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This paper examines the global impacts of a policy that internalizes the the external costs (related to air pollution damage, excluding climate costs) of electricity generation using a combined energy systems and macroeconomic model. Starting point are estimates of the monetary damage costs for SO2, NOx, and PM per kWh electricity generated, taking into account the fuel type, sulfur content, removal technology, generation efficiency, and population density. Internalizing these externalities implies that clean and advanced technologies increase their share in global electricity production. Particularly, advanced coal power plants, natural gas combined cycles, natural gas fuel cells, wind and biomass technologies gain significant market shares at the expense of traditional coal- and gas-fired plants. Global carbon dioxide emissions are lowered by 3% to 5%. Sulfur dioxide emissions drop significantly below the already low level. The policy increases the costs of electricity production by 0.2 (in 2050) to 1.2 Euro cent/kWh (in 2010). Gross domestic product losses are between 0.6% and 1.1%. They are comparatively high during the initial phase of the policy, pointing to the need for a gradual phasing of the policy.

This paper examines the global impacts of a policy that internalizes the the external costs (related to air pollution damage, excluding climate costs) of electricity generation using a combined energy systems and macroeconomic model. Starting point are estimates of the monetary damage costs for SO2, NOx, and PM per kWh electricity generated, taking into account the fuel type, sulfur content, removal technology, generation efficiency, and population density. Internalizing these externalities implies that clean and advanced technologies increase their share in global electricity production. Particularly, advanced coal power plants, natural gas combined cycles, natural gas fuel cells, wind and biomass technologies gain significant market shares at the expense of traditional coal- and gas-fired plants. Global carbon dioxide emissions are lowered by 3% to 5%. Sulfur dioxide emissions drop significantly below the already low level. The policy increases the costs of electricity production by 0.2 (in 2050) to 1.2 Euro cent/kWh (in 2010). Gross domestic product losses are between 0.6% and 1.1%. They are comparatively high during the initial phase of the policy, pointing to the need for a gradual phasing of the policy.

Simulation models and theory prove that emission trading converges to market equilibrium. This paper sets out to test these results using experimental economics. Three experiments are conducted for the six largest carbon emitting industrialized regions. Two experiments use auctions, the first a single bid auction and the second a Walrasian auction. The third relies on bilateral, sequential trading. The paper finds that, in line with the standard theory, both auctions and bilateral, sequential trading capture a significant part (88% to 99%) of the potential cost savings of emission trading. As expected from trade theory, all experiments show that the market price converges (although not fully) to the market equilibrium price. In contrast to the theory, the results also suggest that not every country might gain from trading. In both the bilateral trading experiment and the Walrasian auction, one country actually is worse off with trade. In particular bilateral, sequential trading leads to a distribution of gains significantly different from the competitive market outcome. This is due to speculative behavior, imperfect foresight and market power.

This paper examines the impact of public research and development (R&D) support on cost reducing innovation for wind turbine farms in Denmark, Germany and the United Kingdom (UK). First we survey the literature in this field. The literature indicates that in Denmark R&D policy has been more successful than in Germany or the UK in promoting innovation of wind turbines. Furthermore, such studies point out that (subsidy-induced) capacity expansions were more effective in the UK and Denmark in promoting cost-reducing innovation than in Germany. The second part of the paper describes the quantitative analysis of the impact of R&D and capacity expansion on innovation. This is calculated using the two-factor learning curve (2FLC) model, in which investment cost reductions are explained by cumulative capacity and the R&D based knowledge stock. Time-series data were collected for the three countries and organized as a panel data set. The parameters of the 2FLC model were estimated, focusing on the homogeneity and heterogeneity of the parameters across countries. We arrived at robust estimations of a learning-by- doing rate of 5.4% and a learning-by-searching rate of 12.6%. The analysis underlines the homogeneity of the learning parameters, enhancing the validity of the 2FLC formulation.

