Where in the world is it cheapest to cut carbon emissions?*

Countries with low marginal costs of abating carbon emissions may have high total costs, and vice versa, for a given climate mitigation policy. This may help to explain different countries’ policy stances on climate mitigation. We hypothesize that, under a common percentage cut in emissions intensity relative to business as usual (BAU), countries with higher BAU emission intensities have lower marginal abatement costs, but total costs relative to output will be similar across countries, and under a common carbon price, relative total costs are higher in emission‐intensive countries. Using the results of the 22nd Energy Modeling Forum (EMF‐22), we estimate marginal abatement cost curves for the US, EU, China and India, which we use to estimate marginal and total costs of abatement under a number of policy options currently under international debate. This analysis provides support for our hypotheses, although its reliability is limited by the shortcomings of the EMF‐22 models and the degree to which our econometric model can adequately account for the substantial differences among them.     

EFFICIENT COMPLIANCE WITH AGRICULTURAL NITRATE POLLUTION STANDARDS

Non-point pollutants such as nitrates are difficult to monitor and hence control. This paper considers nitrate abatement policies for the Tyne catchment in northern England. The analysis is based on an aggregate-level LP model which predicts producers' production decisions and estimates the resulting spatial distribution of nitrogen applications and nitrate emissions. The policy evaluation compares a catchment-level nitrate emission quota, a catchment-level nitrogen input quota and nitrogen input quotas targeted at individual land classes as alternative measures to achieve nitrate concentration standards. The results indicate that targeted nitrogen input quotas provide a feasible and relatively efficient abatement policy when a lack of information on individual farms prevents the use of the least cost emission tax.     

Marginal abatement costs of greenhouse gas emissions: broadacre farming in the Great Southern Region of Western Australia

Broadacre agriculture is a major emitter of greenhouse gases (GHG). To improve efficiency of climate change policies, we need to know the marginal abatement costs of agricultural GHG. This article combines calculations of on‐farm GHG emissions with an input‐based distance function approach to estimate the marginal abatement costs for a broadacre farming system in the Great Southern Region of Western Australia. The results show that, in the study region, the average marginal abatement cost for the 1998–2005 periods was $29.3 per tonne CO₂‐e. Farms with higher crop output shares were found to have higher marginal abatement costs. Overall, our results indicate that broadacre agriculture is among the lowest cost sources of GHG mitigation.     

Setting Climate Action as the Priority for the Common Agricultural Policy: A Simulation Experiment

We quantitatively assess the impacts of re-allocating budgetary resources within Pillar 1 of the EU's Common Agricultural Policy (CAP) from direct income support to a direct greenhouse gas (GHG) reduction subsidy for EU farmers. The analysis is motivated by the discussion on the future CAP, with calls for both an increased ambition on climate action from the agricultural sector and for a more incentive-based delivery system of direct payments under strict budgetary restrictions. By conducting a simulation experiment with an agricultural partial equilibrium model (CAPRI), we are able to factor in farmers’ supply and technology-adjusting responses to the policy change and to estimate the potential uptake of the GHG-reduction subsidy in EU regions. We find that a budget-neutral re-allocation of financial resources towards subsidised emission savings can reduce EU agricultural non-CO₂ emissions by 21% by 2030, compared to a business-as-usual baseline. Two-thirds of the emission savings are due to changes in production levels and composition, implying that a significant part of the achieved GHG reduction is offset globally by emission leakage. At the aggregated level, the emission-saving subsidy and increased producer prices compensate farmers for the foregone direct income support, but differences in regional impacts indicate accelerated structural change and heterogeneous income effects in the farm population. We conclude that the assumed regional budget-neutrality condition introduces inefficiencies in the incentive system, and the full potential of the EU farming sector for GHG emissions reduction is not reached, leaving ample room for the design of more efficient agricultural policies for climate action.     

The regional economic effects of a reduction in carbon emissions

Concern about climate change has led to policy to reduce CO₂ emissions although it is likely that policy will have differential regional impacts. While regional impacts will be politically important, very little analysis of them has been carried out. This paper contributes to the analysis of this issue by building a small model involving two regions, incorporating the right to emit CO₂ as a factor of production with the level of permitted emissions set by the national government. We argue that there is likely to be pressure on governments to use other policies to offset the possible adverse regional economic consequences of the pollution‐reduction policy; we also consider a range of such policies. Using numerical simulation, we find that a 10 per cent reduction has relatively small but regionally differentiated economic effects. Standard fiscal policies are generally ineffective or counterproductive while labour market policies are more useful in offsetting the adverse effects.     

