nep-env New Economics Papers
on Environmental Economics
Issue of 2007‒07‒27
three papers chosen by
Francisco S.Ramos
Federal University of Pernambuco

  1. On the Design of Global Refunding and Climate Change By Gersbach, Hans; Winkler, Ralph
  2. Greenhouse Gas Reductions under Low Carbon Fuel Standards? By Stephen P. Holland; Christopher R. Knittel; Jonathan E. Hughes
  3. Developing Supra-European Emissions Trading Schemes: An Efficiency and International Trade Analysis By Alexeeva-Talebi, Victoria; Anger, Niels

  1. By: Gersbach, Hans; Winkler, Ralph
    Abstract: We design a global refunding scheme as a new international approach to address climate change. A global refunding system allows each country to set its carbon emission tax, while aggregate tax revenues are partially refunded to member countries in proportion to the relative emission reductions they achieve within a given period, compared to some given baseline emissions. In a simple model we show that a suitably designed global refunding scheme is self-enforcing and achieves the social global optimum.
    Keywords: climate change mitigation; global refunding scheme; international agreements; self-enforcing mechanisms
    JEL: H23 H41 Q54
    Date: 2007–07
  2. By: Stephen P. Holland; Christopher R. Knittel; Jonathan E. Hughes
    Abstract: A low carbon fuel standard (LCFS) seeks to reduce greenhouse gas emissions by limiting a fuel producer's carbon emissions per unit of output. California has launched an LCFS for transportation fuels; others have called for a national LCFS. We show that this policy decreases production of high-carbon fuels but increases production of low-carbon fuels. The net effect of this may be an increase in carbon emissions. The LCFS cannot be first best, and the best LCFS may reduce social welfare. We simulate the outcomes of a national LCFS, focusing on gasoline and ethanol as the high- and low-carbon fuels. For a broad range of parameters, we find that the LCFS is unlikely to increase CO2 emissions. However, the surplus losses from the LCFS are likely to be quite large ($80 to $760 billion annually for a national LCFS reducing carbon intensities by 10 percent), energy prices are likely to increase, and the average carbon cost ($307 to $2,272 per ton of CO2 for the same LCFS) can be much larger than damage estimates. We describe an efficient policy that achieves the same emissions reduction at a much lower surplus cost ($16 to $290 billion) and much lower average carbon cost ($60 to $868 per ton of CO2).
    JEL: H23 L51 L71 L91 Q42 Q52 Q53 Q58
    Date: 2007–07
  3. By: Alexeeva-Talebi, Victoria; Anger, Niels
    Abstract: Given the coexistent EU priorities concerning the competitiveness of European industries and international emissions regulation at the company level, this paper assesses the efficiency and competitiveness implications of linking the EU Emissions Trading Scheme (ETS) to emerging trading schemes outside Europe. Currently, countries like Canada, Japan or Australia are contemplating the set up of domestic ETS with the intention of linking up to the European scheme. While a stylized partial-market analysis suggests that the integration of trading systems is always beneficial in efficiency terms, our applied general equilibrium approach shows that the aggregate welfare impacts of linking the EU ETS are rather limited. We further find that the trade-based competitiveness effects of linking the European ETS crucially depend on the linked trading system: Although EU economy-wide competitiveness varies only moderately across linking scenarios, the sectoral decomposition of these aggregate effects shows that European industries are much more sensitive to the linking constellation. Similarly, the incentives for non-EU regions to join the European system display considerable heterogeneity. A stricter allowance allocation within domestic ETS can, however, substantially improve the overall prospects for establishing supra-European emissions trading schemes.
    Keywords: Emissions Trading, EU ETS, Linking, Competitiveness, CGE model
    JEL: D58 H21 H22 Q48
    Date: 2007

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