Simulation models and theory prove that emission trading converges to market equilibrium. This paper sets out to test these results using experimental economics. Three experiments are conducted for the six largest carbon emitting industrialized regions. Two experiments use auctions, the first a single bid auction and the second a Walrasian auction. The third relies on bilateral, sequential trading. The paper finds that, in line with the standard theory, both auctions and bilateral, sequential trading capture a significant part (88% to 99%) of the potential cost savings of emission trading. As expected from trade theory, all experiments show that the market price converges (although not fully) to the market equilibrium price. In contrast to the theory, the results also suggest that not every country might gain from trading. In both the bilateral trading experiment and the Walrasian auction, one country actually is worse off with trade. In particular bilateral, sequential trading leads to a distribution of gains significantly different from the competitive market outcome. This is due to speculative behavior, imperfect foresight and market power.

This paper examines the impact of public research and development (R&D) support on cost reducing innovation for wind turbine farms in Denmark, Germany and the United Kingdom (UK). First we survey the literature in this field. The literature indicates that in Denmark R&D policy has been more successful than in Germany or the UK in promoting innovation of wind turbines. Furthermore, such studies point out that (subsidy-induced) capacity expansions were more effective in the UK and Denmark in promoting cost-reducing innovation than in Germany. The second part of the paper describes the quantitative analysis of the impact of R&D and capacity expansion on innovation. This is calculated using the two-factor learning curve (2FLC) model, in which investment cost reductions are explained by cumulative capacity and the R&D based knowledge stock. Time-series data were collected for the three countries and organized as a panel data set. The parameters of the 2FLC model were estimated, focusing on the homogeneity and heterogeneity of the parameters across countries. We arrived at robust estimations of a learning-by- doing rate of 5.4% and a learning-by-searching rate of 12.6%. The analysis underlines the homogeneity of the learning parameters, enhancing the validity of the 2FLC formulation.

In this paper we evaluate the compliance mechanisms in the Kyoto Protocol as agreed at the seventh Conference of Parties to the United Nations Framework Convention on Climate Change (UNFCCC) in Marrakech. We differ from the literature since we concentrate on the complete set of compliance rules agreed in Marrakech and, as a new element, we systematically discuss these compliance incentives in conjunction with the implicit compliance incentives: reputation protection, emission trading and banking. We conclude that effectiveness and efficiency go hand in hand for all explicit and implicit compliance incentives except one -- emission trading. Trading improves efficiency but this can also occur at the cost of increasing non-compliance.

In this paper we evaluate the compliance mechanisms in the Kyoto Protocol as agreed at the seventh Conference of Parties to the United Nations Framework Convention on Climate Change (UNFCCC) in Marrakech. We differ from the literature since we concentrate on the complete set of compliance rules agreed in Marrakech and, as a new element, we systematically discuss these compliance incentives in conjunction with the implicit compliance incentives: reputation protection, emission trading and banking. We conclude that effectiveness and efficiency go hand in hand for all explicit and implicit compliance incentives except one -- emission trading. Trading improves efficiency but this can also occur at the cost of increasing non-compliance.

In this paper we evaluate the compliance mechanisms in the Kyoto Protocol as agreed at the seventh Conference of Parties to the United Nations Framework Convention on Climate Change (UNFCCC) in Marrakech. We differ from the literature since we concentrate on the complete set of compliance rules agreed in Marrakech and, as a new element, we systematically discuss these compliance incentives in conjunction with the implicit compliance incentives: reputation protection, emission trading and banking. We conclude that effectiveness and efficiency go hand in hand for all explicit and implicit compliance incentives except one -- emission trading. Trading improves efficiency but this can also occur at the cost of increasing non-compliance.

This article investigates the impact on optimal CO2 abatement and carbon tax levels of introducing endogenous technological change in a macroeconomic model of climate change. We analyse technological change as a function of cumulative capacity, as incorporated recently in energy-systems models. Our calculations confirm that including endogenous innovation implies earlier emission reduction to meet atmospheric carbon concentration constraints. However, the effect is stronger than suggested in the literature. Moreover, the development of non-fossil energy technologies constitutes the most important opportunity for emission reductions. Optimal carbon tax levels, reducing fossil energy use, are lower than usually advocated.

