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Die Europäische Union (EU) hat erkannt, dass das Ziel der Klimaneutralität bis 2050 ein zentraler Innovations- und Wachstumsmotor für Industrie und Wirtschaft in der EU sein kann. Neben großen Chancen stellt dies die europäische Wirtschaft und überwiegend die besonders emissionsintensiven sowie im international starkem Wettbewerb stehenden Grundstoffindustrien auch vor erhebliche Herausforderungen. Eine integrierte Klima- und Industriestrategie ist für den Klimaschutz von zentraler Bedeutung, da auf die Produktion von Stahl, Zement, Grundstoffchemikalien, Glas, Papier und anderen Materialien in der EU und weltweit rund 20 Prozent der gesamten Treibhausgasemissionen entfallen. Auch in einer treibhausgasneutralen Zukunft kann auf diese Materialien nicht verzichten werden. Zugleich ist die emissionsfreie Herstellung der Materialien technologisch sowie mit Blick auf die dafür erforderlichen Infrastrukturen besonders herausfordernd. Dies gilt vor allem für die Frage woher die hohen benötigten Mengen an grüner Energie - insbesondere Strom und Wasserstoff - zu wettbewerbsfähigen Preisen kommen sollen. Analysen zeigen, dass trotz erheblicher Kosten bei der Prozessumstellung die Kosten der Transformation der Grundstoffindustrie für die Gesellschaft insgesamt tragbar sind. Denn bezogen auf die Endprodukte betragen die Mehrkosten meist nur wenige Prozentpunkte; die Preise von Rohstahl oder Zement dagegen würden sich zwischen einem Drittel und 100 Prozent verteuern. Da fast alle Grundstoffhersteller in starker Weltmarktkonkurrenz stehen, können sie die Investitionen in eine klimaneutrale Produktion und die benötigten Energieinfrastrukturen aber nicht ohne Unterstützung tragen. Das vorliegende Papier skizziert ein integriertes Klima-Industriepolitikpaket, das der EU ermöglichen kann, die bestehende technologische Führung in vielen dieser Industrien zielgerichtet zum Aufbau einer treibhausgasneutralen Grundstoffindustrie zu nutzen.

The Low Carbon Fuel Standard (LCFS) plays a critical role in California’s efforts to reduce greenhouse gas (GHG) and air pollutant emissions from transportation. The LCFS incentivizes the use of fuels with lower life cycle GHG emissions by using a credit market mechanism to provide incentives for low-carbon fuels, using revenue generated by charges applied to high-carbon ones. Maintaining an approximate balance between LCFS credit and deficit supplies helps support a stable LCFS credit price and the broader transition to low-carbon transportation. The Fuel Portfolio Scenario Model, presented here, evaluates bottom-up fuel supply and LCFS compliance to inform LCFS policy decisions. We considered two key fuel demand scenarios: (1) the Low Carbon Transportation scenario, reflecting the expected transition to low-carbon transportation in California over the next 15 years, and (2) the Driving to Zero scenario, featuring a significantly higher consumption of petroleum gasoline. In both scenarios, 2030 LCFS targets around 30% resulted in a near-balance between credits and deficits, with some banked credits remaining. Several additional scenarios were modeled to explore the impact of target trajectory timing, alternate post-2030 targets, greater biofuel use, and other parameters. This fuel portfolio scenario modeling work can meaningfully inform policy development.

As more governments consider minimum domestic CO2 prices, we investigate three unilateral options for jurisdictions operating within a multilateral emissions trading system (ETS): 1) an additional CO2 TAX; 2) an auction reserve policy to KILL (invalidate) allowances; and 3) an overcompliance requirement to BILL domestic emitters for extra allowances per ton of emissions. We assess three main economic incentives for unilateral action: environmental benefits, fiscal benefits, and terms-of-trade gains. We derive theoretically optimal unilateral price floors and, based on numerical simulations for the EU ETS, illustrate how a national government's preferred strategy depends on how it values fiscal versus environmental benefits.

The European Union Emissions Trading System (EU ETS) is a cap-and-trade scheme, whose adjustable supply of allowances is determined by a quantity mechanism, as opposed to a price mechanism. This paper quantifies the reduction in cumulative emissions that arises from bringing the final year of a cap-and-trade scheme that operate a quantity mechanism, such as the EU ETS, forward in time. Using a dynamic simulation model of the EU ETS, the paper shows that bringing the final year forward in time will lead to cumulative emissions reductions, if the duration is sufficiently or drastically shortened. On the other hand, shortening the duration of the scheme to a lesser extent will lead to increased cumulative emissions. Moreover, the intuition behind the result is described through a three-period theoretical model of emissions trading. These results have implications not only for emissions in the EU, when the EU ETS is complemented by other policies such as the European Green Deal, but also for the design of overall quantity-based policy instruments for cap-and-trade schemes. The paper concludes by stating that careful consideration should be considered for future reforms of the EU ETS and for broader climate policies.

