Cap-and-trade Research Articles

Was carbon pricing effective in Virginia? The withdrawal from RGGI

ABSTRACT Climate change has drawn increasing attention worldwide. Market-based Cap and Trade (CAT) programmes achieve environmental goals in the most cost-efficient way. This timely research evaluates the effectiveness of Virginia’s involvement in the Regional Greenhouse Gas Initiative (RGGI), a CAT programme that Virginia joined in 2021 but decided to withdraw from in 2023. We find significant evidence that RGGI reduced CO 2 emissions from the power sector in Virginia during the regulation period. Both coal and natural gas (NG) plants reduced their generation and CO 2 emissions. The findings support Virginia’s continuation of RGGI regulations.

On the opposition to market institutions on moral grounds

From a liberal viewpoint, voluntary trade appears to be something that should meet universal approval. If no one is obliged to trade, establishing a market institution could only make all better off. Nonetheless, specific market institutions meet substantial skepticism and criticism. This paper extends the extant literature by surveying the moral opposition towards trade in multiple dimensions and linking this to policy support measures. We provide survey results on moral opposition to trade in organs, sex services, surrogate mothers, trade in carbon permits, goods produced in poor countries, and food from countries where people suffer from hunger. These cover the potential reasons for opposing trade institutions: moral concerns, paternalism regarding risk-taking, and distributional concerns. Beyond this, we measure support for policies on unemployment benefits, risk prevention, equality goals within society, and redistribution. The survey of Amazon Mechanical Turk workers from the U.S. reveals significant moral opposition to trade in diverse dimensions. About a third of the participants strongly oppose trade in body items, sex services, and food imports from countries where a large proportion of the population suffers from hunger and malnutrition. Fewer participants strongly oppose trading CO2 permits, importing from developing countries, or allowing surrogate mothership. Besides other correlates (e.g., gender, education, being conservative), individuals’ attitudes towards imposing risks on others are identified as an important correlate of the opposition to trade for all the contexts of trade: those who are averse to exposing others to risk for their own advantage are more likely to oppose trading institutions. This measure of social preferences also relates to support for policies on risk prevention, equality goals within society, and redistribution. We discuss potential mechanisms behind this explanatory power of the newly identified measure.

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

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

Evolutionary game analysis and efficiency test of water pollution control driven by emission trading: Evidence from Zhejiang Province, China

Presently, China is actively endorsing the pilot initiative for the remunerative use and trading of emission. By examining the operation and efficacy of emission trading in the context of water pollution control, one can contribute to the advancement and refinement of this system, thereby facilitating the attainment of regional pollution reduction, carbon reduction, and high-quality development objectives. In pursuit of this objective, we develop a theoretical framework for the local government and sewage enterprises evolutionary game of water pollution control, which includes two scenarios without considering and considering emission trading for studying the influencing factors and evolution trajectory of the game subject's. Through the stability analysis, the game interactive mechanism, the difference in evolutionary trajectory, and the response logic of the decision-making body in different situations become clearly visible. Further, the system sensitivity factors are analyzed by solving the partial derivation of the area formula of the phase diagram. And the efficacy of the sewage trading system in water pollution control in Zhejiang Province is empirically examined at the micro level by adopting the trading data of the first pilot area of sewage trading in the country and the case of pollution control in Jinhua City. The research reveals the following conclusions: Under specific circumstances, emission trading can incentivize businesses and even industries to enhance pollution control measures as a whole. The performance and degree of sensitivity factors vary across gaming systems, with public reputation evaluation and central government inspection serving as positive constraints. The initial cost of paid use of emission permits, as a fixed cost component for firms to address pollution, has no effect on the enterprises' behavioral actions to satisfy emission regulations. The findings can furnish local governments with a theoretical foundation and decision support in order to optimize regulatory strategies and enhance pollution control policies.

Decarbonizing Water: The Potential to Apply the Voluntary Carbon Market toward Global Water Security.

The increase in global water insecurity is one of the first perceivable effects of climate change. Two billion people are now without access to safe drinking water, and four billion experience water stress at least once a year, primarily in low per-capita emission countries. This nexus between climate change and water insecurity has significant implications for the global economy, with the water sector contributing 10% of global emissions. Though traditionally a local issue, climate finance mechanisms like the voluntary carbon market (VCM) present opportunities for a global, sustainable, performance-based funding stream to address water insecurity. Since 2010, water-related carbon projects have yielded over 45 million emission reduction credits. Our analysis estimates a global potential of over 1.6 billion tCO2e per year across various water project subsectors. At a $10 per credit average, this could attract over $160 billion in investments over the next decade, enhancing global water security. However, barriers like high intervention costs and limited technologies hinder widespread implementation, creating a tension between standardized and bespoke credits. We present case studies, spanning drinking water initiatives to the wastewater treatment sector that illustrate VCM's role in channeling private sector capital for water security in climate-vulnerable regions.

