Joint implementation under asymmetric information and strategic behavior

Joint Implementation (JI) under the Framework Convention on Climate Change means that countries could partly offset their national abatement commitments by investing in CO₂ abatement projects abroad. JI is introduced as a mechanism for achieving a certain global abatement target less costly by separating the commitments from the implementation of measures. This paper studies the design of a JI contract when the investor has incomplete information about the foreign firm which carries out the JI project (the host). Asymmetric information leads to a decrease in the potential cost savings from JI. Furthermore, private information held by the potential host firm could give the firm a significant positive utility of participating in JI projects. The possibility of being a host for a JI project in the future can prevent potential host firms from investing in profitable abatement projects today. The paper analyzes the impact on emissions of CO₂ of strategic behavior among potential hosts for JI projects.     

Long-Run Implications for Developing Countries of Joint Implementation of Greenhouse Gas Mitigation

Joint Implementation (JI) calls for cooperation between industrialized and developing countries in the mitigation of greenhouse gas (GHG) emissions. However, a major concern of potential host countries is that, if they utilize their low-cost options for JI now, they will be left with only high cost options in the future, thereby penalizing them at a time when they may be obligated to mitigate GHGs themselves. This paper formalizes this hypothesis by utilizing an optimal control framework analogous to the Hotelling model of non-renewable resource extraction. The results are that cumulative abatement effects can impose costs on the future, but that they can be offset by technological change, market power, or compensation.     

NEGOTIATING A RESPONSE TO CLIMATE CHANGE: ROLE OF BIOLOGICAL EMISSIONS

Researchers have attributed 15 percent of global methane releases to emissions of methane from enteric fermentation in animals (wild and domestic). Bovines contribute approximately two-thirds of this amount. Since methane is a potent greenhouse gas, this source frequently is a target for emission reductions. However, the existing literature overstates the importance of bovine methane as a greenhouse gas by as much as 800 percent. Estimates to date have focused solely on gas emissions, ignoring the biological and chemical cycling that removes carbon from the atmosphere. The analysis presented here demonstrates the importance of these cycles in assessing the overall greenhouse effect of biological methane sources such as rice production, termites, and bovine animals. Ignoring this cycling results in overemphasizing the role of developing countries' total contributions to climate change. In economic terms, the analysis shows that reducing CO2 emissions from energy use in industrialized countries is more efficient than reducing net greenhouse methane from animal sources.     

Strategic Investment in Climate Friendly Technologies: The Impact of Global Emissions Trading

Our point of departure is that a group of industrialized countries invest in research and development (R&D) of greenhouse gas (GHG) abatement technologies. R&D investments influence the future GHG abatement choices of both industrialized and developing countries. We distinguish between investments that reduce industrialized countries’ abatement costs and investments that reduce developing countries’ abatement costs. Unlike earlier contributions, we include global trading in emission permits. This changes the nature of the game. With global permit trading, industrialized countries should in many cases invest strategically in technologies that only reduce abatement costs at home. This comes in addition to investments abroad. Second, we show that R&D investments always decrease total emissions. Finally, we find that the developing region receiving investments always benefits.     

The political economy of global carbon emissions reductions

The discussion about what reductions in greenhouse gas emissions are required and how the emissions rights might be distributed globally has fostered the belief that there is a fundamental conflict between the rich nations of the “North” and the poor but populous nations of the “South.” The argument is that grandfathering the rights will only reinforce existing global inequalities, while per capita distribution of the rights would lead to such huge transfers of wealth to the South as to be unacceptable to the North. However, a very simple general equilibrium model highlighting key elements of the global economy shows that this perception is incorrect under a plausible interpretation of the goal of the United Nations Framework Convention on Climate Change to “avoid dangerous anthropogenic interference with the climate system.” Instead of using an economic damage function to determine the optimal level of emissions reductions, the model's utility functions are calibrated to reflect scientific understanding of what would be required to stabilize the atmosphere at safe concentrations of greenhouse gases. Among policy options that would accomplish this, the United States has a preference for grandfathering the allocation of emissions rights over a per capita allocation, but this preference is not strong and could be offset by other geopolitical considerations.     

