The U.S. Low Carbon Economics Tool

by McKinsey & Company

- McKinsey has developed a model to allow public- and private-sector leaders and nongovernmental organizations (NGOs) to better understand the macroeconomic impact that different policy and infrastructure-development scenarios have on GDP, jobs, and the consumer in the United States at the state and federal levels, by year, for the two decades between 2010 and 2030. The model enables analysis of the potential economic implications of a wide variety of possible energy and climate policies.

McKinsey & Co. (2010). "The U.S. Low Carbon Economics Tool." Mar 2010.

The Political Economy of India’s Climate Agenda

by Noriko Fujiwara

- This Working Document elaborates on three key issues related to the country’s energy challenges: access to energy, the future emissions trajectory and energy subsidies. This study looks into the making and framing of the country’s domestic climate agenda from a political economy perspective. As long as both GDP and primary energy demand keep growing at the current rates, it may be concluded that the country’s future, absolute greenhouse-gas emissions are also likely to grow but remain relatively low. Moreover, India’s emissions intensity is expected to continue declining.

Fujiwara, N. (2010). "The Political Economy of India’s Climate Agenda." CEPS Working Document, Mar 2010.

The Impact of Instrument Choice on Investment in Abatement Technologies: A Case Study of Tax versus Trade Incentives for CCS and Biomass for Electrici

by Tim Laing and Michael Grubb

- There has been a wide discussion on the different properties between carbon taxes, cap-and-trade schemes and hybrid instruments such as cap-and- trade schemes with price floors and ceilings. There has been less discussion on the incentives to investment that each of these instruments may provide. We build a three-period model to investigate the incentives offered to a large firm with diversified abatement options from such instruments when facing a choice between investing in low-carbon technologies with potential learning benefits. We parameterise our model for a system similar to the EUETS and for two sample technologies, biomass for electricity and coal with carbon capture and storage.

Laing, T. and M. Grubb (2010). "The Impact of Instrument Choice on Investment in Abatement Technologies: A Case Study of Tax versus Trade Incentives for CCS and Biomass for Electricity." EPRG Working Paper: EPRG1004, Mar 2010.

The Effects of an Emissions Offsets Scheme on Australian Agriculture

by Evan M Calford, Andrew Gurney, Edwina Heyhoe and Helal Ahammad

- This paper presents an assessment, both qualitative and quantitative, of the long-run effects of an offsets scheme on Australian agriculture. The uptake of agricultural technologies and practices that may generate offsets is likely to be significantly higher in the long run than in the short run. This paper focuses on the long-run uptake of mitigation technologies and practices under the assumption that relevant offset methodologies for agriculture will have been developed during the projection period to 2030. The effects of the offsets scheme on Australian agriculture, as a whole, are projected to be positive by 2030.

Calford, E.M., A. Gurney, E. Heyhoe and H. Ahammad (2010). "The Effects of an Emissions Offsets Scheme on Australian Agriculture." ABARE, Issues Insights 10.2, Mar 2010.

Robust Incentives and the Design of a Climate Change Governance Regime

by Gregory F. Nemet

- In building a governance regime to address climate change, should we prioritize the development of global institutions or national ones? This paper adds insight to the issue of how much international coordination on climate governance is optimal by focusing on two neglected characteristics of the problem: first, the crucial role of incentives for private sector investors in low-carbon energy technology and second, that investors typically risk-adjust expectations of policy-induced payoffs because of historical policy volatility.

Nemet, G.F. (2010). "Robust Incentives and the Design of a Climate Change Governance Regime." La Follette School Working Paper No. 2010-006, Feb 2010.

Auctioning Greenhouse Gas Emissions Permits in Australia

by Regina Betz, Stefan Seifert, Peter Cramton and Suzi Kerr

- This paper discusses the proposed Australian CPRS’s auction design. A major difference to other emissions trading schemes is that the CPRS plans to auction multi-ple vintages of emissions permits simultaneously.

Betz, R., S. Seifert, P. Cramton and S. Kerr (2010). "Auctioning Greenhouse Gas Emissions Permits in Australia." Australian Journal of Agricultural and Resource Economics, forthcoming. - Available as MOTU Working Paper, Feb 2010.

