January 28, 2008

Linking a U.S. Cap-and-Trade System for Greenhouse Gas Emissions: Opportunities, Implications, and Challenges.

The long-run cost of a U.S. cap-and-trade system for greenhouse gas (GHG) emissions could be significantly reduced by linking that system with other existing and emerging tradable permit systems for GHG emissions. However, along with the cost savings that it offers, linking has distributional consequences and, under some circumstances, linked systems collectively will not achieve the same level of emission reductions as they would absent linking. Also, linking can reduce a government's control over the impacts of its tradable permit system. Thus, in considering linkages, the United States and potential linking partners may have to weigh linking's implications for potentially competing policy objectives, much as will be required in developing other elements of their respective domestic climate policies.

Jaffe, Judson L. and Stavins, Robert N. "Linking a U.S. Cap-and-Trade System for Greenhouse Gas Emissions: Opportunities, Implications, and Challenges" Reg-Markets Center Working Paper No. 08-01, Jan 2008.

Promoting Biofuels: Implications for Developing Countries.

Interest in biofuels is growing worldwide as concerns about the security of energy supply and climate change are moving into the focus of policy makers. With particular focus on developing countries, this paper discusses the economic justification of biofuel promotion instruments and investigates their implications. Based on data from India and Tanzania, this paper shows that substantial biofuel usage induces significant financial costs. Furthermore, acreage availability is a binding natural limitation that could also lead to conflicts with food production.

Peters, J. and S. Thielmann. "Promoting Biofuels: Implications for Developing Countries." Ruhr Economic Paper No. 38. Jan 2008.

Renewable Energy Policies And Technological Innovation: Evidence Based On Patent Counts.

This paper examines the effect of environmental policies on technological innovation in the specific case of renewable energy. The analysis is conducted using patent data on a panel of 25 countries over the period 1978-2003. It is found that public policy plays a significant role in determining patent applications. Different types of policy instruments are effective for different renewable energy sources.

Johnstone, N., I. Hascic and D. Popp. "Renewable Energy Policies And Technological Innovation: Evidence Based On Patent Counts." NBER Working Paper No. 13760, Jan 2008.

Using Tax Expenditures to Achieve Energy Policy Goals.

Tax expenditures are a major source of support for energy related activities in the federal budget exceeding direct budget support for energy by a factor of nearly six. Focusing on the policy goals of reducing greenhouse gas emissions and petroleum consumption, this paper finds that these tax expenditures highly cost ineffective at best and counterproductive at worse. The tax credit for ethanol is an example of a cost ineffective subsidy.

Metcalf, G.E. "Using Tax Expenditures to Achieve Energy Policy Goals." NBER Working Paper No. 13753, Jan 2008.

Catastrophic Risks and First-Party Insurance.

Although the insurance industry demonstrates a growing concern about the severe rise in losses from natural disasters, only about one third of all potential victims have in fact purchased first-party catastrophe insurance. Although first-party insurance has several advantages, this paper finds that there is indeed actually no demand for and supply of first-party insurance for natural catastrophes.

Faure, M.G. and V. Bruggeman. "Catastrophic Risks and First-Party Insurance." Available at SSRN, Jan 2008.

A Sensible and Practical Way to Cut U.S. CO2 Emissions.

Stavins, R. "A Sensible and Practical Way to Cut U.S. CO2 Emissions." Election 2008 Commentary. Harvard Kennedy School website, Jan 2008.

Better Management of Municipal Waste will Reduce Greenhouse Gas Emissions.

The amount of municipal waste is expected to grow by 25 % from 2005 to 2020. Increased recovery of waste, and diverting waste away from landfill play a key role in tackling the environmental impacts of increasing waste volumes. As recycling and incineration with energy recovery are increasingly used, net greenhouse gas emissions from municipal waste management are expected to drop considerably by 2020.

European Environment Agency. "Better management of municipal waste will reduce greenhouse gas emissions." Jan 2008.

Estimating the environmentally compatible bioenergy potential from agriculture.

This report provides technical background for the estimation of the environmentally compatible bioenergy potential from agriculture that the EEA published in 2006. It also gives information on agri-environmental pressures that explain the environmental conditions in the EEA scenario. Finally, policy measures are discussed that can be used to promote an environmentally compatible bioenergy production.

European Environmental Agency. "Estimating the environmentally compatible bioenergy potential from agriculture." Technical report No 12/2007, Jan 2008.

January 26, 2008

Banking Permits: Economic Efficiency and Distributional Effects.

In the model presented in this paper, banking of carbon allowances in a global permit market is fully endogenised. It is therefore possible to identify under what conditions traders find it optimal to bank permits, when banking is socially optimal, and what are the implications for present and future permit prices. It is also explain why the equilibrium rate of growth of permit prices is likely to be larger than the equilibrium interest rate.

