European Commission, European Parliament, and European Council. What's more, the framework system of the CBAM is clarified, and further analysis is conducted on the future development of CBAM of the EU based on various factors. In response to the new development of the CBAM, it is suggested that developing countries should adhere to the principle of common but differentiated responsibilities on the international front and attempt to build and improve a carbon market system to partially offset carbon tariffs. Finally, we should strengthen the research on the response plan of the EU CBAM and establish an effective communication mechanism with the EU, in order to better cope with the impact of the CBAM on the trade of developing countries in the future.

Investigating the carbon border adjustment mechanism transition process with linguistic summarization method: A situational analysis of exporting countries

The Paris Agreement holds significant importance since it establishes a global framework for addressing the issue of climate change and endeavors to mitigate the release of greenhouse gases. The Carbon Border Adjustment Mechanism was introduced as an integral component of this agreement, aiming to oversee the carbon emissions associated with imported items within the European Union and provide compensation for the emissions from the nations engaged in importation. It is essential to analyze the countries involved in exporting to the European Union within the Carbon Border Adjustment Mechanism context to mitigate carbon leakage and effectively support the objectives outlined in the Paris Agreement. This research investigated 104 nations engaged in exporting activities to 27 European Union member countries. The linguistic summarization method, a descriptive data analytics tool, was employed for the analysis. A total of 42 Combined Nomenclature codes were encompassed within the scope of evaluation throughout the transition phase of the Carbon Border Adjustment Mechanism. This study examines the characteristics of exporting nations based on three variables: The Environmental Performance Index, a sustainability indicator; the Region in which the countries are located as classified by the World Bank; and the quantity of Renewable Energy Consumption. Additionally, the study explores the characteristics of EU countries, focusing on their Environmental Performance Index score and geography. The study employed fuzzy sets and the fuzzy c-means algorithm as parts of the linguistic summarization technique. Polyadic quantifiers were used to extract linguistic summaries, resulting in the acquisition of 124,227 summaries. A total of 1594 summaries have a truth degree exceeding 0.9. The findings were effectively utilized to assess the influence of the linguistic summarization approach and offered a valuable viewpoint for decision-makers needing more expertise in this domain.

The impact of adjustment mechanisms on China’s ETS: lessons from the pilot programs

AbstractThis article examines the adjustment mechanisms which have been designed and implemented under China’s experimentations with its emissions trading scheme (ETS). In China, several ETS pilot programs have adopted these mechanisms in the process of cap setting, allowance allocation and price regulation to allow regulatory intervention at different stages of the ETS operation to ensure that particular regulatory objectives are going to be achieved. Using doctrinal analysis, this article provides some critical insights into the specific regulatory design of the flexible mechanisms in China. It highlights their impact on regulatory stability and on the credibility of the ETS program. Considering that the ETS pilots are designed for and operated at local levels for the purpose of testing regulatory design and implementation in order to inform the policymakers at the central government when designing the national scheme, the lessons learned from the ETS pilots with respect to the adjustment mechanism are critical to fulfilling this strategy.

Research on home appliance circular design strategy in response to carbon border adjustment mechanism

In May 2023, the EU formally adopted the Carbon Border Adjustment Mechanism (CBAM) bill, which requires that from 2026 onwards, high-carbon imports must use the appropriate Carbon Border Adjustment Mechanism (CBAM) certificates. At the initial stage, the mechanism has gradually covered eight high-carbon industries, and is likely to be expanded to include more industries, including the already highly competitive home appliance industry. In order to cope with the challenges that the CBAM may bring, and in line with the general trend of international green trade and circular economy, the government and the international trade industry in multiple categories, including home appliance enterprises, should react quickly and take feasible countermeasures. This study adopts a case study analytical framework to understand the responses of Chinese home appliance enterprises to CBAM through cluster analysis of 240 samples, and to explore the impact of CBAM on individual enterprises, as well as their product development and design strategies in the transition to a carbon-reducing economy. The results show that, firstly, CBAM has both negative and positive impacts on Chinese home appliance firms. Second, four product development strategies were summarized in the cluster analysis, including technological advantage, customer orientation, cost advantage and imitation. Third, 20 strategies related to product cycle design were summarized in the case interviews. In addition, there is a correlation between the product design strategies adopted by the sample firms and the firm attributes (firm size, business form and product development type). The results of this study can provide product design strategy references for the sample companies to deal with CBAM and future competition, as well as practical experience for companies in other fields to deal with CBAM.

Risk and Incentive Analysis on Valuation Adjustment Mechanism: The Mergers and Acquisitions of A-Shares During 2018-2022

Risk and Incentive Analysis on Valuation Adjustment Mechanism: The Mergers and Acquisitions of A-Shares During 2018-2022