Does Foreign Aid Reduce Energy and Carbon Intensities in Developing Countries

by Bettina Kretschmer, Michael Hübler and Peter Nunnenkamp

- Advanced OECD countries are widely held responsible to contain global carbon emissions by providing financial and technical support to developing economies, where emissions are increasing most rapidly. It is open to question, however, whether more generous official development assistance would help fight climate change effectively. Empirical evidence on the effects of foreign aid on energy and emission intensities in recipient countries hardly exists. We contribute to closing this gap by considering energy use and carbon emissions as dependent climate-related variables, and the volume and structure of aid as possible determinants.

Bettina Kretschmer, Michael Hübler and Peter Nunnenkamp (2010). "Does Foreign Aid Reduce Energy and Carbon Intensities in Developing Countries." Kiel Institute Working Paper No. 1598, Feb 2010.

Identifying the Indirect Effects of Bio-Energy Production

by JPM Ros, KP Overmars, E Stehfest, AG Prins, J Notenboom and M van Oorschot

- Bio-energy has the potential to reduce greenhouse gas (GHG) emissions. Indirect effects might partly or even completely undo this advantage. Indirect land use change (ILUC) -leading to emissions and loss of nature- is an important example, but there are other indirect effects, as well.

Ros, JPM, KP Overmars, E Stehfest, AG Prins, J Notenboom and M van Oorschot (2010). "Identifying the Indirect Effects of Bio-Energy Production." PNB Report No. 500143003, Feb 2010.

Bio-Economics of Conservation Agriculture and Soil Carbon Sequestration in Developing Countries

by Wisdom Akpalu and Ekbom Anders

- Improvement in soil carbon through conservation agriculture in developing countries may generate some private benefits to farmers as well as sequester carbon emissions, which is a positive externality to society. Leaving crop residue on the farm has become an important option in conservation agriculture practice. However, in developing countries, using crop residue for conservation agriculture has the opportunity cost of say feed for livestock. In this paper, we model and develop an expression for an optimum economic incentive that is necessary to internalize the positive externality.

Akpalu, W. and E. Anders (2010). "Bio-Economics of Conservation Agriculture and Soil Carbon Sequestration in Developing Countries." University of Gothenburg School of Business, Economics and Law, Working Papers in Economics No 431, Feb 2010.

Optimal Capture and Sequestration from the Carbon Emission Flow and from the Atmospheric Carbon Stock with Heterogeneous Energy Consuming Sectors

by Jean-Pierre Amigues, Gilles Lafforgue and Michel Moreaux

- We characterize the optimal exploitation paths of two primary energy resources. The first one is a non-renewable polluting resource, the second one a pollution-free renewable resource. Both resources can supply the energy needs of two sectors. Sector 1 is able to reduce the potential carbon emissions generated by its non-renewable energy consumption at a reasonable cost while sector 2 cannot. Another possibility is to capture the carbon spread in the atmosphere but at a signi cantly higher cost.

J-P Amigues, G. Lafforgue and M. Moreaux (2010). "Optimal Capture and Sequestration from the Carbon Emission Flow and from the Atmospheric Carbon Stock with Heterogeneous Energy Consuming Sectors." LERNA Travaux No. 10.05.311, Feb 2010.

Non-cooperative Games with Confirmed Proposals

by Giuseppe Attanasi, Aurora García Gallego, Nikolaos Georgantzís and Aldo Montesano

- We propose a bargaining process as a way of playing and solving non cooperative games. We focus on social dilemma situations and show that sequential proposals which, if confirmed by players, determine real play, may give rise to equilibrium outcomes which differ from the standard non cooperative solution. Specifically, we show that, under standard assumptions, in a prisoners’ dilemma with confirmed proposals, there is a unique confirmed agreement between players to behave cooperatively.

Attanasi, G., A. García Gallego, N. Georgantzís and A. Montesano (2010). "Non-cooperative Games with Confirmed Proposals." LERNA Travaux No. 10.02.308, Jan 2010.

Future Impacts of Climate Change across Europe

by Arno Behrens, Anton Georgiev and Maelis Carraro

- This CEPS Working Document reviews the potential impacts of climate change on 11 key indicator categories and 3 large regions covering the entire European Union. Although there remains a considerable degree of uncertainty about local and regional effects, the paper highlights strong distributional patterns. Northern Europe might even experience some positive effects, while the Mediterranean will mostly be negatively affected.

Behrens, A., A. Georgiev and M. Carraro (2010). "Future Impacts of Climate Change across Europe." CEPS Working Document No. 324, Feb 2010.

