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We analyse the international dimension of the EU Emissions Trading System (EU ETS) over the past two decades and in the foreseeable future by reviewing facts and economic theory. The facts mainly concern the international climate change regime and the EU’s relevant experience in international cooperation. Club theory shows how incentives can be created for cooperation on climate mitigation. The linkage of the EU ETS to the Kyoto flexible mechanisms had mixed results: it promoted emissions trading abroad, but the inflow of credits into the EU ETS added to a large market surplus and the environmental integrity of certain credits was problematic. Looking ahead, the ability of the EU ETS to reduce foreign emissions may grow. Key will be whether competitiveness and distributional effects are successfully addressed. The Carbon Border Adjustment Mechanism might help the EU reduce the risk of carbon leakage while incentivising emission reductions in countries exporting to the EU. The EU’s focus on reducing domestic emissions only, suggests we will probably not see new international linkages this decade. However, it cannot be excluded that the EU will revisit its decision and relax the domestic constraint.

Emissions trading schemes (ETSs) have emerged as stable components of a fragmented climate governance landscape. Yet the proliferation of ETSs raises critical questions concerning their design, the development of conflicting norms, and how such schemes might link. This Article engages with these concerns by advancing a linkage framework based on a series of core convergence criteria which are considered necessary to assess the compatibility of candidate partner schemes. For the EU, the search for a candidate linkage partner has seemed a Sisyphean undertaking, but it is suggested that South Korea offers the prospect of stable climate settings. The critical design features of South Korea’s Emissions Trading Scheme (KETS) are evaluated before applying core convergence criteria to evaluate compatibility. This Article identifies a degree of alignment between the design features of the EU’s flagship Emissions Trading Scheme (EU ETS) and the KETS, but also uncovers divergences where detailed negotiation will prove necessary. European Union emissions trading scheme, Korea emissions trading scheme, linkage, climate governance

This paper investigates the optimal strategies for an economic constrained closed-loop supply chain network. Manufacturers are classified into two categories namely low-emission manufacturers and high-emission manufacturers, and are subject to two greenhouse gas (GHG) emission control policies. Low-emission manufacturers are equipped with green production technologies to achieve ecological goals. All manufacturers are responsible in recycling and remanufacturing processes. New products and remanufactured products are homogeneous, and have the same sales price in the demand markets. Based on the variational inequality (VI) theory, we obtain the control equilibrium conditions of the non-cooperative game theory model for each firm. We further solve the model with the modified projection algorithm, and statically analyze and compare the influence of relevant parameters such as carbon quota, consumers’ low carbon preference and recovery rate on the network state through numerical examples. The results show that the GHG emission constraint may stimulate manufacturers to increase green technology investment level. Moreover, the introduction of reverse channel will promote resource recycling, but impair manufacturers’ profits. The promotion of consumer's environmental protection awareness has positive influence on the operation of supply chain network. In general, there is a conflict between economic goals and ecological ones. However, the developed model proves that economic goals and ecological ones can be realized consistently under certain conditions.

NO: Carbon markets are theoretically flawed and practically ineffective The case for carbon markets and greenhouse gas emissions trading has emerged out of welfare economics and the field of neoclassical economics more broadly. But the arguments in favour of emissions trading rest on questionable definitions of market externalities; an insufficient theory of economic incentives; a questionable approach to ecological processes; and on unreliable assumptions about market structures/dynamics. This essay argues against carbon markets as an adequate way to address climate change by exposing the limitations of neoclassical economic orthodoxy as a justification for emissions trading and by offering evidence of the weak efficacy of emissions trading in practice. Over decades of practice, experiments in carbon markets have led to very little substantive change in the emissions profiles of industrial sectors and nations where trading schemes and carbon offset markets operate.

The concept of emissions trading is deceptively straightforward. However, designing and implementing a successful ETS has proven quite difficult. The EU ETS, despite its teething problems, continues to be the largest and most successful example of such a system. Although some inefficiencies remain, the EU has resolved various key implementation problems and has been unrelentingly ambitious in its expansion and application of the EU ETS.However, as the EU’s climate and environmental goals expand, there is a danger of assuming that the EU ETS can help to achieve them all. Emissions trading systems are good at achieving cost-effective emission reductions, but they are often presented or viewed as being capable of achieving many secondary goals as well, such as technological innovation. While low-carbon innovation may occur under a cap-and-trade scheme, it is not its main aim and arguably its functioning should not be judged by this standard.Similarly, the EU ETS’ role in addressing inequities between the Member States in terms of economic development and climate mitigation costs remains a source of dispute. The EU ETS is part of a larger regulatory context in which many compromises have had to be made in order to align interests of high- and low-income Member States. With the increased ambition levels expressed in the Green Deal, these controversies, and the resulting compromises, are set to continue to play an important role in the EU ETS’ development and implementation.

Purpose This paper aims to minimize the total carbon emissions and costs and also maximize the total social benefits. Design/methodology/approach The present study develops a mathematical model for a closed-loop supply chain network of perishable products so that considers the vital aspects of sustainability across the life cycle of the supply chain network. To evaluate carbon emissions, two different regulating policies are studied. Findings According to the obtained results, increasing the lifetime of the perishable products improves the incorporated objective function (IOF) in both the carbon cap-and-trade model and the model with a strict cap on carbon emission while the solving time increases in both models. Moreover, the computational efficiency of the carbon cap-and-trade model is higher than that of the model with a strict cap, but its value of the IOF is worse. Results indicate that efficient policies for carbon management will support planners to achieve sustainability in a cost-effectively manner. Originality/value This research proposes a mathematical model for the sustainable closed-loop supply chain of perishable products that applies the significant aspects of sustainability across the life cycle of the supply chain network. Regional economic value, regional development, unemployment rate and the number of job opportunities created in the regions are considered as the social dimension.