The international nature of the climate change challenge complicates the cost analysis. Researchers have therefore concluded that atmospheric carbon concentrations influence climate change, and that greenhouse gas emissions may be a contributing factor, leading policy makers in several countries to examine options for reducing emissions of greenhouse gases, particularly carbon dioxide (CO2). There are at least four ways to estimate the "cost of carbon emission reductions: (1) the carbon tax necessary, which measures the marginal cost of the final tonne of emissions cut; (2) the total direct cost, which measures the marginal cost of all emissions reductions; (3) the loss in GDP." A wide range of businesses' economic performance and behaviour are directly impacted by carbon emissions. “This study was aimed at examining, using quantitative methods, the relationship between Corporate Carbon Disclosure and Financial Performance of the top 30 companies listed in the FTSE (Financial Times Stock Exchange) and JSE (Johannesburg Stock Exchange) Responsible Investing Index. The study results showed that sales revenue is negatively correlated to carbon disclosure, although the relationship is statistically insignificant. The regression results showed that the relationship between Carbon Disclosure and Return on Equity is statistically insignificant implying independence between the variables, despite the negative correlation being established”. The study results also showed that Earnings per Share is negatively correlated to Carbon Disclosure, although the relationship was not statistically significant. The study recommends the crafting of comprehensive Carbon Disclosure metrics, which enable objective measurement of the variable and establishment of the statistically significant relationship with performance measures and the improvement in stakeholder involvement and engagement in order to improve the level of carbon disclosure and financial performance. Legislations should be

Acord transformatiu CRUE-CSIC, Unidad de excelencia María de Maeztu CEX2019-000940-M, Many countries have carbon pricing in place, in the form of a tax and/or market. Generally, this involves low price rates, incomplete emissions coverage, and price reductions for particular sectors. This raises the question whether the label "carbon price" - in the environmental-economics textbook sense - really applies. To answer it, we assess the authenticity of 31 national carbon prices, calculating average carbon prices and their gap with advertised prices, at both national and sector levels. The results indicate a poor level of authenticity. This means that the carbon prices published by sources such as the World Bank provide a misleading representation of the actual national policy pressure on emissions. Countries show considerable differences regarding the average carbon price level and the gap with advertised prices. Moreover, there is not a one-to-one relationship between advertised and average carbon prices, suggesting the former are not a good basis for international comparison of policy effectiveness. Across countries, the mean carbon price equals €7.90/ton of CO while the mean price gap is 57.7%. Most noticeably, the highest advertised price for Sweden should be interpreted with care as it goes along with a price gap of almost €100 to the average price. In addition, Switzerland and Finland show relatively high price gaps. To illustrate the relevance and non-triviality of our indicators, note that Sweden occupies a 3rd position in terms of average carbon price (after Norway and Switzerland), 27th in terms of price gap, and 16th in terms of effective rate (i.e. sum of implicit and explicit carbon prices). We further find that implicit carbon prices dominate explicit ones for most countries, notably in road transport, whereas the reverse holds for industrial and electricity sectors. Combining our findings with recent empirical evidence for carbon-pricing effectiveness highlights the potential of the instrument to combat climate change, provided implementat

Top-down approaches to reducing global carbon dioxide emissions have so far met with limited success, even though most countries accept the urgency of mitigating climate change and have entered into various agreements that should help reduce emissions. This article does not dismiss the importance of such "top-down" agreements for developing rational strategies to achieve declining total emissions, but it suggests a complementary approach to encourage immediate "bottom-up" progress on climate goals that do not need to wait for global cooperation. This paper develops a framework to identify free-riding behavior among countries that use three readily measured parameters of the country’s economy: carbon intensity, rate of change of the carbon intensity, and per capita GDP. It then goes on to propose a simple formula to calculate trade sanctions against a free-riding country that could be used in bilateral actions to incentivize carbon emissions reductions. The paper argues that the value of the goods, the difference in carbon intensity between the importer and exporter, and the cost of carbon removal can be used to calculate the unfair trade advantage of a free-riding country. The dynamics of the proposed framework are tested through three case studies, highlighting current free-rider behavior - based on historic emissions for the period 1991-2012; an lternate, hypothetical scenario whereby a subset of countries follow aggressive carbon emission reductions; and a 450 ppm stabilization scenario.

Dieses Wuppertal Paper dient dazu, a) die mögliche Klimaschutzwirkung eines CO2-Preises zu analysieren, allein und im Gesamtpaket von Instrumenten zum Klimaschutz, b) die Möglichkeiten der Mittelverwendung zu analysieren und zu bewerten, c) dadurch den Dschungel der Argumente und Motivationen in den bestehenden Vorschlägen zu lichten und d) aus der Analyse ein Modell zu skizzieren, das den Anforderungen von Klimaschutz und sozialer Gerechtigkeit sowie Erhalt der Wettbewerbsfähigkeit am besten gerecht wird und damit der Bundesregierung als Anregung bei der Entscheidung über Einführung und Ausgestaltung eines CO2-Preises dienen kann. In dem Papier werden diese Fragen anhand von neun Thesen mit einem abschließenden Fazit ergründet. Daraus wird deutlich: Ein CO2-Preis kann sektorale Ziele und Instrumente nicht ersetzen. Seine volle Wirkung kann er nur entfalten, wenn er komplementär zu sektorspezifischen Klimaschutzinstrumenten eingeführt wird. Nur wenn für diese Instrumente ein guter Teil der Einnahmen aus der CO2-Steuer eingesetzt wird, sind die Klimaziele erreichbar. Die Ziele werden dadurch mit weitaus geringerem CO2-Preis bei gleichzeitig höheren Kostenentlastungen für Verbraucherinnen und Verbraucher, Unternehmen und sogar die öffentlichen Haushalte erreichbar, als wenn die Politik allein auf einen CO2-Preis setzen würde.