UK Renewable Energy Policy since Privatisation

by Michael G. Pollitt

- The aim of this paper is to look at the UK’s renewable energy policy in the context of its overall decarbonisation and energy policies. This will allow us to explore the precise nature of the ‘failure’ of UK renewables policy and to suggest policy changes which might be appropriate in light of the UK’s institutional and resource endowments. Our focus is on the electricity sector both in terms of renewable generation and to a lesser extent the facilitating role of electricity distribution and transmission networks.

Pollitt, M.G. (2010). "UK Renewable Energy Policy since Privatisation." EPRG Working Paper: EPRG1002, Jan 2010.

Sustainable Production of Second-Generation Biofuels- Potential and Perspectives in Major Economies and Developing Countries

by Anselm Eisentraut

- This study aims to identify opportunities and constraints related to the potential future production of second-generation biofuels in major economies and developing countries, and to examine under which conditions the new fuels could be produced sustainably in these countries. The paper identifies global drivers for second-generation biofuel development, discusses projections on biomass potentials and assesses the potential of agricultural and forestry residues for the sustainable production of lignocellulosic biofuels.

Eisentraut, A. (2010). "Sustainable Production of Second-Generation Biofuels- Potential and Perspectives in Major Economies and Developing Countries." International Energy Agency, Information Paper, Feb 2010. [4 MB]

Household Energy Expenditure and Income Groups: Evidence from Great Britain

by Tooraj Jamasb and Helena Meier

- Household energy use is increasingly important in the context of fuel poverty and the equity debate as well as in relation to energy saving and efficiency policies. We first explore the link between household energy spending and income. We use a panel dataset from a comprehensive survey of UK households from 1991 to 2007 comprising over 77,000 observations to analyse electricity, gas, and overall energy spending for the whole sample and several income groups. We find an S-shaped Engel curve and inflection point at which the increase in household energy spending briefly stabilizes and interpret this as a point where the essential energy needs are likely to have been met.

Jamasb, T. and H. Meier (2010). "Household Energy Expenditure and Income Groups: Evidence from Great Britain." Working Paper: EPRG1003, Feb 2010.

Why is the USA so Energy Intensive? Evidence from US Multinationals in the UK

by Ralf Martin

- A potential explanation for the higher energy intensity are lower US energy price levels. However, common price elasticity estimates are not high enough to explain the observed differences between countries. Alternative explanations include firstly geographic or other locational differences and secondly firm specific technology differences between US firms and others. This study explores this latter possibility by comparing establishments of US firms in Britain with other comparable firms thereby ruling out locational differences.

Martin, R. (2010). "Why is the USA so energy intensive? Evidence from US multinationals in the UK." Grantham Research Institute on Climate Change and the Environment Working Paper No. 15, Jan 2010.

Environmental Policy and the Economic Downturn

by Alex Bowen and Nicholas Stern

- This paper considers how environmental policies should respond to macroeconomic downturns. It first explores the implications of the global economic downturn of 2008-09 for environmental policies, focusing in particular on the example of action against climate change. The arguments for and against activist fiscal policies in general are then reviewed, and the case made that a demand-induced downturn provides a very good opportunity to undertake a necessary step change in the public spending component of environmental policies and to start working through a backlog of public investment to improve the environment.

Bowen, A. and N. Stern (2010). "Environmental Policy and the Economic Downturn." Grantham Research Institute on Climate Change and the Environment Working Paper No. 16, Jan 2010.

Prospects for Large-Scale Energy Storage in Decarbonised Power Grids

by Shin-ichi Inage

- This report describes the development of a simplified algorithm to determine the amount of storage that compensates for short-term net variation of wind power supply and assesses its role in light of a changing future power supply mix. It also examines the range of options available to power generation and transmission operators to deal with variability.

Inage, S. (2009). "Prospects for Large-Scale Energy Storage in Decarbonised Power Grids." International Energy Agency Working Paper, Dec 2009. [3.4 MB]

A Simple hybrid 6 sector I-O model

by Robert U. Ayres and Peter Fleissner

- Most large dynamic economic models, including Input-Output models, are driven by a singlesector ‘driver’, usually a production function of the Cobb-Douglas, or CES form, with two factors of production, capital and labor, possibly augmented by quality multipliers. We think the time has come to graduate from the oversimplified single sector model to a more complex and, hopefully, more realistic model from which interesting implications may be drawn regarding resource exhaustion and long-term growth and consumption, as well as other questions of interest in the present world.