[EN] Rapid economic development usually leads to serious environmental pollution problems. In order to solve the problem of pollutant emission in sustainable industrial development, it is urgent to examine the implementation effect of emissions trading policy (ETP) and its impact on green industrial development. This study adopts China's ETP as a case study and selects provincial panel data from 2004 to 2018. We first use a non-radial, non-directed, slack-based measure-directional distance function (SBM-DDF) to measure industrial green innovation efficiency. Then we use a difference in differences (DID) model to empirically test the emissions reduction effect of China's policy and whether it promotes industrial green innovation. Thereafter, results show that: (1) the ETP reduces sulfur dioxide (SO2) emissions indicating the effectiveness of the policy; (2) the policy significantly improves industrial green innovation efficiency, meaning it promotes the sustainable development of the economy; (3) heterogeneity analysis highlights that ETP produces greater benefits for the most polluted regions of China which have more strict environmental regulations. The study examines the effect of emissions trading policy implementation from a new perspective. The study also provides a reference point for China to further refine its policy mechanisms and for other countries to formulate suitable ETP., This work was supported by the National Social Science Fund projects [No. 20BJY010]; National Social Science Fund Postfinancing projects [No. 19FJYB017]; Sichuan-Tibet Railway Major Fundamental Science Problems Special Fund [No. 71942006]; Qinghai Natural Science Foundation [grant numbers 2020-JY-736]; List of Key Science and Technology Projects in China's Transportation Industry in the International Science and Technology Cooperation Project [No. 2018-GH-006 and grant numbers 2019-MS5-100]; Shaanxi Social Science Fund [No. 2017S004]; Xi'an Construction Science and Technology Planning Project [No. SZJJ201915 and No. SZJJ201916]; Fundamental Research for Funds for the Central Universities (Humanities and Social Sciences), Chang'an University [No. 300102231641, 300102230612, 300102281669, 300102230503].

Climate change has caused great pressure on the air transport sector. European airlines are subject to a pioneering CO2 emissions regime. This paper sets out, first, to ascertain whether the European aviation sector has adapted since the launch of the European Union (EU) Emissions Trading Scheme (ETS). Second, based on the answer to the above, we predict the situation of the sector in the medium and long term. The study sample was formed by the top 10 European airlines. The years covered are those since the inclusion of the airline sector in the emissions regime (2012–2019). Clusters were defined by eco-efficiency level using K-means cluster analysis and the Markov model was applied to predict future behaviour. The results have shown, on the one hand, that the larger airlines were the most eco-efficient throughout the study period. On the other hand, companies focused on a low-cost strategy have behaved worse since, although they have also experienced significant improvements in their use of air traffic capacity, even above the large airlines, they have not evolved to a higher level of CO2 emission efficiency and even getting worse in some cases. However, in the medium and long term, our estimate for the sector is a trend towards minimal eco-efficiency in CO2 emissions. As governments continue to increase emission limitation requirements, in order not to jeopardise the sustainability of the aviation sector, it is advisable to encourage investments in the development of biofuels and their supply chain, international agreements to optimise flight routes or projects to improve the energy efficiency of new engines.

This study investigates the relationship among technology innovation, emission trading schemes, and carbon productivity based on data from firms participating in the Korean Emission Trading Scheme. First, the total factor carbon productivity based on stochastic frontier analysis is estimated by industry and it is confirmed that changes in carbon productivity vary by industry. Based on the estimated carbon productivity, panel data analysis is conducted to determine the effects of innovation and environmental policy on carbon productivity. The results show that R&D investment and environmental policy play an important role in promoting carbon productivity. In this study, the factors affecting carbon productivity are also analyzed by industry. Comparative analysis across industries confirms that factors affecting environmental performance vary by industry. Innovation does not significantly affect carbon productivity in assembling industries, but in the process industry, R&D investment plays an important role in increasing environmental performance.

Air quality issues, especially haze pollution, have become an important aspect that threatens the sustainable development and health of human beings. Previous studies on the environmental effects of emissions trading system (ETS) mainly focused on carbon emission reduction, instead of focusing on the synergistic governance effect between carbon emission and PM2.5 reduction. Based on the PSM-DID method and the World Development Index (WDI) database, this paper examines whether the EU ETS has a spillover effect on PM2.5 damage reduction, and discusses the related impact mechanisms. The research results show that the EU ETS promotes the reduction of PM2.5 damage, and in different phases of implementation, the impact of the EU ETS on the reduction of PM2.5 damage has a dynamic effect. The robustness test results also show that the research conclusions of this paper are highly reliable. Finally, this paper gives relevant policy suggestions, which can encourage countries to achieve carbon emission reduction targets while helping to reduce PM2.5 damage, and eventually achieve a win-win situation between economic growth and environmental improvement.