Carbon offsets and agriculture: Options,obstacles, and opinions

While carbon offsets in agriculture can play a role in addressing climate change, they are not a perfect substitute for direct emission reductions. As shown in this paper through various arguments and case studies, climate policies in Canada have avoided the use of offsets to be sold in carbon markets, preferring instead to incentivize adoption of best management practices (BMPs) that provide environmental benefits along with climate mitigation benefits. We argue that this is a preferred policy option due to the perils and pitfalls inherent in the measurement and monitoring required to identify offset credits. While an appropriate approach might be to penalize Canadian farmers for any emissions their activities cause, this may do more harm than good. Canadian agricultural production is highly efficient and technologically advanced; therefore, reductions in Canada's contribution to the global food supply will result in less-efficient production occurring elsewhere (i.e., leakage) that increases global greenhouse gas emissions.     

Quantifying the impact of farmers' social networks on the effectiveness of climate change mitigation policies in agriculture

To reduce agricultural greenhouse gas (GHG) emissions, farmers need to change current farming practices. However, farmers' climate change mitigation behaviour and particularly the role of social and individual characteristics remains poorly understood. Using an agent-based modelling approach, we investigate how knowledge exchange within farmers' social networks affects the adoption of mitigation measures and the effectiveness of a payment per ton of GHG emissions abated. Our simulations are based on census, survey and interview data for 49 Swiss dairy and cattle farms to simulate the effect of social networks on overall GHG reduction and marginal abatement costs. We find that considering social networks increases overall reduction of GHG emissions by 45% at a given payment of 120 Swiss Francs (CHF) per ton of reduced GHG emissions. The per ton payment would have to increase by 380 CHF (i.e., 500 CHF/tCO₂eq) to reach the same overall GHG reduction level without any social network effects. Moreover, marginal abatement costs for emissions are lower when farmers exchange relevant knowledge through social networks. The effectiveness of policy incentives aiming at agricultural climate change mitigation can hence be improved by simultaneously supporting knowledge exchange and opportunities of social learning in farming communities.     

What’s next for the Renewable Energy Target – resolving Australia’s integration of energy and climate change policy?*

Australian climate change policy and its integration with Australia’s electricity markets have been fraught for at least two decades. The only enduring policy has been the Commonwealth Renewable Energy Target (RET). Despite the relative success of the RET in driving investment and reducing emissions, state governments have now pivoted towards contracts-for-difference (Cfds). In this article, we outline the issues associated with policy discontinuity and the large-scale RET and review its effectiveness as an emissions reduction tool and driver of electricity sector abatement. We find that the RET has been relatively successful across the key criteria of cost and emissions reductions and is a better policy instrument than contracts-for-difference, which are increasingly being adopted by state governments. Building on the work of Nelson et al. (2020), we propose a new approach, which would allow for continued use of Cfds but utilising the RET’s policy architecture.     

Cost-effectiveness of alternative green payment policies for conservation technology adoption with heterogeneous land quality

This paper quantitatively analyses the cost‐effectiveness of alternative green payment policies designed to achieve a targeted level of pollution control by heterogeneous microunits. These green payment policies include cost‐share subsidies that share the fixed costs of adoption of a conservation technology and/or input reduction subsidies to reduce the use of a polluting input. The paper shows that unlike a pollution tax that achieves abatement through three mechanisms, a negative extensive margin effect, a negative intensive margin effect and a technology switching effect, a cost‐share subsidy and an input reduction subsidy are much more restricted in the types of incentives they provide for conservation of polluting inputs and adoption of a conservation technology to control pollution. Moreover, they may lead to varying levels of expansion of land under production. Costs of abatement with alternative policies and implications for production and government payments are compared using a simulation model for controlling drainage from irrigated cotton production in California, with drip irrigation as a conservation technology.     