Ayres, R.U. and P. Fleissner (2009). "A Simple hybrid 6 sector I-O Model." IIASA Interim Report IR-09-049, Dec 2009.

Investments and Financial Flows Induced by Climate Mitigation Policies

by Andrea Bastianin, Alice Favero and Emanuele Massetti

- In this paper we use the hybrid integrated model WITCH to quantify and analyze the investments and financial flows stimulated by a climate policy to stabilize Greenhouse Gases concentrations at 550ppm CO2-eq at the end of the century. We focus on investments to decarbonize the power sector and on investments in knowledge creation. We examine the financial flows associated with the carbon market and the implications for the international trade of oil.

Bastianin, A., A. Favero and E. Massetti (2010). "Investments and Financial Flows Induced by Climate Mitigation Policies." FEEM Note di Lavoro 2010.013, Feb 2010.

Fairness, Credibility and Effectiveness in the Copenhagen Accord: An Economic Assessment

by Enrica De Cian and Alice Favero

- State-of-the-art literature on climate change policies has proposed numerous approaches for the Post-Kyoto agreement. However, in analysing the outcome of negotiations, the feeling is that a huge gap exists between policy makers and scientists. This paper tries to bridge this gap by providing a critical and comparative analysis of the Copenhagen Accord provisions, linking them to a part of the climate-economy literature. It assesses Copenhagen outcome in terms of economic efficiency, environmental effectiveness and political credibility.

De Cian, E. and A. Favero (2010). "Fairness, Credibility and Effectiveness in the Copenhagen Accord: An Economic Assessment." FEEM Note di Lavoro 2010.021, Feb 2010.

Second-Best Optimal Taxation of Oil and Capital in a Small Open Economy

by Alberto Petrucci

- This paper analyzes the efficient taxation of oil and capital income in an oil-dependent infinite-lived economy facing perfect capital mobility. Two cases are examined: one with product market imperfections and free tax choice, one with perfect competition and tax restrictions. The optimal tax rates on oil and capital strictly depend on the international tax system implemented; however, they are also affected by the degree of market power and the extent to which monopoly profits are taxed, the type of tax restrictions and the use of oil (as an input or a consumer good). Under the residence-based system, capital income should always be exempted from taxation, while the optimal tax on productive oil may differ from zero. Under the source-based system, second-best taxes on capital and oil are non-zero.

Petrucci, A. (2010). "Second-Best Optimal Taxation of Oil and Capital in a Small Open Economy." FEEM Note di Lavoro 2010.020, Feb 2010.

Capital Malleability and the Macroeconomic Costs of Climate Policy

by Elisa Lanzi and Ian Sue Wing

- This paper argues for introducing the role of capital malleability into the analysis of environmental policies. The issue is explored by means of a theoretical model, a numerical analysis and a computable general equilibrium (CGE) model. Considering the three approaches together is fundamental in obtaining theory-compatible policy-relevant results. The model outcomes reveal differences between results under separate assumptions regarding the malleability of capital.

Lanzi, E. and I. Sue Wing (2010). "Capital Malleability and the Macroeconomic Costs of Climate Policy." FEEM Note di Lavoro 2010.019, Feb 2010.

Climate Change Meets Trade in Promoting Green Growth: Potential Conflicts and Synergies

by ZhongXiang Zhang

- To date, border adjustment measures in the form of emissions allowance requirements (EAR) under the U.S. proposed cap-and-trade regime are the most concrete unilateral trade measure put forward to level the carbon playing field. The paper argues that, on the U.S. side, in designing such trade measures, WTO rules need to be carefully scrutinised, and efforts need to be made early on to ensure that the proposed measures comply with them. After all, a conflict between the trade and climate regimes, if it breaks out, helps neither trade nor the global climate. The U.S. needs to explore, with its trading partners, cooperative sectoral approaches to advancing low-carbon technologies and/or concerted mitigation efforts in a given sector at an international level.

Zhang, Z. (2010). "Climate Change Meets Trade in Promoting Green Growth: Potential Conflicts and Synergies." FEEM Note di lavoro 2010.018, Feb 2010.

Too Much Oil

by Reyer Gerlagh

- In the climate change debate, economists have pointed to a green paradox: when policy makers stimulate the development of non-carbon energy sources to (partly) replace fossil fuels in the future, oil markets may anticipate a future reduction in demand and increase current supply. The insight comes from the basic exhaustible resource model. We reproduce the green paradox and to facilitate discussion differentiate between a weak and a strong version, related to short-term and long-term effects, respectively. Then we analyze the green paradox in 2 standard modifications of the exhaustible resource model.