The Paris Rulebook—nearly complete, but with the ‘markets’ text tied to Article 6 of the Paris Agreement unadopted after nearly three years—invites comparison with a similar effort under the Kyoto Protocol: the Marrakesh Accords. This article compares the Paris Rulebook and the 2001 Marrakesh Accords implementing the Kyoto Protocol as a way of exploring the similarities and differences in regulatory design between the two sub-regimes and their implications for sustainability and climate integrity. An in-depth analysis of the negotiating history and the text of the two instruments yields trenchant and perhaps unexpected conclusions. Issues that plagued the Marrakesh Accords also appear in similar form in the Paris Rulebook discussions around Article 6; however, because of the difference in structure between the two treaties, even more complex issues have arisen in the Rulebook negotiations. The article reflects on the fundamentally different purpose of the ‘markets’ text in the Rulebook in comparison with its Kyoto/Marrakesh precursor, as well as on the implications of those differences for the Article 6 negotiations.

The trading market of carbon emission permits is not only an effective tool for tackling climate change, but it also reinforces the connection between carbon and energy markets by risk transmission...

The pollution emissions trading system (PETS) pilot policy is China's first large-scale implementation of market-based environmental regulations; whether it can reduce pollution emissions and improve the export competitiveness is crucial for China to achieve the coordinated development of environment and economy. Based on the panel data of Chinese listed companies from 2003 to 2016, this paper considers the PETS pilot policy as a natural experiment, and investigates the impact of the policy on export products' quality using the difference-in-difference (DID) model. We found that (1) the PETS pilot policy has significantly improved the quality of listed companies' export products. (2) Technological innovation plays a partial intermediary role in promoting export products' quality by the PETS pilot policy; the "Porter Hypothesis" has been verified in China. (3) When the listed companies with different characteristics face the PETS pilot policy, the quality of their export products will show a differentiated development trend. Based on the above research conclusions, we put forward corresponding recommendations for China to realize the coordinated development of environment and trade.

An emissions trading scheme (ETS) is widely regarded as a cost-effective instrument for curbing global climate change. In 2011, China, the world’s leading carbon emitter, introduced ETS pilots in seven cities/provinces. Subsequent studies have debated their effectiveness, especially in terms of their economic performance. This article investigates whether China’s ETS pilots have successfully balanced carbon emission reductions and economic growth. For this, we apply an extended synthetic control method for multiple treated units that relaxes the parallel trends assumption required by the difference-in-differences estimation commonly used in the field The results show that overall CO2 emissions decreased by approximately 1,165.72 Mt from 2011 to 2015, representing 12.78% of the pilot regions’ total industrial CO2 emissions. As for the ETS pilots’ economic performance over this period, we find that there was a loss in the value of industrial output totalling approximately RMB5,608.88 billion. That said, the economic loss was short term in nature and decreased over time. Regions showed heterogeneous responses to the ETS pilots. Although all of them experienced a decline in CO2 emissions, Beijing and Shanghai showed the fastest reduction, while Guangdong showed the largest reduction. Losses in industrial output were concentrated in Guangdong (RMB7,416.66 billion; 4.64% of the region’s total industrial output) and Shanghai (RMB701.28 billion; 4.08%); the other regions saw economic losses only in the first two years after ETS implementation. These findings suggest that policy makers should consider a gradual (rather than a radical) ETS policy and make firm subsidies part of their battery of instruments in the early stage of establishing a nationwide ETS.

While there a growing interest in Voluntary Carbon Disclosure (VCD), comparatively little is discussed whether the improved quality of voluntary carbon disclosure can lead to subsequent changes in a company’s carbon reduction performance. Drawing on companies under the Korean Emission Trading Scheme (ETS) with the contents analysis of their sustainable reports, the present research seeks to address the existing knowledge gaps in the current literature on environmental disclosure. Findings empirically show that an increase in the voluntary carbon disclosure score is positively transformed into changes in carbon performance and further develop that the effect of voluntary carbon disclosure on carbon performance varies depending on changes in management capability with the moderation effect.

Based on the panel data of 30 provinces in China and the SBM-Malmquist-Luenberger model, a comprehensive evaluation of all-factor green energy efficiency in each province is conducted. It is found that the energy structure and all-factor green energy efficiency in southeast China are significantly higher than those in central and western China. On this basis, this paper empirically tests the impact of the pilot policy of emission trading on total factor green energy efficiency in 2008 by using the double difference method. The research shows that the emission trading system can significantly improve the regional total factor green energy efficiency; further research finds that green technological innovation is the main path for the policy to promote green total factor energy efficiency; heterogeneity analysis shows that in the high pollution pilot areas, the emission trading system plays a more significant role in promoting all-factor green energy efficiency and green technology innovation.

Does participation in voluntary environmental initiatives affect firm value? We take a closer look at the Chicago Climate Exchange (CCX) and the Climate Leaders (CL), two US initiatives to curb carbon emissions that were operating during a decisive regulatory event. In 2009 the Waxman-Markey Bill surprisingly passed the House of Representatives and brought the US economy a big step closer to a nationwide CO2 emission trading system. With an event study we assess how the stock market valued membership in the initiatives when the likelihood of CO2 regulation unexpectedly increased. Our findings suggest that only membership in the market-based CCX was considered beneficial for a mandated carbon market. This is consistent with research that equity-based regulation through financial markets can help economies favor clean industries over dirty ones. We interpret the empirical results in a simple model. Adding earlier market reactions to the firms’ membership announcements, the model implies that the market had been betting on a mandatory emission trading system all along., International Economics and Economic Policy, 19 (1), ISSN:1612-4804, ISSN:1612-4812

