Carbon Emission Price Research Articles

Latent carbon emission pricing model for Thailand: A nonlinear autoregressive distributed lag model

Nowadays, many scientific researchers confirm that carbon emissions cause global warming. Accurate carbon emission pricing is a direct economic measure of greenhouse gas emissions’ actual cost or price. However, Thailand currently does not have a carbon emission price from the formal mandatory carbon market. This paper aims to calculate Thailand’s latent carbon emission price based on the KLEM production function and Nonlinear Autoregressive Distributed Lag Model (NARDL). Used are the seasonally adjusted data on the volume of carbon emissions, energy resources, and energy prices from January 2009 to December 2020. The best fit model for NARDL (3,4,0,4,2,0,4,2,0), while that for the ARDL (2,0,4,0,0). In all cases considered, the average estimated monthly carbon emission prices lie in the range of 42.21–78.61. The calculated latent carbon emission price may differ depending on the proportion of the energy source and the energy price in each country.

The Global Quest for Green Growth: An Economic Policy Perspective

Economic growth has historically been the main driver of rising greenhouse gas (GHG) emissions. To achieve steep emission reductions, the world would have to either decouple global GHG emissions from gross domestic product (GDP) at an unprecedented pace or face deep cuts to GDP. The so-called ‘green growth’ literature is optimistic that suitable policies and technology can enable such fast decoupling, while ‘degrowth’ proponents dismiss this and argue that the global economy must be scaled down, and that systemic change and redistribution is necessary to accomplish this. We use the so-called Kaya identity to offer a simple quantitative assessment of the gap between the historic performance in reducing the emission intensity of GDP and what is required for green growth, i.e., the basis of ongoing disagreement. We then review the literature on both degrowth and green growth and discuss their most important arguments and proposals. Degrowth authors are right to point out the considerable gap between current climate mitigation efforts and what is needed, as well as the various technological uncertainties and risks such as rebound effects. However, the often radical degrowth proposals also suffer from many uncertainties and risks. Most importantly, it is very unlikely that alternative welfare conceptions can convince a critical mass of countries to go along with a degrowth agenda. Governments should therefore instead focus on mobilizing the necessary investments, pricing carbon emissions, and encouraging innovation and behavioral change.

How does carbon emission price stimulate enterprises' total factor productivity? Insights from China's emission trading scheme pilots

Carbon emission price of Emissions Trading Scheme (ETS) reflects firms' marginal cost of emission, while no previous literature discusses whether it is consistent with the Porter hypothesis or not. Based on a rounded and unique fir-level longitudinal dataset with the information of total factor productivity (TFP) and the economic variables from 2009 to 2019, this paper employs the time-varying difference-in-differences (TDID) model and conducts a post-evaluation of the carbon emission price of ETS pilots on firms' TFP for the first time. The results show that there exists a persistent and significant positive causal relationship between the carbon emission price and firms' TFP. According to a rough estimate, the Chinese firms' TFP should increase by approximately 22.73% if it reaches the same carbon emission price as EU ETS. Our empirical results have passed the placebo test as well as the common trend test, and is mainly consistent with the PSM-DID approach, which can further eliminate the possible selection bias. Furthermore, the influence of the carbon emission price is more evident among the state-owned firms located in the eastern China. While the spillover effect is not significant, which means the price effect is merely effective on target industries. Most importantly, the mechanism analysis shows that it is an effective way to improve firms' TFP by investing more on R&D patents and funds, as well as promoting the status of R&D executive. Based on our findings, we suggest that: 1) the policymakers should restrict CO2 emission quotas so as to guarantee the carbon emission price with a certain upward trend appropriately; 2) researchers should further explore the ways to activate the market-oriented environmental regulation tools from the perspective of the carbon emission price for better designing a unified carbon ETS market.

Low-Carbon Economic Dispatch for Integrated Energy System Through the Dynamic Reward and Penalty Carbon Emission Pricing Mechanism

The integrated energy system (IES) plays a key role in energy conservation and emission reduction. In order to realize the low-carbon economic dispatch of the IES, current studies usually utilize the fixed and the ladder-type pricing mechanism-based carbon emission unit cost (CEUC) in the optimal dispatch model. However, those mechanisms fail to take carbon emissions levels of the system into account, and the relevant parameters, such as the interval length, are hard to set. In order to tackle this challenge, a CEUC model with a dynamic reward and penalty pricing mechanism (DRPPM) is constructed. And then an optimal dispatch model to minimize the comprehensive operation cost, including the carbon emission cost, the energy purchasing cost, and the equipment operation cost, is proposed. At last, an actual electricity–heat–cooling–gas IES is employed to analyze the impact of parameters of the CEUC model on the dispatch.