Gerlagh, R. (2010). "Too Much Oil." FEEM Note di lavoro 2010.014, Feb 2010.

What Drives the International Transfer of Climate Change Mitigation Technologies? Empirical Evidence from Patent Data

by Antoine Dechezleprêtre, Matthieu Glachant and Yann Ménière

- Using patent data from 66 countries for the period 1990-2003, we characterize the factors which promote or hinder the international diffusion of climate-friendly technologies on a global scale. Regression results show that technology-specific capabilities of the recipient countries are determinant factors. In contrast, the general level of education is less important. We also show that restrictions to international trade -e.g., high tariff rates- and lax intellectual property regimes negatively influence the international diffusion of patented knowledge.

Dechezleprêtre, A., M. Glachant and Y. Ménière (2010). "What Drives the International Transfer of Climate Change Mitigation Technologies? Empirical Evidence from Patent Data." FEEM Note di lavoro 2010.012, Feb 2010.

Is There Really a Green Paradox?

by Frederick van der Ploeg and Cees Withagen

- The Green Paradox states that, in the absence of a tax on CO2 emissions, subsidizing a renewable backstop such as solar or wind energy brings forward the date at which fossil fuels become exhausted and consequently global warming is aggravated. We shed light on this issue by solving a model of depletion of non-renewable fossil fuels followed by a switch to a renewable backstop, paying attention to timing of the switch and the amount of fossil fuels remaining unexploited.

van der Ploeg, F. and C. Withagen (2010). "Is There Really a Green Paradox?" CESifo Working Paper No. 2963, Feb 2010.

Biofuels Subsidies and the Green Paradox

by R. Quentin Grafton, Tom Kompas and Ngo Van Long

- This paper develops sufficient conditions under which the Weak Green Paradox may (and may not) hold in terms of subsidies for biofuel production such that the supply-side responses by fossil fuel producers may more than offset the substitution to biofuels. Analytical results are derived and numerical simulations show that, under a wide range of parameter values, biofuel subsidies will increase the rate of extraction of fossil fuels in the short and medium term, and possibly bring climate-change damages closer to the present.

Grafton, R.Q. T. Kompas and N. Van Long (2010). "Biofuels Subsidies and the Green Paradox." CESifo Working Paper No. 2960, Feb 2010.

Will Border Carbon Adjustments Work?

by Winchester, N., S. Paltsev and J. Reilly

- The potential for greenhouse gas (GHG) restrictions in some nations to drive emission increases in other nations, or leakage, is a contentious issue in climate change negotiations. We evaluate the potential for border carbon adjustments (BCAs) to address leakage concerns using an economy-wide model. For 2025, we find that BCAs reduce leakage by up to two-thirds, but result in only modest reductions in global emissions and significantly reduce welfare. In contrast, BCA-equivalent leakage reductions can be achieved by very small emission charges or efficiency improvements in nations targeted by BCAs, which have negligible welfare effects.

Winchester, N., S. Paltsev and J. Reilly (2010). "Will Border Carbon Adjustments Work?" MIT Joint Program Report Series, Report 184, Feb 2010.

Analytical General Equilibrium Effects of Energy Policy on Output and Factor Prices

by Don Fullerton and Garth Heutel

- Using an analytical general equilibrium model, we find closed form solutions for the effect of energy policy on factor prices and output prices. We calibrate the model to the US economy, and we consider a tax on carbon. By looking at expenditure and income patterns across household groups, we quantify the uses-side and sources-side incidence of the tax. When households are categorized either by annual income or by total annual consumption as a proxy for permanent income, the uses-side incidence is regressive.

Fullerton, D. and G. Heutel (2010). "Analytical General Equilibrium Effects of Energy Policy on Output and Factor Prices." NBER Working Paper No. 15788, Feb 2010.

On the Drivers of Eco-Innovations: Empirical Evidence from the UK

by Effie Kesidou and Pelin Demirel

- The environmental economics literature emphasises the key role that environmental regulations play in stimulating eco-innovations. Innovation literature, on the other hand, underlines other important determinants of eco-innovations, mainly the supply-side factors such as firms’ organisational capabilities and demand-side mechanisms, such as customer requirements and societal requirements on corporate social responsibility (CSR). This paper brings together the views of these different disciplines and provides empirical insights on the drivers of eco-innovations based on a novel dataset of 1566 UK firms that responded to the Government Survey of Environmental Protection Expenditure by Industry in 2006.