What lessons emerged during the development of China's national emissions trading scheme (ETS)? It was launched in late 2017 and started operation in July 2021, beginning with online trading of emissions permits. The preceding decade was used for preparing and testing, including seven pilot markets. It was decided to start with the power sector, the largest-emitting sector, and initially cover coal- and gas-fired power plants. This article offers theory-oriented and empirical contributions to domestic-level learning, and asks what happens after a policy has "landed". We employ an analytical concept originating from diffusion theory-learning - and view internal learning as a key mechanism. We argue that having a slow and well-prepared start contributes to the potential success of the ETS; further, that the lengthy preparatory period enabled China to address various obstacles, providing a strong basis for success, singly and as part of the national mitigation policy complex. Internal learning has proven crucial to the development of the ETS in China, with the learning process continuing as the national ETS becomes operative. We also discuss the possibilities for linking China's carbon market with other markets, which should heed China's ETS experience and emphasize learning.

Carbon pricing is a key policy instrument used to steer markets towards the adoption of low-carbon technologies. In the last two decades, several carbon pricing policies have been implemented or debated at the state and federal levels in the US. The Regional Greenhouse Gas Initiative and the California cap-and-trade policy are the two regional policies operational today. While there is no federal policy operational today, several carbon pricing proposals have been introduced in Congress in the last decade. Using the literature on interest group politics and policy entrepreneurship, this article examines the carbon pricing policies at the subnational and federal levels in the US. First, the article explores the evolution of two main regional carbon pricing policies, the Regional Greenhouse Gas Initiative and California cap-and-trade, to identify how interest groups and policy entrepreneurs shaped the design and implementation of the respective policies. Second, the article details the federal carbon pricing policy proposals and bills discussed in the last decade. Third, it examines the factors that limit the prospects of realizing an ambitious federal carbon price for pursuing deep decarbonization of the US economy. The article finds that federal carbon pricing in the US suffers from the lack of any natural and/or consistent constituency to support it through policy development, legislation, and implementation. While interest group politics have been mitigated by good policy entrepreneurship at the subnational level, the lack of policy entrepreneurship and the changing positions of competing interest groups have kept a federal carbon pricing policy from becoming a reality.

As part of the EU Green Deal initiative in 2019, the EU Commission decided to develop a proposal to include emissions from shipping in the EU emissions trading system. This occurred only one year after the Commission had heralded the emissions reduction agreement negotiated in the International Maritime Organization (IMO) as a significant step forward - thereby signalling support for the IMO process. We apply a multi-level reinforcement perspective to explain this apparent policy volte-face, resulting in a Commission proposal in July 2021 which is now moving through institutions in the EU. Such a perspective notes the "friendly" competition for leadership among central actors at various levels in the EU - particularly the Commission, the European Parliament, and leading member states. We find, first, that the inclusion of shipping is in line with the broadening ambitions of the Commission since the start of the emissions trading system. Second, until 2019, the Parliament carried the regulatory torch. A turning point in the policymaking process was the inclusion of the shipping issue in Ursula von der Leyen's programme for getting accepted by the Parliament and elected as Commission leader in 2019. From then on, the Commission again took the lead. Third, despite the 2018 IMO agreement, progress there was deemed slow, which further motivated EU policymakers to act unilaterally.

In this article, we explain why the current climate policy mix of the European Union (EU), consisting of the EU Emissions Trading System (ETS) and overlapping policies, is incoherent with respect to emission abatement and cost-effectiveness. The concept of policy coherence guides our analysis in identifying the EU ETS’ current dynamic supply adjustment mechanism, the Market Stability Reserve (MSR), to be at the heart of the shortcomings of current market design. Incoherence emerges due to the MSR’s quantity-based indicator for scarcity. It only works well for current and past demand fluctuations, but not for anticipated changes in demand, e.g., caused by a member state’s fossil-fuel phase-out. As a result, instead of fostering synergies as intended, the MSR undermines coherence by creating backfiring interactions and making precise predictions of overlapping policies’ impacts close to impossible. Considering the European Commission’s reform proposal of July 2021, we argue that a change in the MSR’s parametrisation leaves the fundamental cause of incoherence unaddressed. Based on recent findings in the economics literature, we propose introducing a price-based indicator for scarcity as a solution to substantially reduce the current incoherence of the policy mix.

Over the past two decades, the emergence of multiple carbon market segments has led to fragmentation of governance of international carbon markets. International baseline-and-credit systems for greenhouse gas mitigation have been repeatedly expected to wither away, but show significant resilience. Still, Parties to the Paris Agreement have struggled to finalize rules for market-based cooperation under Article 6, which are still being negotiated. Generally, there is tension between international top-down and bottom-up governance. The former was pioneered through the Clean Development Mechanism under the Kyoto Protocol and is likely to be utilized for the Article 6.4 mechanism, while the latter was used for the first track of Joint Implementation and will be applied for Article 6.2. Voluntary carbon markets governed bottom-up and outside the Kyoto Protocol by private institutions have recently gained importance by offering complementary project types and methodological approaches. The clear intention of some Parties to use market-based cooperation in order to reach their nationally determined contributions to the Paris Agreement have led to an ongoing process of navigating the alignment of these fragmented carbon market instruments with the implementation of nationally determined contributions and Paris Agreement's governance architecture. We discuss emerging features of international carbon market governance in the public and private domain, including political and technical issues. Fragmented governance is characterized by different degrees of transparency, centralization, and scales. We assess the crunch issues in the Article 6 negotiations through the lens of these governance features and their effectiveness, focusing on governance principles and their operationalization to ensure environmental integrity and avoid double counting.

Emissions trading systems (ETSs) are operating and developing in many regions and countries. Doubts have been raised about their effectiveness, but the global picture has many nuances, as the contributions to this thematic issue on carbon markets show. In this editorial, we briefly review some of the achievements and limitations of key ETSs, and provide an overview of the assembled articles. The cases examined in this issue include carbon markets rules under the Paris Agreement, the reform of the EU ETS and the proposed expansion of its sectoral coverage to shipping, and emissions trading initiatives in China, the USA, and New Zealand. The evidence indicates that, despite uncertainties related to future developments, carbon markets are continuing to evolve and expand around the world.