Effect Analysis of China's Carbon Emission Trading Pilot Policy on Carbon Emission Control

Many countries have achieved a fundamental consensus to decrease carbon dioxide emissions in order to address environmental and climate issues. China, as the foremost energy consumer and carbon emitter globally, has significantly contributed to the exacerbation of greenhouse gas issues. The most effective method for lowering carbon emissions is through the trade of carbon emissions. In 2011, China began the process of implementing pilot projects for pricing carbon emissions as a means of addressing environmental and climate-related issues. This study use the literature review approach to examine the current state of China's carbon emission trading pilot policies on carbon emission management. It also analyzes the technical and economic impacts of these pilot policies in comparison to non-pilot carbon emission trading policies. The objective of this study is to propose recommendations for the implementation of the national carbon emission trading market in 2021.

Entry under placement uncertainty

We present a model of firm entry in an industry that operates under an aggregate production quota or cap-and-trade (CAT) regulation. Firms are heterogeneous in their own productivity; each knows its costs of production but is uncertain about where its costs rank among an entrant population. We show the existence of a unique, symmetric, dominance solvable, Bayesian Nash equilibrium in switching strategies in a parameterized game with a continuum of players. Our main result is that uncertainty over one's productivity rank is sufficient to cause socially inefficient over-entry when the average cost in the population of potential entrants is low. We find socially inefficient under-entry when the opposite conditions hold. Within both the class of models on global games with strategic substitutes and the class of models on firm entry, our model offers innovative insights into inefficient over-entry, under-entry, and introduces a novel underlying mechanism that drives entry bias.

Carbon storage units and carbon storage obligations: A review of policy approaches

Policies that incentivize the capture and geological storage of CO2 from large point sources (‘CCS’; and more recently, atmospheric removals), have so far tended to reward the resultant avoided CO2 emissions (or CO2 removals) achieved by operators at the point of capture. The expectation has been that geological CO2 storage sites, as well as the connecting infrastructure, will be developed and operated based upon the funding delivered from the single point of incentive (e.g. under an emissions trading system or a carbon tax, only CO2 capture installation operators are absolved of the obligation to acquire and surrender CO2 emission rights or to pay the tax). Project-based crediting mechanisms (e.g. in the voluntary carbon market) tend to treat the entire chain of operations as a single entity to be supplied with emission reduction or removal credits. Consequently, there has been minimal explicit financial incentive to store CO2. Yet a multiple gigaton-per-year scale capture and storage industry requires complex CO2 networks to evolve, with multiple sources connecting to multiple sinks, with installations owned by different operators with different technical expertise, climate mitigation goals and obligations. This multiplicity of goals and incentives can create agency problems and cross-chain risks, which impact negatively upon investment decisions. In this paper, we review the history, evolution and potential of geological net zero (GNZ) and carbon storage (or takeback) obligation concepts applied to fossil carbon producers and suppliers as a means to address these risks alongside policies aimed at atmospheric net zero (ANZ) and fossil carbon emitters.

A novel two-phase approach for a sustainable p-hub median problem with multiple service levels and carbon cap-and trade policy under uncertainty

ABSTRACT To reduce the carbon emissions for society's sustainable development and satisfy customers' personalized delivery service, this paper addresses the cap-and-trade policy and multiple service levels into a p-hub median problem. In the hub network designing, single-assignment patterns between hubs and demand nodes, the choice of transportation mode for each O-D pair and the uncertainties of carbon emission and price are taken into account. Based on a fuzzy chance-constrained programming approach, a fuzzy mathematical model under an expected cost-minimization context with some fuzzy constraints is first presented. Then a two-phase approach is proposed to solve the proposed model. Finally, in view of the comparative analysis with small- and large-scale Turkish instances, serval managerial insights are finally obtained for government and logistics companies in the reduction of carbon emission and the hub network's total designing cost for the sustainable development.