Agent‐based Modelling of Climate Adaptation and Mitigation Options in Agriculture

Computer simulation models can provide valuable insights for climate‐related analysis and help streamline policy interventions for improved adaptation and mitigation in agriculture. Computable general equilibrium (CGE) and partial equilibrium (PE) models are currently being expanded to include land‐use change and energy markets so that the effects of various policy measures on agricultural production can be assessed. Agent‐based modelling (ABM) or multi‐agent systems (MAS) have been suggested as a complementary tool for assessing farmer responses to climate change in agriculture and how these are affected by policies. MAS applied to agricultural systems draw on techniques used for Recursive Farm Programming, but include models of all individual farms, their spatial interactions and the natural environment. In this article, we discuss the specific insights MAS provide for developing robust policies and land‐use strategies in response to climate change. We show that MAS are well‐suited for uncertainty analysis and can thereby complement existing simulation approaches to advance the understanding and implementation of effective climate‐related policies in agriculture.     

Sequester or substitute—Consequences of increased production of wood based energy on the carbon balance in Finland

Forests play an important role in mitigating climate change. Forests can sequester carbon from the atmosphere and provide biomass, which can be used to substitute for fossil fuels or energy-intensive materials. International climate policies favor the use of wood to substitute for fossil fuels rather than using forests as carbon sink. We examine the trade off between sequestering carbon in forests and substituting wood for fossil fuels in Finland. For Finland to meet its EU targets for the use of renewable energy by 2020, a considerable increase in the use of wood for energy is necessary. We compare scenarios in which the wood energy targets are fully or partially met to a reference case where policies favoring wood based energy production are removed. Three models are used to project fossil fuel substitution and changes in forest carbon sinks in the scenarios through 2035.Finnish forests are a growing carbon sink in all scenarios. However, net greenhouse gas (GHG) emissions will be higher in the medium term if Finland achieves its current wood energy targets than if the use of energy wood stagnates or decreases. The volume of GHG emissions avoided by replacing coal, peat and fossil diesel with wood is outweighed by the loss in carbon sequestered in forests due to increased biomass removals. Therefore, the current wood energy targets seem excessive and harmful to the climate. In particular, biodiesel production has a significant, negative impact on net emissions in the period considered. However, we did not consider risks such as forest fires, wind damage and diseases, which might weaken the sequestration policy. The potential albedo impacts of harvesting the forests were not considered either.     

Climate change: a rational choice politics view*

Reduction in carbon dioxide emissions constitutes a global public good; and hence there will be strong incentives for countries to free ride in the provision of CO₂ emission reductions. In the absence of more or less binding international agreements, we would expect carbon emissions to be seriously excessive, and climate change problems to be unsolvable. Against this obvious general point, we observe many countries acting unilaterally to introduce carbon emission policies. That is itself an explanatory puzzle, and a source of possible hope. Both aspects are matters of ‘how politics works’– i.e. ‘public choice’ problems are central. The object of this paper is to explain the phenomenon of unilateral policy action and to evaluate the grounds for ‘hope’. One aspect of the explanation lies in the construction of policy instruments that redistribute strategically in favour of relevant interests. Another is the ‘expressive’ nature of voting and the expressive value of environmental concerns. Both elements – elite interests and popular (expressive) opinion – are quasi‐constraints on politically viable policy. However, the nature of expressive concerns is such that significant reductions in real GDP are probably not sustainable in the long term – which suggests that much of the CO₂ reduction action will be limited to modest reductions of a largely token character. In that sense, the grounds for hope are, although not non‐existent, decidedly thin.     

Crop Price and Risk Effects on Farm Abatement Costs

Potential leaching losses of nitrogen depend in large part on the crops grown. Since crop selection is a major means of abatement for nitrates in groundwater, it follows that the compliance costs to producers for reducing excess nitrogen is influenced by crop prices. This paper demonstrates the role that crop prices play in determining the level of on-farm abatement costs and even the necessity for regulatory policies to deal with the nitrate problem. Government support programs, specifically the Gross Revenue Insurance Program (GRIP), have increased the relative support for corn, which has higher leachate potential than other crops, and thereby requires increased abatement effort. The required level of abatement is less when risk aversion is considered than under risk neutrality, since the variability in returns among rotations is related to the degree of emissions generated. Changes in the mean and variance of relative output prices can significantly alter the optimal crop mix, leachate potential and on-farm abatement efforts. Subsequently, there is an effect on abatement costs associated with alternative environmental control instruments, which in turn affects policy design through issues such as political feasibility and equity considerations.     