Climate Change Acts (CCAs) seek to anchor national climate policy by establishing long-term targets and lines of accountability that guide the development of other climate policy instruments. However, counter-pressures to modify CCAs can occur where tensions exist with the provisions of already-established policies that enjoy substantial political and stakeholder support. Such tensions can be especially pronounced where CCAs necessitate major changes to emissions trading schemes (ETSs) that have formed the mainstay of efforts to reduce national emissions. This article employs a novel anchoring policy framework to examine the dynamics of aligning ETSs with CCAs. We investigate debates on reforms to the New Zealand Emissions Trading Scheme following the introduction of the Zero Carbon Act in 2019 to examine how alignment pressures between anchoring and subordinate policies are negotiated. The analysis reveals several tactics used to increase the acceptability of reforms to the New Zealand Emissions Trading Scheme and protect the Zero Carbon Act’s integrity. The article concludes by arguing that a greater understanding of alignment pressures between anchoring and subordinate policies is essential in enabling both CCAs and ETSs to contribute to achieving decarbonisation goals.

Beliefs about other people's opinions on climate change influence one's own opinion. Such beliefs can, however, suffer from biases in perception. Using two nationally representative surveys, we examine this issue in a new context, namely of carbon-tax acceptance in Spain. We find that the more one expects the tax to be accepted by others, the more one accepts it personally. But opponents of a carbon tax tend to strongly overestimate the prevalence of their opinion, i.e. they exhibit a so-called false consensus effect. In contrast, despite holding the majority view, tax supporters somewhat underestimate the prevalence of their own view, which is known as pluralistic ignorance. We further test the role of information provision by providing participants with different percentages of people accepting the tax. Overall, we find little evidence that such information provision significantly increases tax acceptance. The impact of information provision on tax acceptance tends to be moderated by the degree of false consensus. © 2022 Elsevier Ltd

Flying can constitute as much as a third of an academic institution’s total emissions and there’s a growing concern among researchers around their academic travel contributing to global warming. This paper is part of KTH FLIGHT, a research project for decreased CO2-emissions in flight-intensive organizations through creation and testing of practical tools. It is a Research through Design work that provides new knowledge about a previously largely unexplored implementation area of emission trading systems like Cap and Trade. These have previously helped reduce emissions at lower costs than tax based systems in various settings but little research exists in terms of design and important factors for a university to promote more sustainable travel patterns. This paper reveals challenges and opportunities regarding implementation and shows current feasibility in implementing in a Swedish university (KTH), and provides suggestions for choosing suitable users and direction of future research., Flygresor kan utgöra upp till en tredjedel av en akademisk institutions totala utsläpp och det finns en växande oro bland forskare kring att deras resande bidrar till den globala uppvärmningen. Denna rapport är en del av KTH FLIGHT, ett forskningsprojekt med syfte att minska CO2 -utsläpp i flygintensiva organisationer genom att skapa och testa praktiska verktyg. Detta är ett Research through Design-arbete som bidrar med ny kunskap om ett tidigare till stor del outforskat område för implementeringar av utsläppshandelssystem såsom Cap and Trade. Dessa har i olika sammanhang tidigare bidragit till minskade utsläpp med lägre kostnader än skattebaserade system. Men i dagsläget finns det lite forskning gällande dess design och viktiga faktorer för att främja mer hållbara resvanor på ett universitet. Denna uppsats visar på utmaningar och möjligheter vid en implementering och visar aktuell genomförbarhet i ett svenskt universitet (KTH), samt ger förslag på val av lämpliga användare samt inriktning för framtida forskning.

The initiative by the EU to combat global warming through the introduction of a cap-and-trade system for greenhouse gas emissions in 2005, known as the EU Emissions Trading System (ETS), resulted in the inception of a new financial market. The right to emit one tonne of CO2-equivalents, as well as derivatives on this right, have become commodities, traded both through exchanges and over the counter. A relevant question thus becomes how a market maker trading these derivatives should hedge their exposures. This thesis examines how stochastic optimisation can be used to hedge a portfolio of futures, forwards, and emissions rights in the EU ETS, while taking into account market microstructre effects such as transaction costs. This is done through the implementation of a Stochastic Programming (SP) model that weights portfolio risk against transaction costs,where the entire term structure of futures is Monte Carlo-simulated. The term structure of the futures is analysed by decomposing futures prices into the spot price, the term structure of the risk free interest rate, and the term structure of the convenience yield, as was first done by Working (1948). These are estimated using the non-parametric optimisation framework of Blomvall (2017), where EUROIS contracts and ICE EUA futures are used as benchmark instruments. It was found that the method results in smooth yield curves with small repricing errors, thanks to suitable parameter calibration through 3-fold Cross Validation for both curves. From day-to-day changes in the resulting curves, three systematic risk factors for each curve, that capture more than 98% of the variance during the analysed period from October 2012 to March 2018, were found with PCA. These factors were then fitted to univariate GARCH-models, and normal mixture copulas. This model allows for the hedging problem to be solved with SP. For the out-of-sample period from March 2018 to April 2022, the results show promise, as the portfolios hedged with

Should the carbon price be high to stimulate climate-friendly technologies or should it be low to realize inexpensive emission reductions? This ‘carbon price paradox’ is unraveled for the EU on the basis of legal, economic and political arguments. Legally, the primary aim of the EU ETS Directive is to promote cost-effective emission reductions. Economically, the rate of emission reduction in the EU ETS and to an increasing extent also its indirect impact on technological innovation are not so much determined by the level of the allowance price, but rather by the rate at which the emission ceiling falls. Politically, a lower carbon price creates room to lower the emission ceiling more quickly. In sum, society should welcome a low carbon price.