International Equity and Differentiation in Global Warming Policy

ne of the major obstacles to reaching a comprehensive agreement on global warming is the setting of greenhouse gas emission reduction targets for individual countries. Long-standing tensions between industrialized and developing countries have raised the issue of equity in burden-sharing. Moreover, individual industrialized nations have pleaded special circumstances and have sought differentiation in their obligations. This paper analyzes alternative rules for distributing tradable carbon dioxide emissions permits. A non-linear programming model, which distinguishes between allocation-based and outcome-based rules, is used to analyze the relative welfare outcomes. The model is applied to the world body of nations and yields several important policy implications.     

Climate Change Policy Options for Asian Economies: Findings from an Integrated Assessment Model

This study outlines potential futures for the global economy through the 2050 with a specific focus on the countries of Asia. With underlying assumptions about population and output growth, a baseline scenario assesses the growth of greenhouse gas emissions and the ensuing impacts on the climate. Under the baseline scenario, Asia's high growth leads to a strong rotation in global output and emissions by the year 2050. The analytical framework traces back the changes in temperature to economic damages – limited to the agricultural sectors. Parts of Asia are likely to see much higher dependence on food imports as a consequence of these damages. Various carbon tax scenarios are implemented to assess the potential for reducing carbon emissions. Because of the structure of their economies, Asian countries are likely to bear the greatest burden in reducing emissions in an efficient global tax scheme, but there is significant scope to ease this burden through financial transfers.     

A Sectoral Approach Balancing Global Efficiency and Equity

This paper explores the idea that a properly designed sectoral approach could be the answer to two sets of constraints that hinder international agreements on climate change, namely a genuine concern from developing countries for economic growth and competitiveness issues from industrialized countries. Our sectoral approach builds on three premises: (i) cap-and-trade systems are established in industrialized countries and intensity targets in developing countries, (ii) sectors subject to international trade abide by the rules of the countries in which they trade and (iii) a fraction of the revenues from permits in industrialized countries go towards carbon mitigation in developing countries. We design an economic model that features interactions in three carbon-intensive sectors (two of which are internationally traded) and two countries (an industrialized country and a developing country). Two scenarios are constructed: an Enhanced Sectoral Approach, which refers to our proposal, and a Global Cap, which implements a uniform CO₂ price. We compare the two scenarios in terms of total welfare and equity. It is shown that, for a minor global welfare loss, the Enhanced Sectoral Approach ranks high in terms of equity for emerging countries. This approach also eliminates competitiveness and leakage issues.     

Policy Framework for Transition to a Low-Carbon World Economy

Climate change mitigation policy is the most difficult to come before our polity in living memory. There can be no solution without international agreement involving all substantial economies, and yet each country has an incentive to free ride on others. The international agreement must have five parts: agreement on the objective in terms of concentrations of greenhouse gases in the atmosphere, agreement on allocation of an emissions entitlements budget among countries, agreement on rules for international trade in entitlements, agreement on developed countries taking the lead on development of low-emissions technologies, and agreement on assistance from developed countries for climate change mitigation in developing countries. Two sources of market failure must be corrected to achieve emissions reduction targets efficiently: the external costs of emitting greenhouse gases and the external benefits of private investment in innovation in relation to low-emissions technologies.     

Construction of legal system of carbon emissions trading in China

Countries in the world have taken a variety of means to control carbon emissions based on the serious situation of global warming,the concept of low-carbon economy and the provisions about emissions in the United Nations Framework Convention on Climate Change（UNFCCC） and the Kyoto Protocol.With the measures of emissions reductions,the system of carbon emissions trading is taking shape.It is necessary for China as the big natural resources consumption country to establish its own carbon emissions trading system.By introducing the carbon emissions trading system of the European Union,America and Japan,and analyzing the market and policies been formed,the carbon emissions trading system in China can be established from the initial configuration of the emissions rights,the subject and object of carbon emissions trading,establishing the carbon emissions trading exchange and supervising and regulating the carbon emissions trading.     

