October 29, 2007

European Carbon Prices Fundamentals in 2005-2007: The Effects of Energy Markets, Temperatures and Sectorial Production.

This article aims at characterizing the daily price fundamentals of European Union Allowances (EUAs) traded since 2005 as part of the Emissions Trading Scheme (ETS). Results show that spot prices react not only to other energy markets and temperatures, but also to economic activity within the main sectors covered by the EU ETS such as proxied by sectoral production indices.

Alberola, E., J. Chevallier and B. Ch├Ęze (2007). "European Carbon Prices Fundamentals in 2005-2007: The Effects of Energy Markets, Temperatures and Sectorial Production." EconomiX Working Paper No. 2007-33, Oct 2007.

European Carbon Prices and Banking Restrictions: Evidence from Phase I (2005-2007).

The price of European Union Allowances (EUAs) has been declining at far lower levels than expected during Phase I (2005-2007). We advocate low allowance prices may also be explained by banking restrictions between 2007 and 2008 which undermine the ability of the EU ETS to provide an efficient price signal.

Alberola, E. and J. Chevallier (2007). "European Carbon Prices and Banking Restrictions: Evidence from Phase I (2005-2007)." EconomiX Working Paper No. 2007-32, Oct 2007.

A Program to Accelerate the Deployment of CO2 Capture and Storage: Rationale, Objectives, and Cost.

This white paper analyzes one strategy for accelerating the deployment of carbon capture and storage (CCS) by the coal-fueled electricity generation industry. This strategy involves providing reimbursement for the incremental costs of installing and operating CCS systems, with reimbursement provided for retrofitting existing coal-fueled electricity generation plants with CCS, incorporating CCS into new plants, and launching large-scale demonstrations of geologic storage of carbon.

Kuuskraa, V.A. "A Program to Accelerate the Deployment of CO2 Capture and Storage: Rationale, Objectives, and Cost." Pew Center on Global Climate Change, Oct 2007.

Auction Design for Selling CO2 Emission Allowances Under the Regional Greenhouse Gas Initiative - Final Report.

A carefully designed allowance auction can help maximize the benefits of the RGGI program and can serve as a model for other states and ultimately for a federal program to control greenhouse gas emissions. The project investigators developed an auction design that meets several key criteria, including attaining economic efficiency, so that the auction delivers allowances to those who value them most; deterring collusive behavior by bidders; and providing good signals about market prices. The auction also should have low administrative costs, be perceived as fair, be transparent and simple, and help minimize price volatility. In addition, the auction should successfully raise revenue from the sale of a valuable public asset and be compatible with existing electricity and energy markets.

Burtraw, D., Goeree, J., Holt, C., Palmer, K. and W. Shobe (2007). "Auction Design for Selling CO2 Emission Allowances Under the Regional Greenhouse Gas Initiative - Final Report." Resources for the Future, Reports, Oct 2007.

An Equitable Tax Reform to Address Global Climate Change.

This paper describes a carbon tax swap that is both revenue and distributionally neutral. The tax swap would levy a tax on greenhouse gas emissions. The revenue would be used to fund a reduction in the income tax, tied to earned income. Carbon pricing through a tax should be considered a viable alternative to carbon pricing through a cap-and-trade system.

Metcalf, G.E. "An Equitable Tax Reform to Address Global Climate Change." Brookings, Hamilton Project Discussion Paper. Nov 2007.

An Economic Strategy to Address Climate Change and Promote Energy Security.

This paper presents a three-part strategy for addressing climate change and promoting energy security. First, the government should price carbon and oil correctly so that the private sector has an incentive to reduce their use. Second, the government should increase and refocus public investments on basic research and on long-run speculative energy technologies. Finally, the United States should lead by example and engage major emitting nations in an international response to climate change.

Furman, J., J.E. Bordoff, M.A. Manasi and P. Noel. "An Economic Strategy to Address Climate Change and Promote Energy Security." Brookings, Hamilton Project Discussion Paper. Nov 2007.

October 22, 2007

U.S. Climate Policy Developments.