This paper explores a manufacturer’s production decisions and a government’s choice between cap-and-trade and carbon tax regulation. The manufacturer sells its product through offline and online channels, and we consider the online-offline spillover effect (OOSE) to reflect the influence of online sales on offline sales. We further compare carbon emission, the manufacturer’s profit, and social welfare for reselling and marketplace modes under the two types of regulations. First, we find that under both policies, when the government allocates a tight cap (high tax rate), the manufacturer should decrease online sales if the OOSE increases, and vice versa. Interestingly, we also discover that the manufacturer’s profit may decrease with the cap regardless of the modes. Second, under a low (high) environmental coefficient, the social welfare using reselling mode is lower (higher) than using marketplace mode, and the two modes can generate the same social welfare under a moderate environmental coefficient. Third, using either mode, when the environmental damage coefficient is low (high), the government should implement cap-and-trade regulation (carbon tax regulation). Finally, based on the data of a real-world company, when the environmental damage coefficient is low (high), the company should use an online platform with marketplace (reselling) mode to achieve optimal profit.

This paper studies the procurement management of carbon financial instruments and the production decisions for an emission-dependent remanufacturing firm under service requirements. In the presence of demand uncertainty, carbon emission options are introduced to hedge risks for the firm who purchases carbon financial instruments under a cap-flexible emission trading scheme (ETS) and then conducts remanufacturing. We develop three optimization models to determine the optimal remanufacturing quantity (procurement quantity of carbon financial instruments) maximizing the firm’s expected profit under three contracts: a pure wholesale price contract, a pure carbon option contract, and a portfolio contract. Through analyses and comparisons of optimal solutions, we demonstrate the values of introducing carbon options and committing to service levels for the firm. Compared with the other two pure contracts, the portfolio contract makes the firm better off. However, high service requirements may lead to a profit loss to the firm. We generalize to the cases when the yield rate is dependent on the quality of used products, when the yield is stochastic, and when carbon price performs volatility. Discussion of these extensions illuminates how the variability of used product quality, yield rate and carbon price influences the firm’s performances.

PurposeThe awareness for protecting the environment has resulted in remanufacturing and recycling policies in manufacturing industries. Carbon emission is one of the most important elements affecting the environment. Carbon emission due to production and transportation creates complicated situations for the manufacturing firms by affecting the manufacturer's carbon quota. The ecological consequences posed in a reverse logistic model are the subject of this study.Design/methodology/approachThe present study explores the fuzzy model of economic production for both remanufacturing and recycling with uncertain cost parameters under the cap-and-trade rule to control the carbon emission due to different modes of transportation. Due to imprecise cost parameters, the hexagonal fuzzy numbers are set to fuzzify the overall cost, which leads to correct decisions in a more confident way. The result is defuzzified by using graded mean integration.FindingsThis study offers an explicit condition to control the carbon emission of the manufacturer and reduce the optimum cost. The findings indicate that the collection of used goods that can be remanufactured must be increased. The model is validated numerically. Sensitivity analysis explores the various aspects of different parameters on net cost to accomplish the fuzzy production model.Originality/valueUnder fuzzy inference, the research offers a relevant contribution in the field of recycling with controlling carbon emission by using the cap-and-trade policy. This study provides a trading strategy for a manufacturer's decision to avoid losses.

Emission trading system is an effective market-oriented means to control pollutant emission and reasonable initial allocation of emission rights is the premise of its smooth implementation. However, at present, the initial allocation of emission rights depends largely on the amount of emissions, which leads to weak positive guidance effect for enterprises. So to explore the optimal initial allocation method of SO2 emission rights, this paper takes 8 thermal power plants in Dalian, China as the research objects to calculate the initial allocation of SO2 emission rights. Because SO2 is the main cause of acid rain, which is one of the most serious air pollution in China, and thermal power plants are among the main SO2-emitters. Firstly, an indicator system is established considering enterprise size, pollutant discharge and social contributions, as well as pollution control capacity. Then, the combination weighting method is developed through integrating the subjective methods G1 and G2 with the objective ones, entropy and maximum deviation. The empirical results show that the enterprises with more desulfurization equipment or large heating supply are supposed to get more emission rights; the actual emission value of SO2 in half of the enterprises exceeds the theoretical ones; SO2 removal rate, desulfurization equipment quantity and heating supply exert the most positive effects on the initial allocation of emission rights. The constructed model can be used as a reference for future research of initial allocation of other pollutants' emission rights. Also, the implications have been proposed for the government, industry, and enterprises.