Market power and hot air in international emissions trading: the impacts of US withdrawal from the Kyoto Protocol

Ten years after the initial Climate Change Convention from Rio in 1992 the industrialized world is finally likely to ratify the Kyoto Protocol, which will impose legally binding greenhouse gas emission reductions on the developed world. However, the Kyoto Protocol will enter into force without the USA, which withdrew under President Bush in March 2001. Accounting for hot air and market power of the Former Soviet Union on emission permit markets, it is shown that US withdrawal has important consequences on environmental effectiveness, compliance costs, and excess costs of market power under the Kyoto Protocol. Non-compliance of the USA implies a dramatic decrease in environmental effectiveness as well as compliance costs of OECD countries whereas the Former Soviet Union and transitional economies in Eastern Europe suffer from a huge decline in permit sales revenues. Excess costs of market power in permit trade increase in relative terms, but decline substantially in absolute terms due to US withdrawal. Policy options are quantified to bypass the problems of hot air and market power through compensation mechanisms.     

TIME PREFERENCE, ABATEMENT COSTS, AND INTERNATIONAL CLIMATE POLICY: AN APPRAISAL OF IPCC 1995

This paper appraises current economic methodologies used in analyzing the social rate of time preference and discounting, abatement costs, and value of life estimates as they relate to climate change. It makes a case for choosing an appropriate rate of time preference when assessing climate policies, including both positive and normative considerations. Furthermore, the paper argues that the currently estimated disparity in the cost of greenhouse gas abatement between developed countries and developing countries may be inaccurate. Integrating discount rates, abatement costs, and value of life estimates highlights important and contrasting implications of international climate policy for developing and high-income countries. The context of the paper is the forthcoming Second Assessment Report of Working Group III of the Intergovernmental Panel on Climate Change.     

From production-based to consumption-based national emission inventories

Under the United National Framework Convention of Climate Change (UNFCCC) countries are required to submit National Emission Inventories (NEI) to benchmark reductions in greenhouse gas (GHG) emissions. Depending on the definition and system boundary of the NEI, the mitigation options and priorities may vary. The territorial system boundary used by the UNFCCC has been critiqued for not including international transportation and potentially causing carbon leakage. To address these issues, past literature has argued in favour of using consumption-based NEI in climate policy. This article discusses several issues in moving from the standard production-based NEI to consumption-based NEI. First, two distinct accounting approaches for constructing consumption-based NEI are presented. The approaches differ in the allocation of intermediate consumption of imported products. Second, a consistent method of weighting production-based and consumption-based NEI is discussed. This is an extension of the previous literature on shared responsibility to NEI. Third, due to increased uncertainty and a wide system boundary it may be difficult to implement consumption-based NEI directly into climate policy. Several alternative options for incorporating consumption-based inventories into climate policy are discussed.     

低碳生活的新工具——碳标签

气候变化问题不仅是全球环境问题,更是人类可持续发展的问题。作为一种将产品生命周期中造成的温室气体排放量标识出来的方法——碳标签,直接影响需求端和供给端,转变大众的消费模式,形成低碳生活的新工具。对国际碳标签的发展进行梳理,并对我国的碳标签制度进行探讨,以期为我国低碳经济的可持续发展提供政策和理论依据。     

Incorporating methane into ecological footprint analysis: A case study of Ireland

Carbon dioxide (CO₂) accounting is important to global ecological footprint analysis. However methane (CH₄), with a global warming potential (GWP) 25 times that of CO₂, should not be neglected as an environmental indicator for informed environmental management. While this is a significant component, the CH₄ associated with imported embodied energy should also be included in national greenhouse gas (GHG) inventories. This study proposes an initial method for incorporating methane into ecological footprint analyses and hopes to inform future debate on its inclusion. In order to account for differences in methane intensities from exporting countries, methane intensities for OECD countries were calculated using emission and energy consumption estimates taken directly from National Inventory Reports (NIR), published in conjunction with the Intergovernmental Panel on Climate Change (IPCC). For other countries the methane intensities were estimated using energy balances published by the International Energy Association (IEA) and IPCC default emission factors. In order to estimate embodied organic methane, material imports and exports were translated into units (such as live animals) capable of conversion into methane emissions. A significant increase in Ireland's footprint results from the inclusion of the GWP of methane is included within the footprint calculation.     