Kesidou, E. and P. Demirel (2010). "On the Drivers of Eco-Innovations: Empirical Evidence from the UK." Nottingham University Business School Research Paper No. 2010-03, Feb 2010.

How to Combat Climate Change? The Determinants of Joining in and Complying with the Kyoto Protocol

by Christian Almer and Ralph Winkler

- The outcome of the COP15 in Copenhagen failed to meet even modest expectations, still there is no alternative to international cooperation for the mitigation of climate change. Thus, it is certainly of interest to know about the determinants of the only existing treaty defining greenhouse gas emission targets, the Kyoto Protocol. We separately analyze accession to and compliance with the Protocol in an empirical political economy framework. While joining in is influenced by damage costs of climate change and political factors, compliance is mainly driven by abatement costs.

Almer, C. and R. Winkler (2010). "How to Combat Climate Change? The Determinants of Joining in and Complying with the Kyoto Protocol." Available at SSRN, Feb 2010.

Policy Uncertainty in Emission Permits and Capital Investment Decisions: A Real Option Approach

by Sang Baum Kang

- Policy uncertainty or a time-inconsistency problem of a government in emission permits may lead to inefficiency in physical capital investments. This paper proposes a new analytic framework in the real option theory to address this problem by introducing a first passage time distribution to Least-Square Monte Carlo (LSMC) simulation. Our simulation outcomes using real-world data are consistent with three theoretical predictions that under the policy uncertainty, investments in a green technology will be reduced, investments in a green technology will be deferred, and a rational firm will expect more profit.

Kang, S.B. (2010). "Policy Uncertainty in Emission Permits and Capital Investment Decisions: A Real Option Approach." Available at SSRN, Jan 2010.

Carbon Dioxide Offsets from Anaerobic Digestion of Dairy Waste

by Brent A. Gloy

- Anaerobic digestion allows farmers to create renewable energy and significantly reduce manure methane emissions. Estimates of the aggregate supply curve for CO2e offsets were developed based upon dairy farm data collected by the USDA/ERS Agricultural Resource and Management Survey (ARMS). The results provide insight regarding the potential for methane emission reductions and renewable energy generation on U.S. dairy farms. Offset prices in excess of $15 per ton of carbon dioxide equivalent would be required to reduce methane emissions from manure storages by 50 percent from 2005 levels.

Gloy, B.A. (2010). "Carbon Dioxide Offsets from Anaerobic Digestion of Dairy Waste." Department of Applied Economics and Management, Cornell University, Ithaca, Feb 2010.

Are Compact Cities Environmentally Friendly?

by Carl Gaigne, Stéphane Riou and Jacques-François Thisse

- There is a large consensus among international institutions and national governments to favor urban-containment policies - the compact city - as a way to reduce the ecological footprint of cities. This approach overlooks the following basic trade-off: the concentration of activities decreases the ecological footprint stemming from commodity shipping between cities, but it increases emissions of greenhouse gas by inducing longer worktrips. What matters for the ecological footprint of cities is the mix between urban density and the global pattern of activities.

Gaigne, C., S. Riou and J-F Thisse (2010). "Are Compact Cities Environmentally Friendly?" GATE (Groupe D'Analyse et de Théorie Èconomique) Working Paper No. 1001. Available at SSRN, Feb 2010.

The Scale and Scope of Environmental Taxation

by Agnar Sandmo

- This paper provides a discussion of the principles of environmental taxation. It considers the empirical identification of environmental taxes and the problems associated with the choice of the right tax base from the point of view of the correction of market incentives. It then presents a model of optimal second best environmental taxation when taxes must fulfil the double role of modifying market incentives and generating tax revenue. It also considers the issues of the double dividend, the interaction between intrinsic and extrinsic incentives and the problem of designing a tax policy for the alleviation of global environmental problems.

Sandmo, A. (2009). "The Scale and Scope of Environmental Taxation." NHH Dept. of Economics Discussion Paper No. 18/2009. Available at SSRN, Oct 2009.