The European Union (EU) aspires to become a global climate power. Climate neutrality became the guiding principle, the goal, and the pillar of the EU’s external policy after the Green Deal endorsement. The Green Deal is internationalized through a system of external policy instruments, including financial, trade and investment mechanisms, carbon border adjustment and emission trading, agreements with other countries, development support, and promotion of the EU’s regulation and standards through cooperation in international institutions. The normative documents and proposals on the key initiatives have been put forward, and the formats and plans for implementation are being discussed and defined. In this context, it is important to analyze the EU’s initiatives for internationalization of green transformation goals and to identify risks and opportunities related to their implementation. This article reviews the array of external policy instruments and initiatives deployed by the EU: the new trade policy of “open strategic autonomy” and the initiative on trade and sustainable development in the World Trade Organization (WTO); the framework for the screening of foreign direct investments and the taxonomy of environmentally sustainable investment and economic activity; new approaches to energy security and the building of global energy markets, including norms and standards for hydrogen markets; and the new neighbourhood policy, including the new strategy for Central Asia and the Neighbourhood, Development and International Cooperation Instrument. Given the initial stage of the initiative’s implementation, the study focuses on the adopted documents and planned actions. The author assesses the potential impact of climate policy internationalization instruments on EU-Russia economic cooperation and on EU leadership in shaping global climate governance. The author asserts that a number of instruments bear risks for the Russian Federation’s economic projects and proposes recommendations for abating them. With regard to global governance, the EU’s commitment to integrate climate goals into the global agenda may serve as a bridge for inclusive governance. At the same time, the EU’s determination to impose its priorities through carrot and stick incentives, including through economic measures, on partners not sharing the EU’s approach may be destructive. The author concludes that the EU’s capacity to build constructive engagement with partners will be a test of the EU’s real leadership. Given that the Green Deal’s external dimension is intended not only to promote EU priorities and values, but also to advance the global public good, controversies arise with regard to the instruments, not the goals. Thus, it is in the interests of Russia, as well as other partners directly affected, not to oppose the export of the EU’s climate policy, but to cooperate to mitigate unintended consequences of its deployment and to shape inclusive global governance.

This paper discusses the impact of cap-and-trade mechanisms, including grandfathering and benchmarking mechanisms, on renewable energy investments and marketing efforts in the electricity market. The current system constructs a two-level electricity supply chain, with a leader's electricity generator and a follower's electricity retailer. Based on the analysis framework of the game theory, the optimal solutions under the grandfathering mechanism and benchmarking mechanism are compared. The results are as follows. First, grandfathering and benchmarking are both conducive to the investment of renewable energy. Further, the benchmarking mechanism is more conducive to investments. Second, benchmarking is beneficial to marketing efforts, while grandfathering is not. Third, the grandfathering mechanism and benchmarking mechanism are conducive to the improvement of market demands. Further, grandfathering produces more total carbon emissions, while benchmarking reduces the total carbon emissions.

Coal-fired power industry is under enormous pressure to accomplish carbon emission reduction targets. This paper proposes a bi-level multi-objective model for co-firing biomass with coal under carbon cap-and-trade regulation which considers a leader-follower Stackelberg game between the authority and the coal-fired power plants. The upper level regards social welfare maximization and allocation satisfaction maximization as its multiple objectives, while the lower level attempts to maximize the profits of each coal-fired power plant. The inherent uncertainty prompts the motivation for employing fuzzy set theory to characterize the uncertain parameters and determine their exact values. A case study from Shandong Province, China is provided to demonstrate the practicality and efficiency of the optimization model. [Formula: see text]-constraint method and interactive algorithm are used to solve the model, and furthermore the solutions associated with different free carbon emission quota levels and minimal allocation satisfactions have been generated to examine the influences. Based on the analysis and discussion, the methodology can meet the carbon emission reduction goals and transit to a lower-carbon power generation. It also assists the decision makers to develop desired quota allocation strategy in accordance with their attitudes and actual conditions.

Australia is a well-known climate laggard with a history of political conflict over climate policy and the dubious distinction of being the only country to repeal a national emissions trading schem...

The Kyoto Protocol, signed in 1997 and enforced in 2005, aimed to reduce global emissions and establish three mechanisms: an emission trading system, a clean development mechanism, and a joint implantation mechanism. The transition from the Kyoto Protocol to the Paris Agreement requires a better understanding of the modalities, procedures, and accomplishments. This study examines the related commitments and achievements in the context of the legal framework, efficiency, carbon price, and the parties and sectors involved; it also draws implications for developing countries. Global emissions increased over the year despite commitments by Annex I members. Middle-income developing countries were largely responsible for this increase. Low-income developing countries could not fully benefit from the clean development mechanism due to insufficient access and implementation capacity. According to the data reported, most of the beneficiary host countries are in the category of middle-income countries (94%), while low-income countries account for only 2% of the related projects hosted, although they represent around 15% of the total countries. The transition to the Paris Agreement must involve a clear definition of the modalities, procedures, and certain enforcement elements for cases of non-compliance. The current experience of related parties, such as the European Union Emissions Trading Scheme and other flexibility mechanisms, has several implications for the developing world in terms of legal frameworks, efficiency, capacity building, the role of agriculture, and regional collaboration to address climate change.

With increasing global pressure on transition to carbon neutrality, various technical and policy efforts such as emission trading scheme and carbon tax are being made to improve energy productivity. Yet, there are not many literatures that analyze determinants of firm-level energy productivity, which is an important issue as energy use in industry accounts for one fourth of global carbon emission. This study investigates factors affecting energy productivity such as technology innovation, environmental policy and energy price based on firm-level data from the Korean Emission Trading Scheme (KETS). The total factor energy productivity is estimated by industry based on stochastic frontier analysis (SFA) and panel data analysis is performed to identify determinants of firm-level energy productivity. The results show that energy productivity in Korea has been improved since 2016, and technical progress and environmental policy play an important role in promoting energy productivity. In addition, analysis identifying industry-specific characteristics is performed as their production process and energy consumptions structures vary. The result shows that innovation activity does not significantly affect energy productivity in process industries, but it does in the assembling and high technology industries. This paper implies that policy design reflecting industry-specific characteristics is important to improve energy efficiency more effectively.