This article investigates the impact on optimal CO2 abatement and carbon tax levels of introducing endogenous technological change in a macroeconomic model of climate change. We analyze technological change as a function of cumulative capacity, as incorporated recently in energy-systems models. Our calculations confirm that including endogenous innovation implies earlier emission reduction to meet atmospheric carbon concentration constraints. However, the effect is stronger than suggested in the literature. Moreover, the development on non-fossil energy technologies constitutes the most important opportunity for emission reductions. Optimal carbon tax levels, reducing fossil energy use, are lower than usually advocated.

This article investigates the impact on optimal CO2 abatement and carbon tax levels of introducing endogenous technological change in a macroeconomic model of climate change. We analyse technological change as a function of cumulative capacity, as incorporated recently in energy-systems models. Our calculations confirm that including endogenous innovation implies earlier emission reduction to meet atmospheric carbon concentration constraints. However, the effect is stronger than suggested in the literature. Moreover, the development of non-fossil energy technologies constitutes the most important opportunity for emission reductions. Optimal carbon tax levels, reducing fossil energy use, are lower than usually advocated.

This article investigates the impact on optimal CO2 abatement and carbon tax levels of introducing endogenous technological change in a macroeconomic model of climate change. We analyze technological change as a function of cumulative capacity, as incorporated recently in energy-systems models. Our calculations confirm that including endogenous innovation implies earlier emission reduction to meet atmospheric carbon concentration constraints. However, the effect is stronger than suggested in the literature. Moreover, the development on non-fossil energy technologies constitutes the most important opportunity for emission reductions. Optimal carbon tax levels, reducing fossil energy use, are lower than usually advocated.

Established opinion is that in the face of uncertain information on pollution control costs, environmental agencies cannot set ambient charges that enable the realization of desired concentration levels at multiple receptors in a cost-effective way. Although a trial-and-error procedure could result in attainment of concentration standards this would generally not be cost-effective. This paper, however, proves that environmental agencies can develop charge adjustment procedures that achieve ambient standards at multiple receptors at minimum costs. The procedure is applied to a case study for acidification in the Netherlands. The results show that the iterative procedure approaches the cost-effective emissions fairly quickly.

The problem of reducing SO2 emissions in Europe is considered. The costs of reduction are assumed to be uncertain and are modeled by a set of possible scenarios. A mean-variance model of the problem is formulated and a specialized computational procedure is developed. The approach is applied to the trans-boundary air pollution model with real-world data.

The problem of reducing SO2 emissions in Europe is considered. The costs of reduction are assumed to be uncertain and are modeled by a set of possible scenarios. A mean-variance model of the problem is formulated and a specialized computational procedure is developed. The approach is applied to the trans-boundary air pollution model with real-world data.

Established opinion is that in the face of uncertain information on pollution control costs, environmental agencies cannot set ambient charges that enable the realization of desired concentration levels at multiple receptors in a cost-effective way. Although a trial-and-error procedure could result in attainment of concentration standards this would generally not be cost-effective. This paper, however, proves that environmental agencies can develop charge adjustment procedures that achieve ambient standards at multiple receptors at minimum costs. The procedure is applied to a case study for acidification in the Netherlands. The results show that the iterative procedure approaches the cost-effective emissions fairly quickly.

This paper explores the potential cost savings which would result from a combined control of emissions of nitrogen oxides and ammonia for the cost-effective achievement of nitrogen deposition targets in Europe. Based on the Regional Acidification Information and Simulation (RAINS) model, a framework has been constructed for a simultaneous optimization of nitrogen oxides and ammonia emission reductions using nitrogen depositions from both pollutants as side constraints. The paper first demonstrates that the same nitrogen deposition resulting from the currently committed reductions of emissions of nitrogen oxides (without measures for ammonia emissions) can be achieved at only 55% of the costs if measures for ammonia reduction would also be applied. The analysis shows that no large scale substitutions of reductions of nitrogen oxides by ammonia measures occur. The cost savings mainly result from replacing the most expensive (and ineffective) nitrogen oxide abatement at a few places in Europe with inexpensive ammonia control measures. Consequently, the total level of emissions of nitrogen oxides is hardly higher than in the reference case, but substantial ammonia reductions are implemented lowering total cost. The second case explores the potential contribution ammonia control can make to attaining the same nitrogen deposition levels resulting from the maximum application of nitrogen oxide abatement technologies solely. In this case, reductions of ammonia emissions can lower total abatement costs by 23%, basically by modified manure handling, stable adaptations for poultry, and the control of industrial ammonia emissions.