A framework proposal for sustainability assessment of sugarcane in Brazil

In many countries, the biofuels sector was encouraged to expand its activities supported by public policies incentives, especially to achieve improvements in energy security and to reduce greenhouse gas (GHG) emission. The Brazilian government followed these initiatives and undertook some responsibilities against the international scenario related to climate change. One of the theses commitments concerning actions to reduce the GEE emissions by some 37% by 2020. The Sugarcane Agroecology Zoning provides technical subside to policy makers to direct sugarcane expansion to permitted areas and a sustainable production in Brazil and is considered a guideline to sustainable sugarcane production in Brazil. However, although aiming at a sustainable production, the zoning only considered natural aspects of the country, as soils and climate and an approach that consider all the dimensions of the sustainability is still missing. Hence, this paper aims to propose a framework to evaluate biofuel sustainability to support public policies, especially concerning improvements in Brazilian decision-supporting tools.     

Decarbonisation and wholesale electricity market design

In recent decades, many power systems have introduced electricity generator competition. Market designs have varied with some countries adopting ‘energy‐only’ markets and others utilising capacity remuneration mechanisms. With increasing deployment of cost competitive renewable energy and the introduction of policy measures to reduce greenhouse gas emissions, concerns are emerging about the sustainability of these market designs. In Australia, wholesale electricity prices have increased markedly – the result of a ‘disorderly’ transition away from coal to new renewable energy. This paper critically examines the ‘energy‐only’ market in a high‐penetration renewables system, with a particular focus on the vertically and horizontally restructured National Electricity Market (NEM). We propose that the ‘energy‐only’ market can indeed work within a decarbonised energy system. But as renewables increasingly replace coal‐fired power stations, ‘unintended consequences’ will need to be addressed to facilitate an ‘orderly’ transition. It will be important that policy ensures appropriate new investment in firm capacity is forthcoming; and pricing outcomes are acceptable given political economy constraints.     

Livestock intensification as a climate policy: Lessons from the Brazilian case

Brazil is trying to identify ways to ally economic growth with climate change mitigation. Productivity gains in livestock have been pointed out as a promising alternative to achieve that goal. Thus, this paper analyses the economic impacts of a policy of productivity gains in the Brazilian livestock. Besides, we evaluate if the policy may conciliate agricultural growth and deforestation control, bearing in mind the reduction of greenhouse gas (GHG) emissions from land-use changes. The analysis was carried out through a computable general equilibrium (CGE) model, tailored to represent land-use changes, GHG emissions and removals. Besides, it made progress modeling the heterogeneity of climate, soils, and emissions in inter-regional models with many regions. The results show that productivity gains can effectively “save” land and thus avoid deforestation, especially in the Amazon and Cerrado (savannah) biomes. The policy also may boost the economic growth, spreading it to other regions of Brazil, like Centre-West and North, and increasing income and consumption in those places. However, as a climate policy, focused on the reduction of GHG emissions, the results may be counterproductive. The net amount issued may increase, as a result of the positive stimulus of the policy on the economy, and GHG emissions are directly related to the economic growth.     

The Effects of Pricing Canadian Livestock Emissions

I examine the environmental and economic effects of pricing greenhouse gas emissions from livestock in Canada. Using a partial equilibrium model, I consider three different pricing policies: a consumer level tax, a producer level tax, and a producer subsidy. All policies price emissions at $50 per tonne of carbon dioxide equivalent. The producer level tax generates the greatest reduction in emissions at the lowest social cost per unit of emissions abatement. The producer subsidy results in a smaller reduction in emissions at a higher social cost, relative to the producer tax. However, the subsidy provides a substantial increase in producer surplus, which may make it a politically feasible second‐best policy. The consumer level tax results in a trivial reduction in emissions, at a social cost that is greater than the price placed on emissions. J'examine les effets environnementaux et économiques de l'imposition d'un prix sur les gaz à effets de serre provenant des animaux d'élevage canadiens. Au moyen d'un modèle d'équilibre partiel, je tiens compte de trois différentes politiques d'imposition de prix : taxer le consommateur, taxer le producteur, et subventionner le producteur. Toutes les politiques imposent les émissions au prix de 50$ par tonne en équivalent de dioxyde de carbone. Taxer l'éleveur génère la plus grande réduction des émissions au plus bas coût social par unité de réduction des émissions. Subventionner l'éleveur entraéne une plus petite réduction des émissions à coût social plus élevé, en comparaison û la taxe imposée à l'éleveur. Par contre, le choix de subventionner fournit une augmentation substantielle de surplus pour l'éleveur, faisant de cette option un bon deuxième choix envisageable au niveau politique. Taxer le consommateur ne produit qu'une réduction négligeable des émissions, à coût social plus élevé que le taux imposé sur les émissions.     