The retailers within a supply chain management are the most important player as it has direct contact with the customers. Customers are the source of the money and information for the entire supply chain management. The equilibrium condition of the forward and backward supply chain is tight until it is reliable. But sometimes the retailers hide information from the manufacturer and this unreliability starts to propagate to the entire supply chain management. Blockchain technology is one of the secure decentralized systems to prevent unreliability. This study eliminates the unreliability of the system. A mathematical model is derived where the vendor-managed inventory policy is used by the single manufacturer to deal with multiple unreliable retailers. The entire process of manufacturing emits carbon. The carbon emission is controlled by the cap and trade policy and by paying the carbon tax. The results are found by the classical optimization technique and the numerical studies open up a way to the blockchain to deal with unreliable retailers. The decentralized system is a probable choice to prevent unreliability and thus the blockchain.

We study the equilibria reached in electricity, natural-gas, and carbon-emission markets, where power producers simultaneously participate in these three markets. We use a conjectural-variations equilibrium model to represent both electricity and natural-gas markets, in which power/natural gas-producers play a quantity game and adjust their production decisions in reaction to the production levels of their rivals. We use a cap-and-trade mechanism to model the carbon-emission market. We develop a direct approach to identify equilibria involving the three markets, in which the optimality conditions of all players and market clearing conditions are gathered and solved jointly. Numerical results from two test systems illustrate the impact of carbon-emission trading and transmission constraints on the equilibria reached. Additionally, we compare equilibrium results under different types of competition.

Due to growing public awareness about environment-friendly (green) products, green improvement has become an important factor in supply chain management. This paper deals with a two-echelon sustainable supply chain where both the manufacturer and the retailer are environmentally conscious. Market demand is assumed to be dependent on the selling price and green activities of both the channel members, while the carbon emissions are affected by the greening level of the product. In a make-to-order setting, this paper develops four models, viz. centralized, decentralized, retailer-led revenue sharing and bargaining revenue sharing under the cap-and-trade policy, and compares the optimal outcomes analytically. Numerical examples are taken to investigate the influence of some key model-parameters on optimal decisions. Our results demonstrate that besides improving the greening level of the product, the retailer-led revenue sharing can achieve a win-win situation for both the manufacturer and the retailer. Although the bargaining revenue sharing results in lower profit for the retailer, through promoting the greening level of the product effectively and diminishing the selling price it appears favorable for consumers, the manufacturer and the entire supply chain. Sensitivity analysis illustrates that a higher value of carbon trading cost encourages the manufacturer in improving the greening level and so, reducing the carbon emissions.

Since Weitzman (1974) raised a question on which is the better environmental policy tax or standard under asymmetric information, many authors have proposed alternatives to both tax and standard or emission trading scheme. The policy recommended in this paper is also one of them. The policy tells us that the government can set tax rates at arbitrary levels during the trial runs. The government can extract private information from observable abatement activities of firms in the trial periods. However, the government needs not only tax but also the standard for abatement and the penalty against violating the standard, because the firms may respond strategically to the tax rates set in the trial periods. Those supplemental policy devices can eliminate any strategic incentive by equating the marginal benefit and the marginal cost. As a result, we can attain the first best after the trial periods.

We investigate the displacement effects of unilateral phase-out-of-coal policies in a stylized two-country model with coal- and gas-fired electricity generation in an international emissions trading scheme. In the basic policy scenario, electricity markets are national and one country bans coal while the emissions cap remains unchanged. The allocative displacement effects are strongly asymmetric: the coal-banning country suffers a welfare loss, the other country is better off, and aggregate welfare declines. Furthermore, the permit price decreases, while the electricity price rises in the unilaterally acting country and declines in the other country. If all countries would phase out coal, the effects would be symmetric and all countries would lose. We then extend the analysis to the cases (i) when the unilateral coal ban is combined with a moderate cut of the emissions cap (as recently suggested in an EU Directive) and (ii) when we allow for international trade in electricity. Compared to the basic unilateral policy, in these cases, the total welfare costs tend to be smaller and some tend to be shifted from the unilaterally acting country to the other one.

This study analyses factors related to allowance-trading behaviour for the first ten years of the existence of the European Union Emissions Trading System (EU ETS). Our empirical analysis employs a dataset that combines information on trading activities for more than 6000 companies with company characteristics. Indicators of trading activity include the volume and the number of transactions as well as the usage of intermediaries and of derivatives markets. For 2005–2014 and for the individual trading periods, we find that trading behaviour is related to the size of a company, its net position (the difference between free allocations and verified emissions), its sector affiliation, productivity, and location. We also find evidence that trading-related transaction costs affect trading activity in the EU ETS in all trading periods. Our results further suggest that net buyers (companies whose verified emissions exceed free allocations in a given year) are more likely to participate in emissions trading and to trade at higher volumes than net sellers are. We explain this asymmetry in behaviour—which might lead to a violation of Coase’s independence property—by potential asymmetries in the actual or perceived opportunity costs of holding allowances between net sellers and net buyers.

In the context of updating the 2015 Nationally Determined Contribution (NDC), the government of Chile has updated its estimates of compliance costs for a series of mitigation actions with an emphas...