This paper outlines recent developments in US climate policies. Although the US does not participate in the Kyoto Mechanism, a number of climate policies are being implemented at state level as well as at the federal level. It is found that technology policies play important roles in the cap and trade proposals and that there is a great expectation for carbon capture and sequestration (CCS) technology. In terms of the impacts on international markets, several federal proposals as well as regional programs permit trading in international markets. As emission targets become more stringent in the future, U.S. GHG emitters are more likely to interact with these markets.

Arimura, T.H., Burtraw, D., Krupnick, A. and K. Palmer. "U.S. Climate Policy Developments." Resources for the Future, Discussion Paper 07-45. Oct 2007.

The Economics of a Biofuel Consumption Mandate and Excise-Tax Exemption: An Empirical Example of U.S. Ethanol Policy.

- This paper develops a general framework to evaluate the effects on agricultural and gasoline markets of a consumption mandate and excise-tax exemption, the two most prominent public biofuel policies. To illustrate the complexity and importance of the interaction between biofuel mandates and tax exemptions, a stylized empirical model of the U.S. ethanol market is calibrated.

De Gorter, H. and D.R. Just. "The Economics of a Biofuel Consumption Mandate and Excise-Tax Exemption: An Empirical Example of U.S. Ethanol Policy." Available at SSRN, Oct 2007.

Local air pollution and global climate change: a combined cost-benefit analysis air pollution.

A combined cost-benefit analysis on both local air pollution and global climate change - two closely related problems since both are driven by energy production and consumption patterns - shows that integrated environmental policies can generate net global welfare benefits. Furthermore, discounted benefits of local air pollution reduction significantly outweigh those of global climate change mitigation.

Bollen, J., B. Zwaan van der, C. Brink and H. Eerens. "Local air pollution and global climate change: a combined cost-benefit analysis air pollution." Netherlands Environmental Assessment Agency, MNP Report Report no. 500116002, Oct 2007.

The Effects of National Allocation Plans on Carbon Markets.

The release of information in carbon markets at its early state is characterized as being numerous and not scheduled. This paper analyzes the impact of National Allocation Plans announcements on carbon prices and their volatility during the period October 2004 through May 2007, during which time more than 70 announcements were released. The results indicate that news has an influence on carbon prices on both the announcement day and previous days. There is no effect of news on returns volatility.

Mansanet Ballater, M. and A. Pardo Tornero. "The Effects of National Allocation Plans on Carbon Markets." Oct 2007, available at SSRN.

The Incidence of a U.S. Carbon Tax: A Lifetime and Regional Analysis.

This paper measures the direct and indirect incidence of a carbon tax using current income and two measures of lifetime income to rank households. The two measures of lifetime income are current consumption and adjusted or "lifetime" consumption. Results suggest that in general, carbon taxes appear to be more regressive when income is used as a measure of economic welfare, than when consumption (current or lifetime) is used to measure incidence.

Hassett, K.A., A. Mathur and G.E. Metcalf. "The Incidence of a U.S. Carbon Tax: A Lifetime and Regional Analysis." NBER Working Paper No. 13554, Oct 2007.

Optimal Energy Investment and R&D Strategies to Stabilise Greenhouse Gas Atmospheric Concentrations.

In this paper the authors use WITCH, a hybrid climate-energy-economy model, to obtain a quantitative assessment of some cost-effective strategies that stabilise CO2 concentrations at 550 or 450 ppm. In particular, this paper analyses the energy investment and R&D policies that optimally achieve these two GHG stabilisation targets (i.e. the future optimal energy mix consistent with the stabilisation of GHG atmospheric concentrations at 550 and 450 ppm).

Bosetti, V., C. Carraro, E. Massetti and M. Tavoni. "Optimal Energy Investment and R&D Strategies to Stabilise Greenhouse Gas Atmospheric Concentrations." FEEM Working Papers, 95.07, Oct 2007.

October 15, 2007

The US Economic Impacts of Climate Change and the Costs of Inaction.

The range of climatic changes anticipated in the United States will have real mpacts on the natural environment as well as human-made infrastructures and their ability to contribute to economic activity and quality of life. These impacts will vary across regions and sectors of the economy, leaving future governments, the private sector and citizens to face the full spectrum of direct and indirect costs accrued from increasing environmental damage and disruption.