A review of “Pricing Carbon Emissions. Economic Reality and Utopia” by Aviel Verbruggen

A review of “Pricing Carbon Emissions. Economic Reality and Utopia” by Aviel Verbruggen

Carbon Emission Reduction and Pricing Decisions of Dual-Channel Closed-Loop Supply Chain with Fairness Concern Under Carbon Tax Policy

Considering a dual channel closed-loop supply chain composed of a manufacturer and a retailer, and the retailer establishes online direct channels, four Stackelberg game models are constructed to study the impact of carbon tax and different fairness concerns of supply chain members on the optimal strategies, such as carbon emission reduction level, recycling and pricing decisions etc. The results show that the fairness concerns of supply chain members does not affect the recycling decision of manufacturer, but increasing carbon tax will promote the manufacturer to recycle more used products to reduce carbon emissions through remanufacturing. When the retailer has fairness concern but the manufacturer ignores it, with the increase of the retailers' fairness concern, the online selling price, the retail price and the retailers' utility increase while the manufacturers' profit decreases. When the manufacturer considers retailers' fairness concern, there will be more carbon emissions in the supply chain. Manufacturer should pay attention to this fairness concern and take certain measures to prevent this behavior. Compared with fairness neutrality, whether one or both of supply chain members have fairness concerns, it will inhibit manufacturers' enthusiasm for carbon reduction investment. When both of them have fairness concerns, the higher the manufacturers' fairness concern, the lower the carbon emission reduction level is.

Assessing the Effects of Uncertain Energy and Carbon Prices on the Operational Patterns and Economic Results of CHP Systems

In the power and heat sectors, the uncertainty of energy and carbon prices plays a decisive role in the rationale for decommissioning/repurposing coal-fired CHP (combined heat and power) systems and on investment decisions of energy storage units. Therefore, there is a growing need for advanced methods that incorporate the stochastic disturbances of energy and carbon emission prices into the optimization process of an energy system. In this context, this paper proposes an integrated method for investigating the effects of uncertain energy and carbon prices on the operational patterns and financial results of CHP systems with thermal energy storage units. The approach combines mathematical programming and Monte Carlo simulation. The computational process generates feasible solutions for profit maximization considering the technical constraints of the CHP system and the variation of energy and carbon emission prices. Four scenarios are established to compare the operational patterns and economic performance of a CHP system in 2020 and 2030. Results show that in 2020, there is an 80% probability that the system’s annual profit will be less than or equal to €30.98 M. However, at the same probability level, the annual profit in 2030 could fall below €11.88 M. Furthermore, the scenarios indicate that the incorporation of a thermal energy storage unit leads to higher expected profits (€0.74 M in 2020 and €0.71 M in 2030). This research shows that coal-fired CHP plant operators will face costly risks and potentially greater challenges in the upcoming years with the increasing regulatory and financial pressure on CO2 emissions and the EU’s plan of phasing out fossil fuels from electricity and heat generation.

Carbon Emissions and Brazilian Ethanol Prices: Are They Correlated? An Econophysics Study

Brazil is one of the largest global producers and exporters of ethanol and in 2017 launched RenovaBio, a programme aiming to mitigate greenhouse gas emissions. In parallel to this domestic scenario, there is rapid growth in the world market of carbon production, as well as complex price relations between fossil and renewable energies becoming increasingly important in recent years. The present work aims to contribute to filling a gap in knowledge about the relationship between Brazilian ethanol and other relevant energy-related commodities. We use a recent methodology (Detrended Cross-Correlation Approach—DCCA—with sliding windows) to analyze dynamically the cross-correlation levels between Brazilian ethanol prices and carbon emissions, as well as other possible-related prices, namely: sugar, Brent oil, and natural gas prices, with a sample of daily prices between January 2010 and July 2020. Our results indicate that (i) in the whole period, Brazilian ethanol has significant correlations with sugar, moderate correlation with oil in the short term, and only a weak, short-term correlation with carbon emission prices; (ii) with a sliding windows approach, the strength of the correlation between ethanol and carbon emissions varies between weak and non-significant in the short term.

