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China announced the launch of a national emissions trading scheme (ETS) in December 2017 for the regulation of its carbon dioxides emissions. In emissions trading, China is likely to encounter issues different from those encountered by the European Union and other developed countries. This study first identifies the contextual factors that influence the design of China’s national ETS and affect its performance. After an overview of the design of China’s national ETS, this study focuses on two key features: (1) ex-post adjustment of the initial allowance allocation in proportion to the actual output levels, and (2) treatment of the power sector. Finally, the study analyzes the interaction between China’s national ETS and some overlapping policies such as those on air pollution control. The study’s key findings are that China’s ETS cannot fully achieve cost-effectiveness because of its design, the price behavior of China’s ETS will be different from that of a cap-and-trade ETS, and overlapping policies such as the command-and-control regulations for energy conservation and/or air quality improvement will decrease the demand for allowances and limit the opportunity for allowance trading. These findings are based on existing theoretical studies and relevant global ETS experience.

China announced the launch of a national emissions trading scheme (ETS) in December 2017 for the regulation of its carbon dioxides emissions. In emissions trading, China is likely to encounter issues different from those encountered by the European Union and other developed countries. This study first identifies the contextual factors that influence the design of China's national ETS and affect its performance. After an overview of the design of China's national ETS, this study focuses on two key features: (1) ex-post adjustment of the initial allowance allocation in proportion to the actual output levels, and (2) treatment of the power sector. Finally, the study analyzes the interaction between China's national ETS and some overlapping policies such as those on air pollution control. The study's key findings are that China's ETS cannot fully achieve cost-effectiveness because of its design, the price behavior of China's ETS will be different from that of a cap-and-trade ETS, and overlapping policies such as the command-and-control regulations for energy conservation and/or air quality improvement will decrease the demand for allowances and limit the opportunity for allowance trading. These findings are based on existing theoretical studies and relevant global ETS experience. [ABSTRACT FROM AUTHOR]

We study the interactions between a CO2 emissions trading system (ETS) and renewable energy subsidies under uncertainty over electricity demand and energy costs. We develop an analytical model and a numerical model applied to the European Union electricity market in which renewable energy subsidies are justified only by CO2 abatement. We confirm that in this context, when uncertainty is small, renewable energy subsidies are not welfare-improving, but we show that when uncertainty is large enough, these subsidies increase expected welfare because they provide CO2 abatement even in the case of over-allocation, i.e. when the cap is higher than the emissions which would have occurred without the ETS. The source of uncertainty is important when comparing the various types of renewable energy subsidies. Under uncertainty over electricity demand, renewable energy costs or gas prices, a feed-in tariff brings higher expected welfare than a feed-in premium because it provides a higher subsidy when it is actually needed i.e. when the electricity price is low. Under uncertainty over coal prices, the opposite result holds true. Key policy insights Due to the possibility of over-allocation in an ETS, subsidies to renewable energies can increase expected welfare, even when climate change mitigation is the only benefit from renewables taken into account. In most cases studied, a feed-in tariff brings a higher expected welfare than a feed-in premium. The European Commission guidelines on State aid for energy, which incentivize member States to replace feed-in tariffs by feed-in premiums, should be reconsidered based on these results. [ABSTRACT FROM AUTHOR]

The Energy Modeling Forum 24 study included a set of policy scenarios designed to compare economy wide market-based and sectoral regulatory approaches of potential U.S. climate policy. Models from seven teams participated in this part of the study assessing economy-wide cap-and-trade climate policy and sectoral policies in the transportation and electric sector in terms of potential greenhouse gas emissions reductions, economic cost, and energy systems implications. This paper presents an overview of the results from the U.S. policy scenarios, and provides insights into the comparison of results from the participating models. In particular, various metrics were used to compare the model results including allowance price, the efficient frontier, consumption loss, GDP loss, and equivalent variation. We find that the choice of economic metric is an important factor in the comparison of model results. Among the insights, we note that the carbon price should cautiously be considered when other non-cap sectoral policies affecting emissions are assumed in tandem. We also find that a transportation sector policy is consistently shown to be inefficient compared to an economy-wide capand-trade policy with a comparable level of emissions reductions. [ABSTRACT FROM AUTHOR]