Climate Cost Uncertainty, Retrofit Cost Uncertainty, and Infrastructure Closedown: a Framework for Analysis

by Jon Strand, Sebastian Miller

- Large and energy-intensive infrastructure investments with long life times have substantial implications for climate policy. This study focuses on options to scale down energy consumption and carbon emissions now and in the future, and on the costs of doing so. Two ways carbon emissions can be reduced post-investment include retrofitting the infrastructure, or closing it down. Generally, the presence of bulky infrastructure investments makes it more costly to reduce emissions later.

Strand, J. and S. Miller (2010). "Climate Cost Uncertainty, Retrofit Cost Uncertainty, and Infrastructure Closedown: a Framework for Analysis." World Bank Policy Research Working Paper no. WPS 5208, Feb 2010.

Cores of Games with Positive Externalities

by Parkash Chander

- This paper introduces a core concept, called the gamma-core, in the primitive framework of a strategic game. For a certain class of strategic games, it is a weaker concept than the strong Nash equilibrium, but in general stronger than the conventional a- and ß- cores. We argue that the coalition formation process is an infinitely repeated game and show that the grand coalition forms if the gamma-core is nonempty. This is a weaker sufficient condition than the previous such condition (Maskin (2003, Theorem 4)). As an application of this result, it is shown that the gamma-core of an oligopolistic market is nonempty and thus the grand coalition forms.

Chander, P. (2010). "Cores of Games with Positive Externalities." CORE Discussion Paper 2010/4, Jan 2010.

Carbon Emission Values in Cost Benefit Analyses

by Svante Mandell

- New infrastructure projects may affect CO2 emissions and, thus, cost benefit analyses for these projects require a value to apply for CO2. The value may be based on the marginal social cost associated with emissions or on the shadow price resulting from present and future policies geared towards CO2 emissions. In the present paper it is argued that the social cost approach should be seen as preceding the shadow price approach. Both are thus necessary, but for cost benefit analysis of infrastructure projects we argue for the shadow price approach as the primary tool.

Mandell, S. (2010). "Carbon Emission Values in Cost Benefit Analyses." Working Papers, Swedish National Road & Transport Research Institute (VTI), 10.01.307, Jan 2010.

Testing Value vs Waiting Value in Environmental Decisions under Uncertainty

by Giuseppe Attanasi and Aldo Montesano

- The paper analyzes environmental decisions under uncertainty and irreversibility by introducing a value - the Testing Value. This value emerges in all situations in which the level of information concerning future economic benefits and costs of development depends on the level of development carried out. We show that including the Testing Value into the analysis could push a risk-neutral decision maker towards a higher level of preservation of the environmental resource in the present and eventually in the future.

Attanasi, G. and A. Montesano (2010). "Testing Value vs Waiting Value in Environmental Decisions under Uncertainty." LERNA, Working Papers 10.01.307, Jan 2010.

Climate Change Mitigation and Ecosystem Services: A Stochastic Analysis.

by Thomas S. Lontzek and Daiju Narita

- Degradation of ecosystem services may be a major component of climate change damage, and incorporation of this factor could significantly alter the significance of uncertainty in climate-economy modeling. However, this aspect has been little investigated by economic analyses of climate change and uncertainty. We apply standardized numerical techniques of stochastic optimization to this research question.

Lontzek, T.S. and D. Narita (2010). "Climate Change Mitigation and Ecosystem Services: A Stochastic Analysis." Kiel Working Paper No. 1593, Jan 2010.

Climate Policy, Technology Choice, and Multiple Equilibria in A Developing Economy

by Daiju Narita

- Control of carbon dioxide emissions in developing countries is becoming a key issue in the international climate policy. A critical element for achieving substantial emission reduction in those countries is the installment of new energy technologies. Drawing on the framework of poverty-trap models in development economics, we discuss how climate policy affects the transition of energy technologies in a developing economy.

Narita, D. (2010). "Climate Policy, Technology Choice, and Multiple Equilibria in A Developing Economy." Kiel Working Paper No. 1590, Jan 2010.

Incentives to Invest in Abatement Technology. A Tax Versus Emissions Trading under Imperfect Competition

by Halvor Briseid Storrøsten

- In the longer run, effects on R&D and the implementation of advanced abatement technology may be at least as important as short-run cost effectiveness when we evaluate public environmental policy. In this paper, we show that the number of firms that adopt advanced abatement technology could be higher with emissions trading than with a tax if there is imperfect competition in the permits market. Under perfect competition, the number would always be higher with a tax, given that the regulator is myopic. If we allow for environmental policy response, the ranking is still ambiguous under imperfect competition, while the regimes become equal with perfect competition.