Pricing and scheduling of barge hinterland transportation service for inbound containers

Barge hinterland transport is playing an increasingly important role in freight transport industry through reducing carbon emission, relieving traffic congestion, and providing high capacity and reliable transport service. This paper studies the barge service pricing and scheduling problem in a hinterland transport system under multiple planning horizons. The problem is modeled as a Stackelberg game with the hinterland container operator as the leader and consignees as followers. Counter intuitively, we find that it is optimal for the hinterland container operator to charge the barge service higher than the trucking service when the sea terminal’s free storage time is short. High barge service price could still attract consignees because long transportation time by barge benefits consignees by reducing their storage costs at the inland terminal. We also find that increasing carbon emission price could not reduce the emission quantity when the shipping quantity is high.

Elmada: Dynamic electricity carbon emission factors and prices for Europe

elmada: Dynamic electricity carbon emission factors and prices for Europe

The Profitability of Energy Storage in European Electricity Markets

In this work, we study the profitability of energy storage operated in the Nordic,German, and UK electricity day-ahead markets during 2006-2016. During this time period, variable renewable energy sources (vRES) have been rapidly penetrating the markets and increasing the volatility of the residual load, which is often assumed to be associated with improving financial viability of energy storages. However, storage operator profits are not publicly available, in particular not at plant level. We therefore develop a linear optimisation model which maximises profits from arbitraging hourly prices and use the model output of profits and storage operating hours in further econometric analyses. This is a novel approach merging two strands of literature (optimisation and econometrics) in a single energy storage study. Specifically, we quantify and disentangle the effects of electricity demand, solar and wind generation, the spread between gas and coal prices, carbon emission prices and tructural breaks on profits and operation of 1-13MWh/MW energy storages. Among others we find that solar generation is associated with lower profits but higher operating frequency of energy storages in Germany. Wind power generation is associated with positive effects on profits in the UK and Germany. vRES does not affect profits or operation of new Nordic energy storages.

Time-varying spillovers and dependencies between iron ore, scrap steel, carbon emission, seaborne transportation, and China's steel stock prices

We have examined the time-varying price spillovers and dependencies between iron ore, scrap steel, carbon emissions, seaborne transportation, and China's steel stock by using price spillover and copula models to cover the period 2011–2020. More specifically, the Platts, the MBIOI, and the Chinese Iron Ore spot prices (CIOPI) are analyzed and compared. Our results show that of the three iron ore price indexes, the Platts is a primary contributor of price spillover and highly comparable with China's steel stock prices. The scrap steel, seaborne transportation, and carbon emission prices incur relatively low price spillovers and moderately link with China's steel stock prices. In addition, the time-varying price spillovers and links are sensitive to economic shocks stemming from China's policy implementation to cut overcapacity in steelmaking and the spread of coronavirus. Our results may suggest that the Platts is still the benchmark spot price in determining China's steel stock prices. The results might also guide market investors to hedge the financial risks in the commodity market and help policymakers design appropriate financialization policies for the iron ore and steel markets.

Fresh Food Dual-Channel Supply Chain Considering Consumers’ Low-Carbon and Freshness Preferences

Due to growing concerns for environmental problems and food quality, consumers pay more attention to the carbon emission and freshness of fresh food. The booming e-commerce also accelerates the development of the dual-channel supply chain. In the dual-channel supply chain of fresh food, the carbon emission and freshness of fresh food are becoming important factors affecting consumers’ purchase demand. This paper focuses on the optimal decision of carbon emission reduction and pricing, which is investigated by a Stackelberg game-theoretic approach in three dual-channel supply chain sales models (retailer dual channel, producer dual channel, and mixed dual channel). A two-stage fresh food supply chain system composed of a producer and a retailer is explored. The sensitivity analysis and the comparison of three dual-channel models are carried out. The results show the following: (1) the sales price, carbon emission reduction, market demand, producer’s profit, retailer’s profit, and supply chain’s profit of fresh food under the three dual-channel supply chains show the same change on different levels of consumers’ low-carbon preference coefficient and freshness level, respectively; (2) the optimal decision of carbon emission reduction and pricing, demand, and profit of the three dual-channel models need to be determined according to the value of consumers’ purchasing preferences for the retailer’s offline channel. The paper gives some enlightenment to the decision-making members in the fresh dual-channel supply chain.