Economic vulnerability and regional implications of a low carbon emissions future

Climate change, as well as associated mitigation efforts, will substantially disrupt some economies. Seemingly inevitable market and policy changes will push economies to transition away from reliance on industries with higher carbon emissions and bring transient economic impacts, especially in regions that are currently heavily reliant on such industries. This situation is not unusual in a global context. To underpin better‐informed decisions that enable a smoother economic transition to a low‐emissions future, we developed a ‘latent economic vulnerability to emissions reduction’ (LEVER) index, which maps and explores regions that are more likely to be economically impacted from climate change mitigation. Thus, this paper provides an analysis and discussion of the potential regional implications of a future low‐emissions economy, with the analysis contextualised for the state of Queensland, Australia. Given this case study, the economic impacts and future of coal‐fired power stations, coal mining and renewable energy are discussed.  The LEVER index weighs the risk of high carbon economic exposure against the variability in carbon economic resilience from employment in low‐emission sectors across local economies. We find that between 3 and 6 per cent of Queensland regions are assessed as having a very high latent economic vulnerability to increased decarbonisation of industrial activities. To promote a smoother transition, these regions will require targeted investments and strategies to enable their transition towards lower carbon‐intensive systems, while maximising economic and social outcomes.     

Marginal Abatement Cost Curves for UK Agricultural Greenhouse Gas Emissions

This article addresses the challenge of developing a ‘bottom‐up’ marginal abatement cost curve (MACC) for greenhouse gas (GHG) emissions from UK agriculture. An MACC illustrates the costs of specific crop, soil and livestock abatement measures against a ‘business as usual’ scenario. The results indicate that in 2022 under a specific policy scenario, around 5.38 Mt CO₂ equivalent (e) could be abated at negative or zero cost. A further 17% of agricultural GHG emissions (7.85 Mt CO₂e) could be abated at a lower unit cost than the UK Government’s 2022 shadow price of carbon [£34 (tCO₂e)^?1]. The article discusses a range of methodological hurdles that complicate cost‐effectiveness appraisal of abatement in agriculture relative to other sectors.     

Addressing Uncertainty in Efficient Mitigation of Agricultural Greenhouse Gas Emissions

The agricultural sector, as an important source of greenhouse gas (GHG) emissions, is under pressure to reduce its contribution to climate change. Decisions on financing and regulating agricultural GHG mitigation are often informed by cost‐effectiveness analysis of the potential GHG reduction in the sector. A commonly used tool for such analysis is the bottom‐up marginal abatement cost curve (MACC) which assesses mitigation options and calculates their cumulative cost‐effective mitigation potential. MACCs are largely deterministic, typically not reflecting uncertainties in underlying input variables. We analyse the uncertainty of GHG mitigation estimates in a bottom‐up MACC for agriculture, for those uncertainties capable of quantitative assessment. Our analysis identifies the sources and types of uncertainties in the cost‐effectiveness analysis and estimates the statistical uncertainty of the results by propagating uncertainty through the MACC via Monte Carlo analysis. For the case of Scottish agriculture, the uncertainty of the cost‐effective abatement potential from agricultural land, as expressed by the coefficient of variation, was between 9.6% and 107.3% across scenarios. This means that the probability of the actual abatement being less than half of the estimated abatement ranged from <1% (in the scenario with lowest uncertainty) to 32% (in the scenario with highest uncertainty). The main contributors to uncertainty are the adoption rate and abatement rate. While most mitigation options appear to be ‘win–win’ under some scenarios, many have a high probability of switching between being cost‐ineffective and cost‐effective.