The Impact of Equity-preferences on the Stability of International Environmental Agreements

This paper uses a coalition formation model to explore how equity considerations affect countries’ cooperation on global environmental issues, e.g. on climate change. When developing countries are exempted from obligations to reduce their emissions, I find that opening them for abatement projects financed by industrialized countries changes the incentives to cooperate in a way which can increase emissions and decrease welfare. Equity- concerns in industrialized countries regarding the difference between their per capita emission levels and those of developing countries lead to increased abatement but do not qualitatively change the incentives to cooperate. Inequality-aversion with respect to differences to abatement targets across industrialized countries generally induces larger coalition sizes and stricter abatement. Here, the inclusion of developing countries improves upon the prospects of cooperation.     

Global environmental problems and the strategic choice of technology

Reductions of environmentally harmful emissions are often a public good in a global context. For strategic reasons, countries may adopt a technology with high per unit cost of emission reduction, even if a technology with lower per unit cost is available at no extra cost. They thereby credibly commit themselves to not reducing emission much in the future. In a game of private voluntary provision of emission reduction, this commitment will make other countries increase their emission reductions. Also, in the case where countries cooperate in the future, such commitment gives a country a strategic advantage, because it shifts the disagreement point in a favorable direction.     

Scenarios of long-term socio-economic and environmental development under climate stabilization

This paper presents an overview of the greenhouse gas (GHG) emissions scenarios that form the analytical backbone for other contributions to this Special Issue. We first describe the motivation behind this scenario exercise and introduce the main scenario features and characteristics, in both qualitative and quantitative terms. Altogether, we analyze three ‘baseline’ scenarios of different socio-economic and technological developments that are assumed not to include any explicit climate policies. We then impose a range of climate stabilization targets on these baseline scenarios and analyze in detail the feasibility, costs and uncertainties of meeting a range of different climate stabilization targets in accordance with Article 2 of the United Nations Framework Convention on Climate Change. The scenarios were developed by the IIASA Integrated Assessment Modeling Framework that encompasses detailed representations of the principal GHG-emitting sectors—energy, industry, agriculture, and forestry. The main analytical findings from our analysis focus on the implications of salient uncertainties (associated with scenario baselines and stabilization targets), on feasibility and costs of climate stabilization efforts, and on the choice of appropriate portfolios of emissions abatement measures. We further analyze individual technological options with regards to their aggregated cumulative contribution toward emissions mitigation during the 21st century as well as their deployment over time. Our results illustrate that the energy sector will remain by far the largest source of GHG emissions and hence remain the prime target of emissions reduction. Ultimately, this may lead to a complete restructuring of the global energy system. Climate mitigation could also significantly change the relative economics of traditional versus new, more climate friendly products and services. This is especially the case within the energy system, which accounts for the largest share of emissions reductions, but it is also the case in the agriculture and forestry sectors, where emissions reduction and sink enhancement measures are relatively more modest.     

生物碳汇类型的特性研究

温室气体增加被认为是全球变暖的主要原因,CO2是大气中最重要的温室气体,在对温室效应和全球气候变暖的贡献中,占70％。为应对全球变暖,各国采取多种措施致力于温室气体的减排增汇。减少二氧化碳温室效应,除人工减排增汇外,自然界生态系统的生物碳汇功能起着主导作用。生物碳汇主要类型有森林等陆生植物碳汇、水生高等植物和低等植物碳汇、水生高等动物碳汇等等,各种类型生物碳汇功效不尽相同,各具特性。     

英国可再生能源产业发展现状

英国在发展可再生能源方面具有良好的自然条件,特别在离岸风能及波浪能和潮汐能方面。但英国在开发这一潜力方面做得并不够好,目前,英国来自可再生能源的发电量占其全部用电需求的不足5％,远远落后于世界上一些先进国家。这其中有多方面的原因,如英国的入网电价相对便宜（与欧洲其他国家相比）,政府对可再生能源行业的财政补贴较少,以及在批准可再生能源项目方面遇到的延误和障碍较多等等。但是,随着近些年一系列鼓励政策和措施的出台,英国在可再生能源方面会有一个较为光明的前景,从而实现它确保能源安全及减少温室气体排放的双重目标。