Storrøsten, H.B. (2010). "Incentives to Invest in Abatement Technology. A Tax Versus Emissions Trading under Imperfect Competition." Discussion Papers 606, Statistics Norway, Jan 2010.

Carbon Capture and Storage Technologies in the European Power Market

by Rolf Golombek, Mads Greaker, Sverre A.C Kittelsen, Ole Røgeberg and Finn Roar Aune

- We examine the potential of Carbon Capture and Storage (CCS) technologies in the European electricity markets, assessing whether CCS technologies will reduce carbon emissions substantially in the absence of investment subsidies, and how the availability of CCS technologies may affect electricity prices and the amount of renewable electricity. To this end we augment a multi-market equilibrium model of the European energy markets with CCS electricity technologies.

Golombek, R., M. Greaker, S.A.C Kittelsen, O. Røgeberg and F.R. Aune (2009). "Carbon Capture and Storage Technologies in the European Power Market." Discussion Papers 603 - Statistics Norway, Dec 2009.

On the Measurement of Environmental Taxes

by Annegrete Bruvoll

- In practical policy, environmental and fiscal taxes are conceptually intertwined. This mixture complicates the calculation of the extent and the evaluation of the effects of environmental taxes. Eurostat, OECD and IEA include all taxes related to energy, transport and pollution, and most resource taxes in their international measurement of environmentally related taxes. Consequently, numerous fiscal taxes are added together with the environmental taxes. This article discusses the distinctions between the Pigouvian and the fiscal taxes in light of tax theory. The revenues following the Eurostat et al. statistical basis deviate significantly from the revenues from the environmental taxes defined on the basis of theory.

Bruvoll, A. (2009). "On the Measurement of Environmental Taxes." Discussion Papers 599 - Statistics Norway, Dec 2009.

It’s One Climate Policy World Out There? Almost

by Nancy Birdsall and Jan von der Goltz

- In the run-up to the December 2009 Copenhagen climate conference, the authors surveyed members of the international development community with a special interest in climate change on three sets of detailed questions: (1) what action different country groups should take to limit climate change; (2) how much non-market funding there should be for emissions reductions and adaptation in developing countries, and how it should be allocated; and (3) which institutions should be involved in delivering climate assistance, and how the system should be governed. A broad majority of respondents from both developing and developed countries held very similar views on the responsibilities of the two different country groups, including on issues that have been very controversial in the negotiations.

Birdsall, N. and J. von der Goltz (2010). "It’s One Climate Policy World Out There? Almost" Center for Global Development Working Paper 195, Dec 2009.

Does Global Climate Policy Promote Low-Carbon Cities? Lessons learnt from the CDM

by Maike Sippel and Axel Michaelowa

- An increasing proportion of greenhouse gas emissions is produced in urban areas in industrializing and developing countries. Recent research shows that per capita emissions in cities like Bangkok, Cape Town or Shanghai have already reached the level of cities like London, New York or Toronto. Based upon a survey of projects under the Clean Development Mechanism (CDM) of the Kyoto Protocol, we find that only about 1% of CDM projects have been submitted by municipalities, mostly in the waste management sector. This low participation is probably due to a lack of technical know how to develop CDM projects and an absence of motivation due to the long project cycle and the limited "visibility" of the projects for the electorate.

Sippel, M. and A. Michaelowa (2009). "Does Global Climate Policy Promote Low-Carbon Cities? Lessons learnt from the CDM." ETH Zurich CIS Working Paper No 49, 2009.

Think Globally, Act Locally? Stock vs Flow Regulation of a Fossil Fuel

by Jean-Pierre Amigues, Ujjayant Chakravorty and Michel Moreaux

- Regulation of environmental externalities like global warming from the burning of fossil fuels (e.g., coal and oil) is often done by capping both emission flows and stocks. Flow regulation is often local or regional in nature, while stock regulation is global. In this paper we show that local and global pollution control efforts, if uncoordinated, may exacerbate environmental externalities. For example, a stricter cap on emission flows may actually increase the global pollution stock and hasten the date when the global pollution cap is reached.

Amigues, J-P, U. Chakravorty and M. Moreaux (2009). "Think Globally, Act Locally? Stock vs Flow Regulation of a Fossil Fuel." LERNA, Working Paper 09.30.306, Nov 2009.