Haze pollution is a major cause of serious respiratory health problems, and reducing haze has become increasingly necessary. Additionally, China is the largest carbon emitter worldwide, and the need to improve the country’s energy conservation and emission reduction strategies has become increasingly urgent. To reduce CO2 emissions, China launched an emissions trading system (ETS) pilot program in 2011. Whether this system reduces haze pollution remains unclear and is the focus of this paper. Based on data from 31 provinces and autonomous regions in Chinese mainland from 2000 to 2017, using haze pollution as the dependent variable, this paper uses the difference-in-differences (DID) and propensity score matching-difference-in-differences (PSM-DID) approaches to conduct empirical analyses of the effects of the ETS on haze pollution in pilot provinces and their neighboring provinces. The results show the following. (1) In the pilot areas, the estimated coefficient of PSM-DID is “− 6.29,” indicating that the ETS can alleviate haze pollution in the pilot areas and achieve a win–win situation of controlling haze pollution and promoting CO2 emission reduction. (2) In the provinces adjacent to the pilot areas, the estimated coefficient of PSM-DID is “− 1.98.” The ETS effectively alleviated local haze pollution, providing a “spillover effect.” (3) Although the ETS was equally effective in controlling haze pollution in the provinces surrounding the pilot areas, its impact on the particulate matter (PM2.5) concentration in the provinces surrounding the pilot areas was weaker than that in the pilot areas, and there was a certain lag period.

The Australia-EU Emissions Trading System (ETS) linking negotiation was the first attempt to link ETSs with substantively different designs, and thus provides insights on the possibilities for hete...

PurposeThe purpose of this paper is to analyze the operational decisions of a manufacturer who produces multiple products and the government's selection of cap-and-trade and carbon tax regulations.Design/methodology/approachThis paper explores the production decisions of a multi-product manufacturer under cap-and-trade and carbon tax regulations in a cap-dependent carbon trading price setting and compares carbon emission, the manufacturer's profits and social welfare under the two regulations. Game theory and extreme value theory are used to analyze our models.FindingsFirst, the authors find that the optimal profit of the manufacturer (the optimal cap) increases and then decreases with the cap (the unit carbon emission of product). Second, if the environmental damage coefficient is moderate, the optimal cap of unit environmental damage coefficient is independent of the product carbon emission or other related product parameters. Ultimately, cap-and-trade regulation always generates more carbon emission than carbon tax regulation. And cap-and-trade regulation (carbon tax regulation) can generate more social welfare if the environmental damage coefficient is low (high), and the social welfare under the two regulations is equal to each other, or otherwise.Originality/valueThis paper contributes the prior literature by considering the inverse relationship of the allocated cap and the carbon trading price and discusses the social welfare under cap-and-trade and carbon tax regulations. Some important and new results are found, which can guide the government's implementation of the two regulations.

We investigate the effects of low-carbon technology transfer between two rivalmanufacturers on their economic, environmental, and social welfare performance under a cap-and-trade policy. We model alternative licensing arrangements of technology transfer and evaluate the model performance from the perspectives of different stakeholders, including manufacturers, customers, and policy makers. Our findings show that the contractual choice on low-carbon technology licensing is dependent on the trade-off between the benefits gained from technology licensing and the consequential losses incurred from competition with a strengthened competitor, which is influenced by a combination of factors, including internal technological abilities, the interfirm power relationship, external market competition, and the carbon emission control policy. Among them, the interfirm power relationship is most influential in determining the optimal contractual decision. In addition, we extend the analysis of technology licensing strategies to different carbon emissions caps with additional cost incurred from purchasing emission allowances through auction, and a two-period model considering emissions cap reduction respectively. Finally, our analyses show it is critical for policy makers to develop appropriate emissions control policies to promote the agenda of a sustainable, low-carbon economy.

Problems of ecological environment and resources have become an important factor restricting the high-quality development of China's economy. How to better integrate into the sustainable development model has become an important goal of macro-policy regulation in the transition period. Mining industry is a fundamental industry in China. Strengthening the incentive role of mining innovation is of great importance for ensuring China's energy security, reducing emissions and promoting economic growth. However, whether environmental regulation can induce technological innovation ability, that is, the existence of Porter effect, is still controversial. It is helpful to study the influence of the Porter hypothesis on mining enterprises for their sustainable development. Based on the data of listed companies in China from 2003 to 2018, and against the background of the SO2 emission trading pilot policy implemented in 2007, this paper studies the incentive effect of the market-incentive environmental regulation on the technological innovation ability of mineral resource enterprises, tests the existence of Porter effect, and discusses the heterogeneity. The results show that the market-incentive environmental regulation has a significant incentive effect on the innovation of mining enterprises, and there is significant Porter effect on mining enterprises. The robustness test confirms the correctness of this conclusion. At the same time, this paper also discusses the variation of the characteristics of heterogeneous enterprises, and finds that enterprises with utility model patents, no low-carbon behavior, and non-provincial cities and regions with high environmental regulation are more sensitive to the SO2 emission trading pilot policy. This paper verifies the incentive effect of the market-incentive environmental regulation on the innovation ability of mining enterprises, and provides a reference for the formulation of innovation incentive policies for mining enterprises in China.