The instrument choice debate has been a fixture of environmental law for much of the last three decades.  While this debate has led to a much sharper focus on the relative merits of different regulatory tools in confronting environmental problems, it has also left the field unprepared to conceive and implement an adequate response to complex, multifaceted challenges such as climate change.  Using the case of emissions trading, this Article investigates how the instrument choice debate has impoverished our conception of government and limited our capacity to respond to the climate crisis.  The central claim is that the overly abstract theory of instrument choice that has underwritten widespread enthusiasm for emissions trading and other forms of carbon pricing over the last three decades has led to a sharply diminished view of public engagement and government problem solving.  In advancing this claim, the Article makes three main contributions.  First, it provides a critical intellectual and institutional history of emissions trading that, for the first time, situates it within a broader history of instrument choice in law, economics, and political science.  Second, it uses this history to develop and demonstrate a more reflexive and critical theory of policy instruments and government problem solving, showing how the mainstream instrument choice debate has constrained our conceptions of the regulatory state and its capacity for climate action in jurisdictions around the world.  Third, and finally, it advances a series of normative claims that seek to rethink and reimagine a more responsive and expansive approach to government problem solving in the face of the looming climate emergency.

The present article describes the main insights deriving from the papers collected in this special issue which jointly provide a ‘room with a view’ on some of the most relevant issues in climate policy such as: the role of uncertainty, the distributional implications of climate change, the drivers and applications of decarbonizing innovation, the role of emissions trading and its interactions with companion policies. While looking at different issues and from different angles, all papers share a similar attention to policy aspects and implications, especially in developing countries. This is particularly important to evaluate whether and to what extent the climate policies adopted thus far in developed countries can be replicated in emerging economies.

The present article describes the main insights deriving from the papers collected in this special issue which jointly provide a ‘room with a view’ on some of the most relevant issues in climate policy such as: the role of uncertainty, the distributional implications of climate change, the drivers and applications of decarbonizing innovation, the role of emissions trading and its interactions with companion policies. While looking at different issues and from different angles, all papers share a similar attention to policy aspects and implications, especially in developing countries. This is particularly important to evaluate whether and to what extent the climate policies adopted thus far in developed countries can be replicated in emerging economies.

Acord transformatiu CRUE-CSIC, Unidad de excelencia María de Maeztu CEX2019-000940-M, There is an ongoing discussion about the effectiveness of carbon pricing, with a strong division between optimists and pessimists. A recent review study by Lilliestam, Patt and Bersalli (2021) of the impact of carbon pricing on low-carbon innovation and deep carbonization concludes that there is no evidence for such an impact. We evaluate this study and identify various shortcomings of it, which together cast strong doubts on its main conclusion. Instead, we conclude, based on the studies reviewed by the authors and additional, overlooked literature, that carbon pricing has had a small but positive and significant effect on low-carbon innovation. Our evaluation provides lessons for undertaking a systematic and objective review of research on this topic. Since the main goal of carbon pricing is changing choices by firms and consumers that affect carbon emissions, we also point the reader towards recent evidence for the broader effectiveness of carbon pricing.

Producing energy by burning fossil fuels leads to the emission of greenhouse gases, such as CO2. These emissions can be reduced in a cost-effective manner by implementing an Emissions Trading Scheme (ETS). An ETS allows legal entities, such as power companies and/or energy-intensive industries, to buy and sell emission rights under an increasingly stringent reduction target. There are three basic design variants of an ETS: cap-and-trade (allowance trading), performance standard rate trading, and project-based credit trading. These variants perform differently in terms of effectiveness and efficiency. The number of ETSs around the world is slowly increasing, with most of Europe, parts of North America, Kazakhstan, China, South Korea and New Zealand now covered. Only a limited number of ETSs have been linked, with some linking taking place within (though not yet between) continents. Emissions trading is an emerging regulatory instrument to efficiently protect the environment, but there remains a long way to go before a global carbon price is realised.

In one of the central scenarios for meeting an European Union-wide net zero greenhouse gas (GHG) emissions target by 2050, the emissions cap in the European Union Emissions Trading System (EU ETS) becomes net negative. Despite this ambition, no mechanism allows for the inclusion of CO2 removal credits (CRCs) in the EU ETS to date. Amending the EU ETS legislation is required to create enabling conditions for a net negative cap. Here, we conceptually discuss various economic, legal, and political challenges surrounding the integration of CRCs into the EU ETS. To analyze cap-and-trade systems encompassing negative emissions, we introduce the effective (elastic) cap resulting from the integration of CRCs in addition to the regulatory (inelastic) cap, the latter now being binding for the net emissions only. Given current cost estimates for BECCS and DACCS, minimum quantities for the use of removals, as opposed to ceilings as currently discussed, would be required to promote the near-term integration of such technologies. Instead of direct interaction between the companies involved in emissions trading and the providers of CRCs, the regulatory authority could also transitionally act as an intermediary by buying CRCs and supplying them in turn conditional upon observed allowances prices, for example, by supporting a (soft) price collar. Contrary to a price collar without dedicated support from CRCs, in this case (net) compliance with the overall cap is maintained. EU legislation already provides safeguards for physical carbon leakage concerning CCS, making Bioenergy with Carbon Capture and Storage (BECCS) and Direct Air Capture and Storage prioritized for inclusion in the EU ETS. Furthermore, a special opportunity might apply for the inclusion of BECCS installations. Repealing the provision that installations exclusively using biomass are not covered by the ETS Directive, combined with freely allocated allowances to these installations, would allow operators of biomass ins