Abstract: Policy-makers apply multiple policy instruments simultaneously in the climate and energy policy field at both EU and Member State levels. This creates interactions between instruments that can be complementary and synergistic but also conflicting. This article focuses on the interactions of climate policy instruments and their impact on biomass use. The objectives are to examine interactions of the EU Emissions Trading System (EU ETS) with the main national climate policy instruments and to identify the influence of these on biomass use. The work draws experiences from seven EU countries (Austria, Finland, Germany, the Netherlands, Poland, Sweden and the United Kingdom), with a special focus on Finland and Sweden. The analysis explores the effects of policy interactions and is based on an examination of literature, and interviews with biomass experts in research, industry and policy spheres. Results indicate that the combined effects of climate policy instruments have a tangible impact on biomass use, whereas the causal links to the EU ETS are difficult to assess separately. Policy impacts found include increased competition for biomass resources, changes in fuel mixes and a contribution to upward pressure on wood prices. Differences in these effects are linked to differing national policy mixes and energy-carrier portfolios – an example being the relative differences in the importance of peat to the energy mix in Finland and Sweden. Analysis and comparison of the effects in the selected countries can yield insight on how to improve the design of policy interventions that impact biomass use. This study confirms the importance of identifying interactions between policy instruments so as to recognise – and manage – synergies and conflicts. The development of more synergistic and coordinated policy instrument mixes would also be beneficial for the bioenergy field. [Copyright &y& Elsevier]

In this paper we analyze policy interactions between two innovative climate and energy policy instruments, namely White Certificates (WhC) and Joint Implementation (JI) that target at energy efficiency improvement and reductions of Greenhouse Gas (GHG) emissions. We have selected The Netherlands and Bulgaria as a case study given that the former has a cumulated experience in energy efficiency policies and the latter for a growing potential in JI projects as a host country. Based on a method of analyzing policy interactions, we demonstrate how a possible design of such a scheme can take place and how it should function. A couple of parameters that deserve attention are a baseline definition and a conversion rate for credits. Our basic finding is that an integrated scheme is complementary and can assist substantially in achieving Dutch national United Nations Framework Convention on Climate Change (UNFCCC) Kyoto Protocol targets. Dutch electricity and gas suppliers (parties that receive energy efficiency obligations) can implement energy efficiency projects domestically and in other countries, hence reducing total abatement costs. Furthermore, such a scheme can stimulate further energy efficiency actions from other stakeholders participating in energy markets. Based on an ex-ante assessment, a carefully designed hybrid WhC and JI scheme appears to be effective in terms of targets, efficient, generating positive impacts on markets and society, while uncertain in stimulating innovation. [ABSTRACT FROM AUTHOR]

The EU is pioneering the development of greenhouse gas emissions trading, but there is a tension between the ‘top-down’ and ‘bottom-up’ evolution of trading schemes. While the Commission is introducing a European emissions trading scheme (EU ETS) in 2005, several member states have already introduced negotiated agreements that include trading arrangements. Typically, these national schemes have a wider scope than the proposed EU directive and allow firms to use relative rather than absolute targets. The coexistence of ‘top-down’ and ‘bottom-up’ trading schemes may create some complex problems of policy interaction. This paper explores the potential interactions between the EU ETS and the negotiated agreements in France and UK and uses these to illustrate some important generic issues. The paper first describes the proposed EU directive, outlines the UK and French policies and compares their main features to the EU ETS. It then discusses how the national and European policies may interact in practice. Four issues are highlighted, namely, double regulation, double counting of emission reductions, equivalence of effort and linking trading schemes. The paper concludes with some recommendations for the future development of UK and French climate policy. [Copyright &y& Elsevier]