Description
Kyoto protocol and the case of USA withdrawal in 2007. The ppt gives alternatives to cap on emissions. It explains The economics of international emission trading.
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? ? ?
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Welcome to Copenhagen! Gobal Contract - Core elements Kyoto Protocol The case of USA withdrawal in 2007 Alternatives to cap on emissions
1. Dynamic targets 2. Non binding targets 3. Sector- specific targets
?
?
? ? ?
Problems with ET Theoretical Solutions Policy Options Economics of International Trade Case
a meaningful beginning to a new global consensus toward limiting GHG emissions
It's gonna be very hard and it's gonna take time
? ? ?
Environmental efficiency Cost effectiveness Equity and justice
Source: A Global Contract on Climate Change Policy paper prepared for the conference
A Global Contract Based on Climate Justice: The Need for a New Approach Concerning International Relations , Brussels, November 2008; Ottmar Edenhofer, Gunnar Luderer, Christian Flachsland, Hans-Martin Füssel
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?
?
Legally binding obligation for industrialised countries-Annex I- to reduce GHG emissions Reduction of 5% below 1990 levels by 20082012 Emission-reduction targets were differentiated to reflect national circumstances
? ? ? ? ? Climate Geography Demographics development patterns available energy resources
? (subject to political negotiation)
?
Joint Implementation (JI)
? Projects which reduce emissions within industrialised countries
?
Clean Development Mechanism (CDM)
? Projects which reduce emissions in developing countries ? Enables emission reductions achieved outside Annex I countries to be credited to these countries)
?
Emission Trading
? Allows countries with binding commitments to trade Assigned Amount Units (AAU) ? Cap and Trade / Permit trade
Source: A Global Contract on Climate Change Policy paper prepared for the conference
A Global Contract Based on Climate Justice: The Need for a New Approach Concerning International Relations , Brussels, November 2008;
Edenhofer, Luderer, Flachsland, Hans-Martin Füssel
Source: A Global Contract on Climate Change Policy paper prepared for the conference
A Global Contract Based on Climate Justice: The Need for a New Approach Concerning International Relations , Brussels, November 2008;
Edenhofer, Luderer, Flachsland, Hans-Martin Füssel
?
?
?
Historically, most of the carbon emissions occurred in the industrialized countries, and there is a strong link between capital accumulation and carbon debt. Developing countries as well as low-income groups in the industrialized world are particularly vulnerable to climate change and are projected to feel the bulk of impacts. Due to the discrepancy between historical responsibility and vulnerability, climate change tends to increase global disparities.
?
? ?
US – major buyer of C Credits Price fell Investment made for reduction in emissions
? No longer justified
?
Cap on emissions
? Cap on economic development
?
Lax target
? Compromising on emission targets
?
Cap on emissions
? Cap on economic development
?
Lax target
? Compromising on emission targets
1.
2. 3.
Dynamic targets Non binding targets Sector- specific targets
?
? ?
Would lift the development constraint posed by the cap Relative rather than absolute targets E.g. Emission per unit of GDP
Reduced certainty of emission outcomes Enhanced willingness to comply with emission reduction
? ?
?
?
?
? ?
Defining the emission budget Surplus can be sold but no compulsion to buy for the deficit Requires binding constraints for other countries Similar to the project based approach Working similar to that of CDM but at the national policy level.
?
Applicable to sectors where emission can be well measured and has potential for reduction. That is sectors with a limited risk of leakage.
?
Supplementary and Hot Air
The question: where may countries reduce emissions, at home, or abroad? A proposed ceiling on the flexibility mechanism
?
Risk of market power
? capacity to influence the transaction price of traded permits (?cost minimising? or ?profit maximising manipulation?) ? ?exclusionary manipulation?, by which a commodity producer hoards permits to prevent market entry by competitors.
Solution to the Negative Externality Imposing a tax on producers that is exactly equal to the difference between marginal social cost and marginal private cost will make the market equilibrium Pareto Efficient again.
Useful when: ? cost of reaching mutual agreement between parties is high ? where pollution is diffuse Double dividend: ? Pollution reduction ? Tax revenue Criticism ? Encourages black marketing and smuggling ? Difficulty of calculating appropriate tax level ? May be regressive in nature
Coase considered it necessary to know whether the damaging business is liable or not for the damage caused since without the establishment of this initial delimitation of rights there can be no market transactions to transfer and recombine them. Determination of the incidence of the Pigouvian Taxes Restricts the role for government to defining and enforcing property rights for environmental resources and mitigating transaction costs.
What has to be kept in mind while deciding on the pollution policy ? Economic costs ? Benefits ? Ease or difficulty of implementation ? Tradeoff between price determination and emission control
?
? ?
?
Price per unit carbon produced Puts an upper limit on the price paid Determination of prices Uncertain emissions
?
? ?
Puts a cap on total emission Tradable permits Market led determination of prices
? Critics argue that emissions trading does little to solve pollution problems overall, since groups that do not pollute sell their conservation to the highest bidder ? Overall reductions would need to come from a sufficient reduction of allowances available in the system.