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 recent years, the issue of the climate has aroused exponentially increasing interest and it is a common priority on the political agenda worldwide. The European Union Emissions Trading System (EU ETS) is the first and largest international system of trading with carbon emissions and it is sometimes described as the cornerstone in EU climate policy to combat climate change with its main objective to reduce carbon emissions. However, there are reasons to concern about topics related to competitiveness of firms included by the ETS. This thesis aims to examine the effects of the spot prices of EU allowances (EUAs) on the level of exports from trading countries to non-trading countries with the intention of drawing conclusions on the effects on competitiveness induced by the EU ETS. The research question is answered based on earlier research combined with an empirical analysis. My empirical analysis finds that the spot price levels of EUAs do have an impact on the level of exports from trading countries to non-trading countries.

We assess evidence from theoretical-modelling, empirical and experimental studies on how interactions between instruments of climate policy affect overall emissions reduction. Such interactions take the form of negative, zero or positive synergistic effects. The considered instruments comprise performance and technical standards, carbon pricing, adoption subsidies, innovation support, and information provision. Based on the findings, we formulate climate-policy packages that avoid negative and employ positive synergies, and compare their strengths and weaknesses on other criteria. We note that the international context of climate policy has been neglected in assessments of policy mixes, and argue that transparency and harmonization of national policies may be key to a politically feasible path to meet global emission targets. This suggests limiting the complexity of climate-policy packages. Key policy insights Combining technical standards or targets, such as renewable-energy quota, or adoption subsidies with a carbon market can produce negative synergy, up to the point of adding no emissions reduction beyond the cap. For maximum emissions reduction, renewable energy policy should be combined with carbon taxation and target expensive reduction options not triggered by the tax. Evidence regarding synergy of information provision with pricing is mixed, indicating a tendency for complementary roles (zero synergy). Positive synergy is documented only for cases where information provision improves effectiveness of price instruments, e.g. by stimulating social imitation of low-carbon choices. We conclude that the most promising packages are combining innovation support and information provision with either a carbon tax and adoption subsidy, or with a carbon market. We further argue that the latter could have stronger potential to harmonize international policy, which would allow to strengthen mitigation policy over time. © 2021 Informa UK Limited, trading as Taylor & Fran

There is an ongoing discussion about the effectiveness of carbon pricing, with a strong division between optimists and pessimists. A recent review study by Lilliestam, Patt and Bersalli (2021) of the impact of carbon pricing on low-carbon innovation and deep carbonization concludes that there is no evidence for such an impact. We evaluate this study and identify various shortcomings of it, which together cast strong doubts on its main conclusion. Instead, we conclude, based on the studies reviewed by the authors and additional, overlooked literature, that carbon pricing has had a small but positive and significant effect on low-carbon innovation. Our evaluation provides lessons for undertaking a systematic and objective review of research on this topic. Since the main goal of carbon pricing is changing choices by firms and consumers that affect carbon emissions, we also point the reader towards recent evidence for the broader effectiveness of carbon pricing. © 2021, The Author(s).

Climate policies can be applied either upstream, where fossil fuels are extracted, or downstream, where emissions are generated. Specific policy instruments can be defined for either level, and can take the form of a price signal such as through a tax, or a quantity limit such as through direct regulation or a permit market. In this study, we present an agent-based model to compare the performance of these different instruments and regulation levels. Since policy coverage is often limited, i.e. not all firms being under the regulator's control, we also examine the impact of incomplete coverage on relative policy performance. Our analysis shows that only upstream regulation leads to an increase in fossil fuel prices, which is benefitial under limited coverage as it also affects firms not directly affected by the policy instruments; that prices under quantity-based regulation can decline after an initial peak, stabilizing at a lower level than under the tax; and that direct regulation is more efficient when applied upstream. © 2021.

This article investigates the shortsightedness or myopia of recent climate and energy policy (CEP) in the EU. To this end, it develops and applies a measurement tool of short-termism composed of four key criteria: (1) the reflection of science-based long-term thinking in the policy process and its output; (2) the degree to which mid-term greenhouse gas emission targets and accompanying policies align with science-based long-term objectives; (3) the stringency of the legislation; and (4) its adaptability. We use these criteria to assess the levels of short-termism of the EU’s 2020 and 2030 CEP frameworks and the (still evolving) European Green Deal (EGD). Overall, we find that the level of myopia of EU CEP has fluctuated and has advanced far less than the development of the nominal mid-term emission targets might suggest. The EGD’s 55% emission reduction target for 2030 only constitutes a return to the levels of alignment with science-based long-term objectives existing in the 2020 Package (making good on the regression of the 2030 Framework). It is primarily due to the maturing of long-term thinking and a ratcheting mechanism, that EU climate policy under the EGD can be considered less myopic than the 2020 Package (although the assessment remains preliminary pending the adoption of further implementing legislation). These findings lay the ground for future research that not only investigates reasons for the general myopia of (EU) climate policy, but also the drivers of the fluctuations over time.