Electricity is an indispensable building block for sustainable development. As national and international electrification measures in rural areas of Tanzania are progressing slowly, a solar-powered mini-grid system with second-life battery storage was commissioned on an island in Lake Victoria in 2019 to support local development. This article evaluates the socio-economic impacts associated with electrification through this system. On average, 42.31 kWh of electricity could be provided per day. The daily demand of the main infrastructure (hospital and school) was 18.75 kWh on average. The remaining capacity thus offers enough potential to supply private households and possible economic activities. In order to evaluate the impact of electrification, a qualitative survey was conducted on site 12 months after commissioning, with 7% of the people living there being interviewed. Language barriers as well as intercultural hurdles made the survey difficult and required an adaptation of the on-site implementation. The focus of the survey was on the areas of health, education and economics. The study revealed that the availability of electricity has enormous potential to improve people's living conditions. Initial successes could be seen, especially in the areas of health care and the economic sector. So far, electrification has had no influence on the area of education. While the connections for the main infrastructure have been institutionally supported, the system-related electricity price of €1.30/kWh has proven to be a major obstacle for private households. This is far too high for widespread use compared to incomes. The article thus focuses on the observation that full socio-economic development through electrification can only succeed if local people can afford it. Possibilities to solve this problem are analysed. Since the energy is generated on the basis of renewable resources, the analysis focuses on the use of mechanisms of the emissions trading system (ETS). The aim is to generate revenue through the sale of certified emission reductions (CERs) for the saved CO2emissions and thus reduce the electricity price. A reference scenario of conventional energy production forms the basis for discussion of the effectiveness of the Clean Development Mechanism (CDM) and the Carbon Initiative for Development (Ci-Dev). In addition, the approach of a monthly free quota of electricity, the free basic electricity initiative (FBE), is included in the evaluation.Graphical abstract

According with a growing sense of climate change in recent decades, an increasing number of works have focused on the impacts of climate on tourism. However, few studies to date have investigated the impacts of various emissions policies on tourism, leading to an ambiguous understanding of tourism adaption to emissions policy change. Here this study attempted to provide a framework to guide future research on tourism change under the leading emissions policies worldwide (i.e. the carbon tax and emissions trading scheme). Regarding the policy setting, this study suggests both the policy diversification within the emissions trading scheme or carbon tax and their comprehensive study. Regarding the research subject, this study recommends taking into account overall or sectoral impacts on different tourism economic and environmental variables. Moreover, future efforts should be devoted to not only simulating future change but also quantifying the actual impacts on tourism based on existing data. Regarding the methodology, this study strongly recommends four methods for assessing the impacts of emissions policies on tourism, including the augmented computable general equilibrium model, dynamic stochastic general equilibrium model, difference-in-differences method, and regression discontinuity method.

In recent years, as a result of the rapid increase in population and industrial development, the need for energy has increased. Many investments are made especially for electrical energy which is an inevitable requirement for the industry. Most of these investments are made by using fossil resources in countries’ lands. Fossil sources are known to be consumable as well as too poisonous gases they give to the atmosphere during energy production. This situation causes global climate change. To prevent climate change, the carbon emitted to the atmosphere has to be brought under a certain control mechanism. In this context, the first Kyoto Protocol and then Paris Climate Agreement was signed. Under these agreements, countries will be responsible for the level of their greenhouse gases in the atmosphere. This situation led to the carbon trade among countries. This situation accelerated the transition of countries from fossil sources to renewable energy sources. In this study, the effect of hydroelectric power plants, one of the renewable energy sources, on carbon emissions was investigated. According to the results, based on fossil sources of 408,533.57 tCO2 per year from Turkey Gokcekaya dam has been shown to reduce the carbon footprint.

This paper constructs a model of an Emission Trading Scheme (ETS) market using bid-ask spreads. We show that when such a market is dominated by a small number of traders with substantial market power, they tend to maximize their profits by widening bid-ask spreads, thereby reducing market liquidity. We argue that adding more market participants, including derivatives traders, can alleviate this illiquidity problem. Policy changes at the European Union’s ETS illustrate our theory, as the market significantly increased liquidity by enacting liquidity-provision policies to attract more participants as it transitioned from Phase 1 to Phase 2.

We empirically investigate the effect of emissions trading scheme (ETS) on the corporate performance of Chinese listed firms from 2010 to 2016, treating China’s pilot ETS as a quasi-natural experim...

Emissions trading schemes (ETSs) have been a central component of international climate change policies, as a carbon pricing tool to achieve emissions reduction targets. Forest carbon offset credits have been leveraged in many ETSs to efficiently meet emission reduction targets, yet there is little knowledge about the perceptions, experiences, and challenges associated with the forest carbon offsetting in existing and pilot ETS. Given that the future inclusion of forest carbon offset in ETS management activities and policies will require strong support and acceptability among the institutions and experts involved in ETS, this study explores the experiences and lessons learned with 16 globally engaging experts representing major existing ETSs (North America, Europe, and New Zealand) and Chinese pilot ETSs towards the inclusion of forestry offsets, major concerns and challenges with existing implementation models. Findings revealed that many respondents particularly from North America, New Zealand, and Chinese pilot systems portrayed positive attitudes toward the inclusion of forestry carbon offsets and its role in contributing to a viable ETS, while European experts were not supportive. Respondents cited leakage, permanence, additionality, and monitoring design features as the major challenges and concerns that inhibit the expansion and inclusion of forest carbon offsetting. Respondents from Chinese pilot schemes referenced a unique set of challenges related to implementation, including the increasing cost of afforestation and reforestation projects, the uncertainty in the future supply and demand for their national Certified Emissions Reduction (CER) scheme and landowner engagement. Existing and future ETSs should learn from and address the challenges experienced by global experts and carbon pricing mechanisms to design, evaluate, or enhance their forest carbon offset programs for an effective and viable system that successfully contributes to GHG mitigation practices globally. We recommend inclusion of forest carbon offsets at the early stages of ETS improves the perceptions and experience of policy makers and practitioners toward the success and potential of forestry offsets in ETS ensuring familiarity and confidence in the mechanism.