This paper explores the potential cost savings which would result from a combined control of emissions of nitrogen oxides and ammonia for the cost-effective achievement of nitrogen deposition targets in Europe. Based on the Regional Acidification Information and Simulation (RAINS) model, a framework has been constructed for a simultaneous optimization of nitrogen oxides and ammonia emission reductions using nitrogen depositions from both pollutants as side constraints. The paper first demonstrates that the same nitrogen deposition resulting from the currently committed reductions of emissions of nitrogen oxides (without measures for ammonia emissions) can be achieved at only 55% of the costs if measures for ammonia reduction would also be applied. The analysis shows that no large scale substitutions of reductions of nitrogen oxides by ammonia measures occur. The cost savings mainly result from replacing the most expensive (and ineffective) nitrogen oxide abatement at a few places in Europe with inexpensive ammonia control measures. Consequently, the total level of emissions of nitrogen oxides is hardly higher than in the reference case, but substantial ammonia reductions are implemented lowering total cost. The second case explores the potential contribution ammonia control can make to attaining the same nitrogen deposition levels resulting from the maximum application of nitrogen oxide abatement technologies solely. In this case, reductions of ammonia emissions can lower total abatement costs by 23%, basically by modified manure handling, stable adaptations for poultry, and the control of industrial ammonia emissions.

This paper presents the first consistent inventory of emission of sulphur dioxide (SO2), nitrogen oxides (NOx), particulate matter (PM), and carbon dioxide (CO2), for the countries co-operating in the Central European Initiative: Austria, Croatia, Czechoslovakia, Hungary, Italy, Poland and Slovenia. The inventory is based on national and regional statistics as well as on information received from collaborating institutions. National data has been verified and converted into a common format, consistent with the database used by the European Environmental Agency and the European Community (the "CORINAIR" system). The inventory describes emissions in the year 1988, before the restructuring process began in former socialist economies. Data has been collected on the national level, for administrational units and for large point sources. The database on point sources contains specific information on 400 large plants in the region (e.g. capacity, commissioning year, fuel use, production, etc.). Total emissions of SO2 in the CEI region in 1988 were 10.3 million tons, which accounts for 25% of total European SO2 emissions. The highest emission densities (more than 100 t/km2) are found in Northern Bohemia (Czech Republic) and Upper Silesia (Poland). The overwhelming majority of SO2 emissions (70%) originates from combustion of domestic (brown and hard) coal. Across the region, 60% of SO2 is emitted from the large point sources identified in the study and over 60% of SO2 emissions from public power plants in the CEI region is produced in plants older than 20 years.

This paper presents the first consistent inventory of emission of sulphur dioxide (SO2), nitrogen oxides (NOx), particulate matter (PM), and carbon dioxide (CO2), for the countries co-operating in the Central European Initiative: Austria, Croatia, Czechoslovakia, Hungary, Italy, Poland and Slovenia. The inventory is based on national and regional statistics as well as on information received from collaborating institutions. National data has been verified and converted into a common format, consistent with the database used by the European Environmental Agency and the European Community (the "CORINAIR" system). The inventory describes emissions in the year 1988, before the restructuring process began in former socialist economies. Data has been collected on the national level, for administrational units and for large point sources. The database on point sources contains specific information on 400 large plants in the region (e.g. capacity, commissioning year, fuel use, production, etc.). Total emissions of SO2 in the CEI region in 1988 were 10.3 million tons, which accounts for 25% of total European SO2 emissions. The highest emission densities (more than 100 t/km2) are found in Northern Bohemia (Czech Republic) and Upper Silesia (Poland). The overwhelming majority of SO2 emissions (70%) originates from combustion of domestic (brown and hard) coal. Across the region, 60% of SO2 is emitted from the large point sources identified in the study and over 60% of SO2 emissions from public power plants in the CEI region is produced in plants older than 20 years.