CIER. "The US Economic Impacts of Climate Change and the Costs of Inaction". Center for Integrative Environmental Research (CIER) at the University of Maryland, Oct 2007.

A review of UK FTSE 100 climate strategy and a framework for more in-depth analysis in the context of a post-2012 climate regime.

This paper reviews the corporate climate strategies of UK FTSE 100 companies as part of a series of steps to identify the range of policy options in a future climate regime that might be successful in terms of securing environmentally effective and efficient long-term business response to climate change.

Okereke, C. "A review of UK FTSE 100 climate strategy and a framework for more in-depth analysis in the context of a post-2012 climate regime". Tyndall Centre Working Paper 109, Oct 2007.

Conceptualizing climate change governance beyond the international regime: a review of four theoretical approaches.

This paper reviews four theoretical approaches for considering the governance of climate change at the international level - regime theory, global governance, neo-Gramscian and governmentality perspectives - to assess their respective strengths and weaknesses.

Okereke, C. and H. Bulkeley. "Conceptualizing climate change governance beyond the international regime: a review of four theoretical approaches". Tyndall Centre Working Paper 112, Oct. 2007.

The Clean Development Mechanism: An assessment of current practice and future approaches for policy.

The paper contains a critical assessment of the Clean Development Mechanism.

Boyd, E. et al. "The Clean Development Mechanism: An assessment of current practice and future approaches for policy". Tyndall Centre Working Paper 114, Oct 2007.

Prices vs. Quantities: Environmental Regulation and Imperfect Competition.

In a market subject to environmental regulation, a firm's strategic behavior affects the production and emissions decisions of all firms. If firms are regulated by a Pigouvian tax, changing emissions will not affect the marginal cost of polluting. However, under a tradable permits system, the polluters' decisions affect the permit price. This paper shows that this feedback effect may increase a strategic firm's output. Relative to a tax, tradable permits improve welfare in a market with imperfect competition.

Mansur, Erin. "Prices vs. Quantities: Environmental Regulation and Imperfect Competition". NBER Working Paper No. 13510. Oct 2007.

October 5, 2007

Assessing Climate Change Impacts on Water, Land-Use and Economic Return in Agriculture.

The paper develops a regional scale economic model for analyzing climate-change impacts on agriculture. Non-linear production functions describing yield responses to land allocation, water application and water salinity are integrated into a mathematical programming model. Internalization of land allocation among crops is based on Howitt's PMP calibration approach (1995). The model, therefore, enables assessment of climate-change impacts on optimal agricultural management, where adaptation is considered endogenously with respect to both the extensive and intensive margins. The model is applied to the case of Israel.

Kan, Iddo, Rapaport-Rom, Mickey and Shechter, Mordechai. "Assessing Climate Change Impacts on Water, Land-Use and Economic Return in Agriculture". Oct 2007.

Exploring European countries' emission reduction targets, abatement costs and measures needed under the 2007 EU reduction objectives.

This paper argues that it is technically feasible for the EU to meet the 20% unilateral and 30% multilateral greenhouse gas emission reduction targets as adopted in 2007. The emission reductions and costs for the individual countries show a wide range, and are more dependent on the burden-sharing regime for internal EU allocation of reductions than the choice of the overall EU reduction target.

den Elzen, M.G.J., P.L. Lucas, A. Gijsen. "Exploring European countries' emission reduction targets, abatement costs and measures needed under the 2007 EU reduction objectives." Netherlands Environmental Assessment Agency, MNP Report 500114009/2007, Oct 2007.

Local Solutions to Global Problems: Policy Choice and Regulatory Jurisdiction.

This paper considers the efficiency of various types of environmental regulations when they are applied locally to pollutants whose damages extend outside the jurisdiction of the local regulator. The authors draw on examples from state- and city-level efforts to address climate change by enacting policies to reduce greenhouse gases.

Bushnell, James B., Peterman, Carla and Wolfram, Catherine D.. "Local Solutions to Global Problems: Policy Choice and Regulatory Jurisdiction." NBER Working Paper No. W13472, Oct 2007.