Techno-economic analysis of green hydrogen production using a 100 MW photovoltaic power generation system for five cities in North and Northwest China

In recent years, photovoltaic power generation technology has developed rapidly, but due to its impact on the stability and security of the power grid, some areas in North and Northwest China have a certain degree of photovoltaic power curtailment phenomenon. Hydrogen is considered a good medium for energy storage, and the photovoltaic power generation system based on hydrogen energy storage has been the focus of research. Therefore, this work established simulation models of a photovoltaic power generation with a rated capacity of 100 MW coupling with hydrogen production system using MATLAB software and performs real-time simulation. Techno-economic performance of the integration system in five cities of Hami, Ordos, Datong, Yinchuan, and Yulin was analyzed. The results show that the coupling system can generate 158484–175675 MWh of electricity annually, which can drive the electrolyzer to produce 2524–2761 tonnes of hydrogen. The energy efficiency of the overall system and levelized cost of hydrogen are 9.03–9.31 % and 25.95/22.54–28.38/24.97 CNY/kg. The total CO2 emissions reduction and carbon credits earned by the established system over a lifetime of 20 years can reach 1.81–2.00 million tonnes and 92.19–102.19 million CNY. This paper will provide economic and energy efficiency reference for studying the coupling of green hydrogen production systems with the coal chemical industry in the above regions.

Impact of introducing Chinese certified emission reduction scheme to the carbon market: Promoting renewable energy

The China Certified Emission Reduction scheme (CCER) and the Cap-and-Trade (CaT) mechanisms jointly constitute the Emission Trading Scheme (ETS), which is expected to have a profound impact on China's social and economic decarbonization. However, previous studies have primarily focused on the impact of the CaT mechanism, neglecting the fact that CCERs serve as a carbon offset trading mechanism. This paper focuses on the impact of the CCER mechanism on China's energy economy and environment by constructing a recursive dynamic computable general equilibrium model that couples CaT and CCER mechanisms. Introducing the CCER mechanism based on the CAT mechanism leads to increased output and reduced prices in renewable energy sectors, cascading positive effects across various energy-utilizing sectors to counter the decline in Gross Domestic Product (GDP) and residential welfare. The finding suggests that China's unique CCER mechanism is poised to play a more important role in promoting renewable energy to mitigate global warming, given its potential to transform the structure of energy production and consumption. Finally, targeted policy recommendations are proposed for implementing the CCER mechanism.

Early warning research on enterprise carbon emission reduction credit risk based on deep learning model under unbalanced data

To enhance the precision of predicting enterprise credit risk related to carbon emission reduction, this study focuses on publicly traded companies. It introduces a risk early warning model grounded in MLP deep learning. Primarily, this research employs the FA-TOPSIS fusion model to comprehensively assess the credit risk associated with carbon emission reduction in enterprises. Subsequently, it employs K-means clustering to compute enterprise similarities, which forms the basis for supervised learning in the MLP model to assign credit risk grade labels. Furthermore, the study tackles the challenge of imbalanced enterprise grade distribution using the ADASYN over-sampling algorithm. Ultimately, the effectiveness of the model proposed herein is confirmed through a series of multi-model comparison experiments. The results show that: First, carbon emission reduction indicators exhibit differing degrees of influence on enterprises at various credit risk levels. Notably, the most influential indicator is carbon emission intensity, while the development capacity indicator exerts the least influence. Second, the adoption of the XGBoost algorithm for screening carbon emission reduction indicators significantly enhances the prediction accuracy of the early warning model by 4.27%. Third, compared to other models, the MLP model achieves an impressive prediction accuracy of 99.48%, representing an average improvement of 15.24%. These results underscore the model’s feasibility and its potential to provide technical support for financial institutions and government entities in conducting credit ratings for enterprise carbon emission reduction.

Kajian Pelaksanaan Skema Cap and Tax dalam Kebijakan Mitigasi Perubahan Iklim Indonesia

This research aims to analyze the implementation of the Cap and Tax scheme in climate changemitigation policies in Indonesia from 2015 to 2021. The Cap and Tax scheme is a climate changemitigation policy that sets an upper limit (cap) on the amount of greenhouse gas emissions that aresubject to tax ( tax) on companies that exceed these limits. This research highlights how the Capand Tax scheme is implemented in Indonesia, including the process of determining the cap, marketmechanisms for emissions permits, and collecting funds from the carbon tax. The research methodused is document analysis and interviews with respondents regarding policies. The research resultsshow that the implementation of the Cap and Tax scheme in Indonesia has experienced severalobstacles, including determining the appropriate cap, inadequate company participation, and anineffective emission permit market mechanism. However, this scheme is still considered animportant climate change mitigation policy and must continue to be improved to achieve bettergreenhouse gas emission reduction goals in the future.

