March 15, 2008

Abatement Cost Uncertainty and Policy Instrument Selection under a Stringent Climate Policy. A Dynamic Analysis.

This paper investigates the relative economic and environmental outcomes of price versus quantity mechanisms to control GHG emissions when abatement costs are uncertain. The analysis is performed in an optimal growth framework via Monte Carlo simulations of the integrated assessment model WITCH (World Induced Technical Change Hybrid). Results indicate that the price instrument stochastically dominates the quantity instrument when a stringent stabilization policy is in place.

Bosetti, V., A. Golub, A. Markandya, E. Massetti and M. Tavoni. "Abatement Cost Uncertainty and Policy Instrument Selection under a Stringent Climate Policy. A Dynamic Analysis." Feem Nota di Lavoro 15.2008, Mar 2008.

Should Greenhouse Gas Permits Be Allocated On a Per Capita Basis?

How should such emission permits be allocated in a cap-and-trade system? This paper explores the shortcomings of the "equal per capita" allocation rule.

Posner E.A. and C.R. Sunstein. "Should Greenhouse Gas Permits Be Allocated On a Per Capita Basis?" Brookings, Reg-Markets Center Working Paper 08-08, Mar 2008.

The Missing Instrument: Dirty Input Limits.

This article evaluates an environmental protection instrument that the literature has hitherto largely overlooked, Dirty Input Limits (DILs), quantitative limits on the inputs that cause pollution. DILs provide an alternative to cumbersome output-based emissions trading and performance standards. DILs have played a role in some of the world's most prominent environmental success stories. They have also begun to influence climate change policy, because of the impossibility of imposing an output-based cap on transport emissions. This paper evaluates DILs' administrative advantages, efficiency, dynamic properties, and capacity to better integrate environmental protection efforts.

Driesen, D.M. and A. Sinden. "The Missing Instrument: Dirty Input Limits." Available at SSRN, Feb 2008.

A Permit Allocation Contest for a Tradable Pollution Permit Market.

This paper advocates a new initial allocation mechanism for a tradable pollution permit market. It outlines a Permit Allocation Contest (PAC) that distributes permits to firms based on their rank relative to other firms. This ranking is achieved by ordering firms based on an "observable external action" where the external action is an activity or characteristic of the firm that is independent of their choice of emissions in the tradeable permit market. This mechanism efficiently allocates permits and, as a result, the tradeable permit market is cost-effective.

MacKenzie, I.A., N. Hanleyb and T. Kornienkoc. "A Permit Allocation Contest for a Tradable Pollution Permit Market." Center for Economic Research (CER), ETH-Zürich, Mar 2008.

On the Sequential Choice of Tradable Permit Allocations.

This paper investigates the sequential announcement of domestic emissions caps by regulators in a federal or international-based tradable pollution permit market for a transboundary pollutant. A leader-follower framework is used to analyse the consequences of regulators sequentially announcing domestic allocation caps. The sequential choice of domestic allocation caps is found to be sub-optimal and to depend on the followers reaction to the leaders choice. Furthermore, the marginal damage and the degree to which allocations are substitutes or complements affects whether the leader changes from being a net permit buyer (seller) of permits to a seller (buyer).

MacKenzie, I.A. "On the Sequential Choice of Tradable Permit Allocations." Centre for Economic Research (CER), ETH-Zürich, Mar 2008.

Environmental Outlook to 2030: How much will it cost to fix the environment?

The OECD's Environmental Outlook to 2030 says that global efforts to tackle the main environmental challenges - climate change, biodiversity loss, water scarcity and risks to human health - are achievable and affordable. The report highlights key environmental problems and outlines a mix of policy solutions to address them, but warns that costs will rise significantly if action isn't taken now.

OECD. "Environmental Outlook to 2030: How much will it cost to fix the environment?" Mar 2008.

March 7, 2008

Climate for a transport change. TERM 2007: indicators tracking transport and environment in the European Union Document Actions.

The TERM 2007 report examines performance of the transport sector vis-a-vis potential future targets for greenhouse gas emission reductions and concludes that technology measures are insufficient to meet likely targets. Policy-makers have to address the growth in transport demand.

EEA. "Climate for a transport change. TERM 2007: indicators tracking transport and environment in the European Union Document Actions." EEA Report No 1/2008, Mar 2008.

Local and global consequences of the EU renewable directive for biofuels. Testing the sustainability criteria.

This report assesses the impact of the European Commission's proposal for a new Renewable Directive, focusing on the specific target for the transport sector, which is 10% in 2020. The European target can only be met by producing additional biofuel outside the European Community. On a global scale, scenarios without specific targets for biofuels already show the need for more agricultural land. With a growing demand for biofuels, even more land conversion will occur. The report concludes that the European Commission's proposal for a new Renewable Directive does not take away upcoming worries about a negative impact of more biofuels. Although alternatives on the basis of renewable resources are available, the phrasing and definitions in the proposal do not, effectively, encourage other options.

Eickhout, B., G.J Van den Born, J. Notenboom, M. Van Oorschot, J.P.M. Ros, D.P. Van Vuuren, H.J. Westhoek. "Local and global consequences of the EU renewable directive for biofuels. Testing the sustainability criteria." Netherlands Environmental Assessment Agency, Report no. 500143001, Mar 2008.