Im Rahmen des Green Deal erwägt die EU die Einführung eines CO2-Grenzausgleichsmechanismus (CBAM) für Importe, damit sie ihre ehr­geizigen klimapolitischen Ziele erreichen kann, ohne dass energieinten­sive Sektoren ihre Emissionen ins Ausland verlagern (Carbon Leakage). Der CBAM sieht die virtuelle Anbindung der EU-Handelspartner an das Emissionshandelssystem der EU (EU ETS) vor - und wird von ihnen entsprechend kritisch beurteilt. Denn der CBAM wird ihre Produkte bei der Einfuhr durch Einpreisung der CO2-Kosten verteuern. Um wie viel, wird in dieser Studie für drei Sektoren - Zement, Stahl und Strom - exemplarisch durchgerechnet. Ein CBAM generiert Einnahmen. Der Umgang damit spielt für die WTO-konforme Ausgestaltung eine wichtige Rolle. Davon ist nur dann aus­zugehen, wenn die Einnahmen konsequent an den Zweck gebunden werden, klimapolitische Maßnahmen im In- und Ausland zu finanzieren. Ein CBAM wirkt als klimapolitischer Hebel. Je mehr Staaten mit der EU in der Klimapolitik zusammenarbeiten, desto geringer wird der Bedarf, das Instrument auch einzusetzen. Ist er erfolgreich, wird der CBAM über­flüssig. Damit die klimapolitische Maßnahme handelsrechtlich durchzusetzen ist, muss sie mit den WTO-Regeln in Einklang gebracht werden. Das schließt Sonderregeln für Entwicklungsländer ein. Zudem sollte das Gerechtigkeits­prinzip (CBDR&RC) des UN-Klimaregimes beachtet werden, das den Entwicklungs- und Schwellenländern geringere Beiträge zum Klimaschutz abverlangt als den Industrieländern. Die EU und die Mitgliedstaaten müssen sich darauf einstellen, dass es zu einer Sanktionsdynamik kommen könnte, wenn sie es versäumen, mit ihren Handelspartnern intensive Gespräche zu führen, in denen sie ihr Vorgehen erklären und über Details der Anwendung sowie Aus­nahmen verhandeln. Das erfordert Fingerspitzengefühl, Klarheit und ein hohes Maß an Abstimmung mit den Partnerländern. (Autorenreferat)

Producing energy by burning fossil fuels leads to the emission of greenhouse gases, such as CO2. These emissions can be reduced in a cost-effective manner by implementing an Emissions Trading Scheme (ETS). An ETS allows legal entities, such as power companies and/or energy-intensive industries, to buy and sell emission rights under an increasingly stringent reduction target. There are three basic design variants of an ETS: cap-and-trade (allowance trading), performance standard rate trading, and project-based credit trading. These variants perform differently in terms of effectiveness and efficiency. The number of ETSs around the world is slowly increasing, with most of Europe, parts of North America, Kazakhstan, China, South Korea and New Zealand now covered. Only a limited number of ETSs have been linked, with some linking taking place within (though not yet between) continents. Emissions trading is an emerging regulatory instrument to efficiently protect the environment, but there remains a long way to go before a global carbon price is realised.

This thesis, consisting of three essays, focuses on examining firms’ operational decisions in global and sustainable operations management under the influence of regulations. In the first essay, we study global manufacturers’ sourcing strategies under the influence of tariff regulation. The past decade has witnessed significant movements to push manufacturing back to developed countries. Such movements call for raising import tariffs and increasing consumers’ valuation on products made from locally sourced components. These factors are believed to motivate local sourcing for firms operating in a single market. However, it is not clear whether they are equally effective for multinational firms that produce and sell products in multiple markets. To gain a thorough understanding of this issue, we build a game-theoretical model to analyze the sourcing decision of a global manufacturer that maintains production sites and sells products in both domestic and foreign markets in a competitive environment. The firm can choose to source components from suppliers located in the same markets of the manufacturing sites to gain tariff savings and a price premium from consumers’ higher valuation, or choose to source all components from a single foreign supplier to obtain a lower sourcing cost. We find that the global supply chain structure plays a critical role in the firm’s sourcing strategy. Consumers’ higher valuation for locally manufactured goods always promotes local sourcing. Raising tariffs, however, might backfire and discourage local sourcing because of the firm’s global supply chain structure and the foreign supplier’s strategic response to the higher tariffs. Finally, local sourcing may hurt consumer surplus even though consumers value locally manufactured goods more. Our analysis sheds light on the recent movement to push manufacturing back to developed countries and signifies the importance of accounting for the manufacturer’s global supply chain structure and vertica

Human activities are threatening to push the Earth system beyond its planetary boundaries, risking catastrophic and irreversible global environmental change. Action is urgently needed, yet well-intentioned policies designed to reduce pressure on a single boundary can lead, through economic linkages, to aggravation of other pressures. In particular, the potential policy spillovers from an increase in the global carbon price onto other critical Earth system processes has received little attention to date. To this end, we explore the global environmental effects of pricing carbon, beyond its effect on carbon emissions. We find that the case for carbon pricing globally becomes even stronger in a multi-boundary world, since it can ameliorate many other planetary pressures. It does however exacerbate certain planetary pressures, largely by stimulating additional biofuel production. When carbon pricing is allied with a biofuel policy, however, it can alleviate all planetary pressures.