Bosetti, V., C. Carraro and E. Massetti (2008). "Banking Permits: Economic Efficiency and Distributional Effects." CEPR Discussion Paper 6652 and FEEM Nota di Lavoro 01/2008, Jan 2008.

Climate Change Impacts and Adaptation Strategies In Italy. An Economic Assessment.

In this paper, the economic value of the impacts of climate change is assessed for different Italian economic sectors and regions. Sectoral and regional impacts are then aggregated to provide a macroeconomic estimate of variations in GDP induced by climate change in the next decades.

Sgobbi, A. and C. Carraro. "Climate Change Impacts and Adaptation Strategies In Italy. An Economic Assessment." FEEM Nota di Lavoro 06/08, Jan 2008.

Can Climate Change Mitigation Policy Benefit the Israeli Economy? A Computable General Equilibrium Analysis.

This study aims to quantify the economy-wide consequences for Israel of meeting the targets of emission reductions similar to those prescribed by the Kyoto Protocol. Costs estimates are generated using a Computable General Equilibrium (CGE) model of the Israeli economy. The hypothesis of a double dividend and of the employment double dividend are also tested, with mixed results.

Palatnik, R. (2008). "Can Climate Change Mitigation Policy Benefit the Israeli Economy? A Computable General Equilibrium Analysis." FEEM Nota di Lavoro 02/2008, Jan 2008.

The Performance and Potential of the Clean Development Mechanism.

This paper presents an overview of the development and current shape of the CDM market, then examines two important classes of emission reduction projects within the CDM and argues that they both point to the need for reform of the international climate regime in the post-Kyoto era, albeit in different ways. Potential options for reform are then presented and discussed.

Wara, M.W. . "The Performance and Potential of the Clean Development Mechanism." Stanford Law School; Program on Energy and Sustainable Development, Jan 2008.

Energy Efficiency and Renewable Energy Supply for the G-7 Countries, with Emphasis on Germany.

This paper discusses structure, impact, costs, and efficiency of renewable energy supply in the eight largest advanced economies (the G-7 plus Spain), with focus on Germany. Renewables production costs are compared to benefits, defined as reductions in net carbon emissions; technological innovation, and increased energy security. The latter part of the paper centers on Germany, the main European producer of non-traditional renewables.

Strand, J. . "Energy Efficiency and Renewable Energy Supply for the G-7 Countries, with Emphasis on Germany." IMF Working Paper No. 07/299, Jan 2008.

On Modeling and Interpreting the Economics of Catastrophic Climate Change.

Using climate change as a prototype example, this paper analyzes the implications of structural uncertainty for the economics of low-probability high-impact catastrophes. At least potentially, the influence on cost-benefit analysis of fat-tailed structural uncertainty about climate change, coupled with great unsureness about high-temperature damages, can outweigh the influence of discounting or anything else.

Weitzman, M.L. "On Modeling and Interpreting the Economics of Catastrophic Climate Change." Revised version, Jan 2008.

January 19, 2008

EU 2020 climate target: 20% reduction requires five-fold increase in impact of CO2 policies.

MNP has estimated that without environmental policies in the EU between 1990 and 2005, emissions of the six greenhouse gases under the Kyoto Protocol would have been approximately 7 % higher in 2005 than they were in reality. Achieving the 2020 EU climate target will require the EU policy impact on CO2 emissions to increase by a factor of almost five.

Wesselink, L.G., H. Eerens and J. Vis (2008). "EU 2020 climate target: 20% reduction requires five-fold increase in impact of CO2 policies." Report no. 500094007, Jan 2008.

Key Congressional Climate Change Legislation Compared.

Researchers at Resources for the Future have prepared an updated comparison of major market-based climate change proposals currently under consideration in the 110th Congress.

Resources for the Future. "Key Congressional Climate Change Legislation Compared." Resources For the Future, Jan 2008.

January 17, 2008

Ethanol: Law, Economics, and Politics.

This paper provides a cost-benefit analysis of substantially increasing ethanol production in the United States, and finds that costs are likely to exceed benefits by about three billion dollars annually in 2012 if current policies continue. It also suggests that earlier attempts aimed at promoting ethanol would have likely failed a benefit-cost test.

Hahn, R.W. (2008). "Ethanol: Law, Economics, and Politics." AEI-Brookings Joint Center for Regulatory Studies January, Reg-Markets Center Working Paper No. 08-02. Available at SSRN. Jan 2008.

Can China Continue Feeding Itself ? The Impact of Climate Change on Agriculture.

Several studies addressing the supply and demand for food in China suggest that the nation can largely meet its needs in the coming decades. However, these studies do not consider the effects of climate change. This paper examines whether near future expected changes in climate are likely to alter this picture.

Wang, J., R.O. Mendelsohn, A. Dinar, J. Huang, S. Rozelle and L. Zhang. "Can China Continue Feeding Itself ? The Impact of Climate Change on Agriculture." World Bank Policy Research Working Paper No. 4470, Jan 2008.