?
Both Tax and Cap and trade give sources an incentive to reduce emissions to the point where the marginal cost of reduction equals the marginal benefit of reduction
Both also require information about the marginal costs and social benefits of reductions They can deliver any environmental goal — even a suboptimal one — at least cost
?
?
?
Carbon tax
? The efficient abatement level is achieved: e* ? The abatement cost to the pollution firm = B + D ? Government revenue = D
?
Carbon cap and trade
? The efficient abatement level is achieved: e* ? The abatement cost to the pollution firm = B
?
Without trade
Carbon tax
? Abatement = e* ? Cost of abatement = C+G+K
?
?
Carbon cap and trade
? The efficient abatement level is achieved: e* ? The abatement cost to the polluting firms, C + G + K, is minimized ? Government revenue = B + C + F + G + J + K
? The efficient abatement level is achieved: e* ? The abatement cost to the polluting firms, C + G + K, is minimized
?
?
The only difference is the distributional implications. The cost to the firm is lower for carbon cap-and-trade. The government receives tax revenue with a carbon tax
Both policies are preferred over technological or output standards
?
? ? ? ?
?
?
Demand Competition Method of allocating the permits Available capacity Regulation International trade
?
?
The value of carbon emission allowances should be reflected in the plants’ generating costs. This is because the production of electricity always coincides with the opportunity to sell the allowances on the emission allowance market.
Marginal Abatement cost (MAC)- cost of reducing an additional unit of emission. Determinants of MAC
? ? ? ? National circumstances Energy prices Economic growth and population Patterns of energy production and use
International trading takes advantage of the differences in MACs of two countries. There are gains of trade by the means of international emission trading.
?
? ? ?
?
Two countries: either reduce the emission by themselves or trade in the international emission market MAC- Margin MAC1> MAC2 RR is the total amount that need to be reduced for the two countries P is the market allowance price for reducing emissions
? ?
In case of emission trading, the total abatement costs are reduced under the command and control approach The greater the difference in MACs, the greater the gains from trade.
?
The Hot-Spot Problem Nature of the pollutant. This approach is not suitable for a regional pollutant. Carbon Leakage
? Direct leakage- shifting production to countries not bound by the Kyoto protocol to reduce the emissions ? Indirect leakage-result from lower prices of petrochemicals
?
USA- American Clean Energy and Security Act calls for carbon surcharges on goods imported from countries without cap-and-trade programs
POWER SECTOR
doc_614028845.pptx
Kyoto protocol and the case of USA withdrawal in 2007. The ppt gives alternatives to cap on emissions. It explains The economics of international emission trading.
?
? ? ?
?
Welcome to Copenhagen! Gobal Contract - Core elements Kyoto Protocol The case of USA withdrawal in 2007 Alternatives to cap on emissions
1. Dynamic targets 2. Non binding targets 3. Sector- specific targets
?
?
? ? ?
Problems with ET Theoretical Solutions Policy Options Economics of International Trade Case
a meaningful beginning to a new global consensus toward limiting GHG emissions
It's gonna be very hard and it's gonna take time
? ? ?
Environmental efficiency Cost effectiveness Equity and justice
Source: A Global Contract on Climate Change Policy paper prepared for the conference
A Global Contract Based on Climate Justice: The Need for a New Approach Concerning International Relations , Brussels, November 2008; Ottmar Edenhofer, Gunnar Luderer, Christian Flachsland, Hans-Martin Füssel
?
?
?
Legally binding obligation for industrialised countries-Annex I- to reduce GHG emissions Reduction of 5% below 1990 levels by 20082012 Emission-reduction targets were differentiated to reflect national circumstances
? ? ? ? ? Climate Geography Demographics development patterns available energy resources
? (subject to political negotiation)
?
Joint Implementation (JI)
? Projects which reduce emissions within industrialised countries
?
Clean Development Mechanism (CDM)
? Projects which reduce emissions in developing countries ? Enables emission reductions achieved outside Annex I countries to be credited to these countries)
?
Emission Trading
? Allows countries with binding commitments to trade Assigned Amount Units (AAU) ? Cap and Trade / Permit trade
Source: A Global Contract on Climate Change Policy paper prepared for the conference
A Global Contract Based on Climate Justice: The Need for a New Approach Concerning International Relations , Brussels, November 2008;
Edenhofer, Luderer, Flachsland, Hans-Martin Füssel
Source: A Global Contract on Climate Change Policy paper prepared for the conference
A Global Contract Based on Climate Justice: The Need for a New Approach Concerning International Relations , Brussels, November 2008;
Edenhofer, Luderer, Flachsland, Hans-Martin Füssel
?
?
?
Historically, most of the carbon emissions occurred in the industrialized countries, and there is a strong link between capital accumulation and carbon debt. Developing countries as well as low-income groups in the industrialized world are particularly vulnerable to climate change and are projected to feel the bulk of impacts. Due to the discrepancy between historical responsibility and vulnerability, climate change tends to increase global disparities.