Measuring Total Carbon Pricing

Abstract While countries increasingly commit to pricing greenhouse gases directly through carbon taxes or emissions trading systems, indirect forms of carbon pricing—such as fuel excise taxes and fuel subsidy reforms—remain important factors affecting the mitigation incentives in an economy. Taken together, how can policy makers think about the overall price signal for carbon emissions and the incentive it creates? We develop a methodology for calculating a total carbon price applied to carbon emissions in a sector, a fuel, or the whole economy. We recognize that rarely is a single carbon price applied across an economy; many direct carbon pricing instruments target specific sectors or even fuels, much like indirect taxes on fossil fuels; and carbon and fuel taxes can be substituted for one another. Tracking progress on carbon pricing thus requires following both kinds of price interventions, their coverage, and specific exemptions. This inclusive total carbon pricing measure can facilitate progress in discussions on minimum carbon price commitments and inform assessments of the pricing of carbon embodied in traded goods. Calculations across 142 countries from 1991 to 2021 indicate that although direct carbon pricing now covers roughly one-quarter of global emissions, the global total carbon price is not that much higher than it was in 1994 when the United Nations Framework Convention on Climate Change entered into force. Indirect carbon pricing still comprises the lion's share of the global total carbon price, and it has stagnated. Taking these policy measures into account reveals that many developing countries—particularly net fuel importers—contribute substantially to global carbon pricing. Tackling fuel subsidy reform and pricing coal and natural gas emissions more fully would have a profound effect on aligning carbon prices across countries and sectors and with their climate costs.

A novel solar reactive distillation based production of algal biodiesel: Retrofitting, carbon cost and process economics

In this contribution, solar power driven reactive distillation based process is developed for the production of algal biodiesel. For industrial scale operation, the conventional reactive distillation (cRD) is designed to retrofit with a parabolic trough collector (PTC) that yields cRD-PTC based scheme. To serve the same purpose, we have subsequently proposed a solar reactive distillation based configuration. The optimal design and operating conditions of both processes are determined with two conflicting objectives: minimising the total annual cost (TAC) and maximising the purity of biodiesel. For this, the optimisation is performed by the technique for order of preference by similarity to ideal solution embedded non-dominated sorting genetic algorithm-II. Further, we evaluate those process units in terms of the emission trading system based carbon pricing (ETS-CP) and social cost of carbon (SCC) considering the availability of solar energy during day time only. The attractiveness of the proposed solar reactive distillation based process lies in its total annual cost savings of 9.92% (ETS-CP) and 19.06% (SCC), whereas they are 6.67% (ETS-CP) and 16.14% (SCC), respectively for the conventional reactive distillation coupled with parabolic trough collector (cRD-PTC) process. It is further investigated that the total annual cost savings comes down when the proposed configurations are operated with solar (2000 working hours/year) and thermal energy (6000 working hours/year) throughout the year. Finally, the economic feasibility of the biodiesel production processes is studied with the usage of solar heat for the entire operating time.

Life Cycle Greenhouse Gas Emissions of Brazilian Sugar Cane Ethanol Evaluated with the GREET Model Using Data Submitted to RenovaBio.

Brazil is the second-largest ethanol producer in the world, primarily using sugar cane as feedstock. To foster biofuel production, the Brazilian government implemented a national biofuel policy, known as RenovaBio, in which greenhouse gas (GHG) emission reduction credits are provided to biofuel producers based on the carbon intensities (CI) of the fuels they produce. In this study, we configured the GREET model to evaluate life cycle GHG emissions of Brazilian sugar cane ethanol, using data from 67 individual sugar cane mills submitted to RenovaBio in 2019/2020. The average CI per megajoule of sugar cane ethanol produced in Brazil for use in the U.S. was estimated to be 35.2 g of CO2 equivalent, a 62% reduction from U.S. petroleum gasoline blendstock without considering the impacts of land use change. The three major GHG sources were on-field N2O emissions (24.3%), sugar cane farming energy use (24.2%), and sugar cane ethanol transport (19.3%). With the probability density functions for key input parameters derived from individual mill data, we performed stochastic simulations with the GREET model to estimate the variations in sugar cane ethanol CI and confirmed that despite the larger variations in sugar cane ethanol CI, the fuel provided a robust GHG reduction benefit compared to gasoline blendstock.