Getting Financial Markets to Work for Climate Finance

Financing the Paris Agreement commitments would require trillions of dollars per year, and most of that would need to come from private sources. Despite huge potential, climate finance flows remain constrained by many barriers, key among them the lack of financial viability of climate-focused projects. Despite several initiatives and innovative financing solutions to incentivize private finance—such as blended finance to leverage public finance and risk mitigation solutions to enable commercial climate investments—private investments in green projects are limited. To a large extent, the regulated financial system of banking and capital markets and the extant regulations do not align well with the goals of climate finance. A major shift is required in the existing trajectory of the current targets for climate-focused investments to be met, both by lending institutions and capital markets. One approach to addressing the concern about adequate finance for green projects focuses on factoring climate risks into investment and lending decisions (that is, into pricing and capital allocation) through banking regulation. These alternatives are discussed in this article. Another concern, the risk associated with the greening financial markets themselves, could be countered by offering a risk subsidy for banks and financial institutions that finance climate investments; this strategy would include subsidizing the cost of financing green projects through a reduction in the risk premium or capital charges of the project. Risks could be priced by using the mechanism of trading and pricing carbon emissions, and resources from a carbon tax also could be allocated to pay for the subsidy. This article discusses a structure to make a blended finance option effective. Both of these approaches—enabling regulations and blended finance to lower the cost of capital—can unlock substantial financing opportunities for climate projects. Institutional commitment is paramount to facilitate both the financing of green projects and the greening of the financial sector. <b>TOPICS:</b>ESG investing, real assets/alternative investments/private equity, risk management, legal/regulatory/public policy <b>Key Findings</b> ▪ A major shift is required in the extant regulated financial system if the current targets for climate focused investments are to be met. ▪ For greening of the financial sector, climate risks need to be factored in for pricing and capital allocation through banking regulations. ▪ A blended option, where risks are priced using carbon markets and resources from a carbon tax are used to pay for the subsidy, is proposed.

Which policy mixes are best for decarbonising passenger cars? Simulating interactions among taxes, subsidies and regulations for the United Kingdom, the United States, Japan, China, and India

Reducing transport emissions, in particular CO2 emissions from passenger vehicles, is a key element in mitigating the risk of climate change. Conventional welfare economics recommends the use of comprehensive pricing of carbon emissions, which may not necessarily be the most effective approach in transport systems. This paper uses an evolutionary technology diffusion model to simulate the impact of climate policies on passenger car emissions in the US, UK, Japan, China and India up to 2050, seeking to understand policy interaction. We analyse six commonly seen policy instruments and explore systematically the impact of combining each of these policies by developing 63 scenarios for the US, the UK, China, Japan, and India. We assess both the policies’ effectiveness in achieving emissions reductions and their cost-effectiveness in doing so. We show how the diffusion dynamics of the system can lead to interaction of policy levers, generating synergies in some cases (combined effectiveness more than the sum of its parts), andmutual impediment effects in others (combined effectiveness less than the sum of its parts). The paper identifies particular combinations of regulatory, procurement and fiscal policies that are particularly effective at generating rapid change without needing the use of very high fuel taxes or carbon pricing. Notably, combining electric vehicle mandates with taxes and regulations on combustion vehicles is highly effective, as it simultaneously improves the availability of low-carbon options while penalising high carbon options.Simple principles for policymaking can be inferred.

A two stage cap-and-trade model with allowance re-trading and capacity investment: The case of the Chilean NDC targets

In this work, we study an alternative approach for capping and pricing carbon emissions in electric markets: the cap-and-trade paradigm with re-trade of allowances. We model the electric market (generators and allowances’ auctioneer) as a two stage stochastic capacity expansion equilibrium problem, where we allow future investment and re-trading of emission permits among generators. The model studies generation and future investments in the electric sector in two regimes of demand: deterministic and stochastic. The configuration enforces the reduction of carbon emissions by setting a carbon budget, which allows to assess the impact of green policies and pledges concerning an electric system. We use the proposed model to analyze the Chilean electric sector under a cap-and-trade paradigm as an alternative to the existing carbon tax. We show that the Chilean pledge regarding emissions reductions does not encourage a shift to greener technologies. Moreover, we characterize two strategies to comply with the renewable targets by mid-century. On the one hand, a stringent carbon budget that induces high price of carbon permits and phases out coal-based generators. On the other hand, a less stringent target which significantly encourages investment in renewable technologies, but with low remaining shares of coal-based electric generation towards 2050.