?
? ?
US – major buyer of C Credits Price fell Investment made for reduction in emissions
? No longer justified
?
Cap on emissions
? Cap on economic development
?
Lax target
? Compromising on emission targets
?
Cap on emissions
? Cap on economic development
?
Lax target
? Compromising on emission targets
1.
2. 3.
Dynamic targets Non binding targets Sector- specific targets
?
? ?
Would lift the development constraint posed by the cap Relative rather than absolute targets E.g. Emission per unit of GDP
Reduced certainty of emission outcomes Enhanced willingness to comply with emission reduction
? ?
?
?
?
? ?
Defining the emission budget Surplus can be sold but no compulsion to buy for the deficit Requires binding constraints for other countries Similar to the project based approach Working similar to that of CDM but at the national policy level.
?
Applicable to sectors where emission can be well measured and has potential for reduction. That is sectors with a limited risk of leakage.
?
Supplementary and Hot Air
The question: where may countries reduce emissions, at home, or abroad? A proposed ceiling on the flexibility mechanism
?
Risk of market power
? capacity to influence the transaction price of traded permits (?cost minimising? or ?profit maximising manipulation?) ? ?exclusionary manipulation?, by which a commodity producer hoards permits to prevent market entry by competitors.
Solution to the Negative Externality Imposing a tax on producers that is exactly equal to the difference between marginal social cost and marginal private cost will make the market equilibrium Pareto Efficient again.
Useful when: ? cost of reaching mutual agreement between parties is high ? where pollution is diffuse Double dividend: ? Pollution reduction ? Tax revenue Criticism ? Encourages black marketing and smuggling ? Difficulty of calculating appropriate tax level ? May be regressive in nature
Coase considered it necessary to know whether the damaging business is liable or not for the damage caused since without the establishment of this initial delimitation of rights there can be no market transactions to transfer and recombine them. Determination of the incidence of the Pigouvian Taxes Restricts the role for government to defining and enforcing property rights for environmental resources and mitigating transaction costs.
What has to be kept in mind while deciding on the pollution policy ? Economic costs ? Benefits ? Ease or difficulty of implementation ? Tradeoff between price determination and emission control
?
? ?
?
Price per unit carbon produced Puts an upper limit on the price paid Determination of prices Uncertain emissions
?
? ?
Puts a cap on total emission Tradable permits Market led determination of prices
? Critics argue that emissions trading does little to solve pollution problems overall, since groups that do not pollute sell their conservation to the highest bidder ? Overall reductions would need to come from a sufficient reduction of allowances available in the system.
?
Both Tax and Cap and trade give sources an incentive to reduce emissions to the point where the marginal cost of reduction equals the marginal benefit of reduction
Both also require information about the marginal costs and social benefits of reductions They can deliver any environmental goal — even a suboptimal one — at least cost
?
?
?
Carbon tax
? The efficient abatement level is achieved: e* ? The abatement cost to the pollution firm = B + D ? Government revenue = D
?
Carbon cap and trade
? The efficient abatement level is achieved: e* ? The abatement cost to the pollution firm = B
?
Without trade
Carbon tax
? Abatement = e* ? Cost of abatement = C+G+K
?
?
Carbon cap and trade
? The efficient abatement level is achieved: e* ? The abatement cost to the polluting firms, C + G + K, is minimized ? Government revenue = B + C + F + G + J + K
? The efficient abatement level is achieved: e* ? The abatement cost to the polluting firms, C + G + K, is minimized
?
?
The only difference is the distributional implications. The cost to the firm is lower for carbon cap-and-trade. The government receives tax revenue with a carbon tax
Both policies are preferred over technological or output standards
?
? ? ? ?
?
?
Demand Competition Method of allocating the permits Available capacity Regulation International trade
?
?
The value of carbon emission allowances should be reflected in the plants’ generating costs. This is because the production of electricity always coincides with the opportunity to sell the allowances on the emission allowance market.
Marginal Abatement cost (MAC)- cost of reducing an additional unit of emission. Determinants of MAC
? ? ? ? National circumstances Energy prices Economic growth and population Patterns of energy production and use
International trading takes advantage of the differences in MACs of two countries. There are gains of trade by the means of international emission trading.
?
? ? ?
?
Two countries: either reduce the emission by themselves or trade in the international emission market MAC- Margin MAC1> MAC2 RR is the total amount that need to be reduced for the two countries P is the market allowance price for reducing emissions
? ?
In case of emission trading, the total abatement costs are reduced under the command and control approach The greater the difference in MACs, the greater the gains from trade.
?
The Hot-Spot Problem Nature of the pollutant. This approach is not suitable for a regional pollutant. Carbon Leakage
? Direct leakage- shifting production to countries not bound by the Kyoto protocol to reduce the emissions ? Indirect leakage-result from lower prices of petrochemicals
?
USA- American Clean Energy and Security Act calls for carbon surcharges on goods imported from countries without cap-and-trade programs
POWER SECTOR
doc_614028845.pptx