An agent-situation-based model for networked action situations: Cap-and-trade land policies in China

Expanding the analysis unit from a single action situation to networks of action situations (NAS) is a theoretical development in response to complex systemic issues. However, the methodology of this emerging field is still in its infancy. This article develops an agent-situation-based model to evaluate the interaction effects of targeted policies by translating a NAS into an agent-based model (ABM). This paper applies this NAS–ABM method to China’s top-down land planning control system to evaluate the performance of two cap-and-trade (CAT) policies, implemented simultaneously, which aim to preserve cultivated land and restrict land expansion for construction. The results show that either CAT policy can improve land allocation efficiency and reduce income gaps in different regions but is not Pareto-improving. Furthermore, if implemented jointly, the two CAT policies expand the income gap between urban and rural areas and are not conducive to protecting soil quality and the environment.

Valuing investments in the Global Carbon Market Mechanism as compound real options: Lessons from the Clean Development Mechanism

AbstractThe Global Carbon Market Mechanism (GCMM) aims to incentivize national or sub‐national actors to invest in climate mitigation projects at the same time as limiting the global costs of tackling global warming. Using the worked example of the Clean Development Mechanism (CDM), this article shows that the exact valuation of a mitigation project requires the application of compound real options techniques, as it is able to account for the multi‐staged nature of a project cycle, as well as the two basic sources of uncertainty (the probability of not moving successfully to the next stage of the cycle, technical risk, and the uncertainty related to future emission reduction credit prices, market risk). Using parameters from the global database of registered CDM projects, this article illustrates that longer than projected lead times, higher than projected transaction costs, and higher than projected rates of failure lowered the value of investing in CDM projects considerably, alongside offset prices and their variability. Regulators of and participants within the patchwork of existing emission trading schemes and market mechanisms, including the GCMM (Article 6.4 of the Paris Agreement), could benefit through wider appreciation of the benefits of this valuation method.

Adaptable pathway to net zero carbon: A case study for Techno-Economic & Environmental assessment of Rooftop Solar PV System

Several countries have a critical need to enhance their electricity production to satisfy the tremendously increasing energy demand and to minimize the black outs. Due to scarcity of fossil fuels and degrading environment, rooftop Solar Photovoltaic (SPV) can be a suitable renewable alternative of green and clean energy. In this paper, due to the techno-economic, environmental and social benefits of Solar PV, the modelling and planning of a solar PV plant to fulfil the energy demand of an academic building is carried out. The analysis is done including all the financial and environmental aspects considering recent market prices and future price escalation. A Modified Greedy Search based optimal planning of the SPV to minimize grid dependence considering load variation pattern with its assessment analysis for an academic building is proposed in this research work. The various financial parameters that affect the feasibility of Solar PV plant i.e., energy payback period, grid dependency, rate of investment return, economic payback period, rate of escalation with actual cost of electricity, annual maintenance cost, depreciation and taxation are considered and evaluated. The environmental factors related to the generation from Solar PV i.e., CO2 emission reduction and carbon credit are also included in analysis. The results obtained for the proposed Solar PV plant shows that the energy payback period is 8 years and IRR with depreciation and taxation is 21% (approx.) with net CO2 mitigation of 1199 tCO2 during the useful life span (25 years) of the plant.

An Overview of Green Bioprocessing of Algae-Derived Biochar and Biopolymers: Synthesis, Preparation, and Potential Applications

Algae have the potential to be used as a feedstock for the synthesis of valuable compounds and biofuels. In addition, algal waste can be further transformed into biofuel, biogas, and biochar using different thermochemical processes such as microwave pyrolysis, pyrolysis, torrefaction, and hydrothermal conversion. Due to its high specific surface area, rapid electron transport, and graphitic carbon structure, algal biochar carbonized at high temperatures has shown outstanding performance for applications as CO2 adsorbents, supercapacitors, and persulfate activation. Due to the combination of various functional groups and porous structures, the algae biomass pyrolysis at a moderate temperature produced high-quality biochar that shows high performance in terms of pollutant removal, while low-temperature pyrolysis produces coal fuel from algae via torrefaction. Over time, there have been exponentially more petroleum-based polymers created that have harmful impacts on both humans and the environment. As a result, researchers are becoming more interested in algae-based biopolymers as a potential alternative strategy for establishing a sustainable circular economy globally. The advantages of microalgal biopolymer over other feedstocks are its capacity to compost, which provides greenhouse gas credits, its quick growth ability with flexibility in a variety of settings, and its ability to minimize greenhouse gas emissions.