Research on the Structural Mutation of Carbon Emission Allowance Trading Price of China

This paper conducts theoretical and empirical research on the structural mutation of China’s carbon emission allowance trading price. Firstly, it analyzes the possibility of price mutation from the perspective of market mechanism through theoretical analysis. Secondly, the Bai-Perron Multiple Breakpoint Test method is used to test the autoregressive model of the carbon valence sequence. It is found that the carbon emission price series of each pilot have multiple structural mutations, and the breakpoints often occur around the annual compliance date. It is believed that the compliance requirement is the direct internal factor that causes the sudden change in the carbon emission price structure. Combined with the observation of market transaction characteristics and the direction of price sudden changes, the analysis of the deeper internal causes of price sudden changes in the market lies in the poor ability of enterprises to actively manage quotas, low market transaction activity, and excessive total supply of quotas. Based on the problems and reasons reflected by the empirical test results, this paper finally puts forward three rationalization suggestions for the improvement of the carbon emission allowance trading market.

Dynamic tail dependence on China's carbon market and EU carbon market

&lt;abstract&gt; &lt;p&gt;This study explores the dynamic relationship between the European carbon emission price (EUA) and the Shenzhen carbon emission price (SZA) in the time and frequency domain. Since they represent major carbon emission rights prices in the markets, they show a close correlation and tail correlation between them. Given the current global implementation to reduce carbon economy and China's implementation of a dual-carbon policy, it is of great value to explore the dynamic relationship between the two major carbon markets. Firstly, this paper uses a wavelet method to decompose the returned sequence into different frequency components to certify the dependent construction under different time scales. Secondly, this paper uses a wide range of static and time-varying link functions to describe the tail-dependent. The empirical results show that under different time scales, the dependence construction between EUA and SZA has significant time variation. The results of this study have important policy implications for understanding the transmission of carbon prices between different markets, as well as for investors and policy makers.&lt;/p&gt; &lt;/abstract&gt;

Climate Change Uncertainty Spillover in the Macroeconomy

The design and conduct of climate change policy necessarily confronts uncertainty along multiple fronts. We explore the consequences of ambiguity over various sources and configurations of models that impact how economic opportunities could be damaged in the future. We appeal to decision theory under risk, model ambiguity and misspecification concerns to provide an economically motivated approach to uncertainty quantification. We show how this approach reduces the many facets of uncertainty into a low dimensional characterization that depends on the uncertainty aversion of a decision-maker or fictitious social planner. In our computations, we take inventory of three alternative channels of uncertainty and provide a novel way to assess them. These include i) carbon dynamics that capture how carbon emissions impact atmospheric carbon in future time periods; ii) temperature dynamics that depict how atmospheric carbon alters temperature in future time periods; iii) damage functions that quantify how temperature changes diminish economic opportunities. We appeal to geoscientific modeling to quantify the first two channels. We show how these uncertainty sources interact for a social planner looking to design a prudent approach to the social pricing of carbon emissions. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Climate Change Uncertainty Spillover in the Macroeconomy

The design and conduct of climate change policy necessarily confronts uncertainty along multiple fronts. We explore the consequences of ambiguity over various sources and configurations of models that impact how economic opportunities could be damaged in the future. We appeal to decision theory under risk, model ambiguity and misspecification concerns to provide an economically motivated approach to uncertainty quantification. We show how this approach reduces the many facets of uncertainty into a low dimensional characterization that depends on the uncertainty aversion of a decision-maker or fictitious social planner. In our computations, we take inventory of three alternative channels of uncertainty and provide a novel way to assess them. These include i) carbon dynamics that capture how carbon emissions impact atmospheric carbon in future time periods; ii) temperature dynamics that depict how atmospheric carbon alters temperature in future time periods; iii) damage functions that quantify how temperature changes diminish economic opportunities. We appeal to geoscientific modeling to quantify the first two channels. We show how these uncertainty sources interact for a social planner looking to design a prudent approach to the social pricing of carbon emissions.