Emission trading is a tool for achieving the European commitment to reduce greenhouse gas emissions. The aim is to create an effective European emissions trading market with the least possible negative impact on economic development and employment within the Union. Waste incineration plants in Sweden were added into this systemin2013andthe general situation has been a non-functioning market with a surplus of allowances where the emission cap was not tight enough to drive a significant reduction in emissions. For the upcoming trading period starting 2021 the cost for emission allowances is expected to increase due to the reformation, and the challenge is to allocate the cost for allowances in a fair and sustainable manner. The aim of this thesis is to present options on how to allocate the cost for emission allowances related to waste incineration plants with energy recovery in Sweden. The aim is further to understand how the cost allocation can result in a decrease of CO2emissions and thereby a lower climate impact. The initial idea for the research topic was proposed by the case study company and further developed in conjunction with the author, supervisor and examiner. The research is based on a case study of Tekniska Verken AB, an energy recovery company in Sweden. A case study approach was chosen as the research questions focuses on investigating a contemporary phenomenon within a real-life context. Data collection consisted of a literature review, semi-structured interviews and field visits, where the interviews were the main source of data for this research. The overall understanding is that the cost for emission allowances should be allocated further up the waste supply chain, all the way to product producers. By allocating the cost to waste providers by increased waste incineration treatment-price, the cost is pushed one step upstream. In this case, differentiating the waste providers by divide them into categories(such as municipal waste for example)and all

Emissions trading is a market-based instrument aimed at achieving environmental targets in a cost-effective way by allowing legal entities, primarily firms, to buy and sell emission rights. The limited but steadily growing international diffusion of emissions trading schemes underlines the political relevance of this instrument. There are three basic design variants of emissions trading: cap-and-trade, credit trading, and international offsets. They operate differently in terms of effectiveness, efficiency, and political acceptability. A few greenhouse gas emissions trading schemes have already been linked to increase low-cost abatement opportunities and to work towards a global carbon price. Nevertheless, doubts about emissions trading schemes remain, mainly due to the many implementation problems they face, including an emissions price that is either too volatile or too low to incentivise environmentally-friendly technologies. Despite these drawbacks, emissions trading schemes are functioning with moderate success and continue to spread across the globe.

The research and demonstration project, DEMO-SPK, a model project under the German Mobility and Fuel Strategy (MFS), investigated the use of renewable kerosene at the Leipzig/Halle airport. Its primary goal was to examine and verify the behavior of blends consisting of several types of renewable kerosene and fossil JET A-1, under the realistic supply conditions of a major airport. The project demonstrated that the supply chain for multiblend JET A-1 was technically feasible and that the fuel could be used without requiring any changes in the normal operating procedures. The project also confirmed that the use of multiblend JET A-1 resulted in a 30–60% reduction in particulate emissions for ground operations and a reduction in CO2 equivalents, compared with pure fossil JET A-1.

The Paris Agreement establishes provisions for using international carbon market mechanisms to achieve nationally determined contribution (NDCs). In international negotiations on the rules governing the Agreement, an important question is whether and under which conditions mitigation outcomes that are not covered by the scope of NDCs should be eligible for international transfer and use by another country to achieve its NDC. Allowing the transfer and use of outside-scope mitigation could facilitate the identification of mitigation potential and reduce the costs of achieving NDCs. It could, however, also provide disincentives for countries to enhance the scope of their NDCs, be perceived as unfair towards countries with similar circumstances and economy-wide targets, reduce countries’ incentives to ensure the quality of carbon market units generated, and lead to double counting. To address these concerns, international rules could: require transferring countries to account for such transfers by applying ‘corresponding adjustments’ even though the emission reductions occur outside the scope of NDCs, or to bring relevant sectors and greenhouse gases into the scope of their next NDCs; adopt safeguards for unit quality, e.g. through international oversight or strict additionality tests; impose other restrictions; and/or require countries to quantify and specify the scope of their NDC in terms of sectors and greenhouses gases covered. Key policy insights: Not allowing the transfer of outside-scope mitigation outcomes, or allowing such transfers without a corresponding adjustment by the transferring country, would both require determining whether a mitigation outcome occurs within or outside the scope of NDCs, which can be difficult in some instances. Requiring corresponding adjustments for outside-scope mitigation is more easily implemented than other options seeking to address possible disincentives for broadening the scope of NDCs but could discourage countries from eng

Despite concerns on their effectiveness and legitimacy, carbon markets are often presented as the main tool of climate policy. Developing countries are particularly eager to establish and interlink their carbon markets to benefit from global climate investment flows. Turkey is a belated but willing player in this endeavor. In tracing the ambivalent politics of establishing a carbon market in Turkey, we focus on the perceptions of different actors vis-à-vis carbon marketization attempts. Using policy documents, 22 expert interviews, and process tracing, we question the underlying assumptions on carbon markets in a country with unambitious climate targets. Our findings suggest that the making of carbon market in Turkey is not necessarily a rational, national interest-driven process but instead one promoted by the international organizations including World Bank and the EU. We conclude that this preference for market-based instruments defer public interest, favor more incremental policies, and ignore distributive justice concerns., QC 20181211

To the best of our knowledge, this is the first paper comparing empirically the transaction costs of the monitoring, reporting and verification (MRV) required by two environmental regulations aimed to cost-efficiently reduce greenhouse gas emissions: a carbon dioxide (CO2) tax and an emissions trading system. We do this in the case of Sweden, where a set of firms are covered by both types of regulations—the Swedish CO2 tax and the European Union’s Emissions Trading System (EU ETS). Our results indicate that there is a significant degree of heterogeneity in the transaction costs of the firms in our sample. Moreover, for some of the firms, the transaction costs are high when compared with the actual cost of the CO2 tax and the price of the EU ETS. Furthermore, we find that the MRV costs are lower for CO2 taxation than for the EU ETS, which confirms the general view that regulating emissions upstream via a CO2 tax yields lower transaction costs vis-á-vis downstream regulation via emissions trading.