Spatial organization,transport, and climate change: Comparing instruments of spatial planning and policy

Approaching the analysis of climate policies from a spatial organization perspective is necessary for realizing both efficient and effective mitigation of greenhouse gas (GHG) emissions. In particular, it allows assessing the potential contribution of specific mechanisms of spatial organization and related spatial planning and policy to climate policy goals. So far, this spatial organization angle of climate policy has hardly received attention in the literature. The main sector significantly contributing to GHG emissions and sensitive to spatial organization and planning is urban transport. A qualitative evaluation of the available spatial organization policy options is provided, on the basis of four standard ‘E criteria’ and a decomposition of CO₂ emissions.     

Taxation of multiple greenhouse gases and the effects on income distribution: A case study of the Netherlands

Current economic instruments aimed at climate change mitigation focus on CO₂ emissions only, but the Kyoto Protocol refers to other greenhouse gases (GHG) as well as CO₂. These are CH₄, N₂O, HFCs, PFCs and SF₆. Taxation of multiple greenhouse gases improves the cost-effectiveness of climate change mitigation. It is not yet clear, however, what the effect is of multigas taxation on the distribution of the tax burden across income groups. This paper examines and compares distributional effects of a CO₂ tax and a comprehensive tax that covers all six GHG of the Kyoto Protocol. The study concentrates on the Netherlands in the year 2000. We established tax rates on the basis of marginal abatement cost curves and the Dutch policy target. The distributional effects have been determined by means of environmentally extended input−output analysis and data on consumer expenditures. Our results show that taxation of multiple GHG improves not only the cost-effectiveness of climate change mitigation, but also distributes the tax burden more equally across income groups as compared to a CO₂ tax. These findings are relevant for the debate on the role of non-CO₂ GHG in climate change mitigation.     

Taxation of multiple greenhouse gases and the effects on income distribution: A case study of the Netherlands

Current economic instruments aimed at climate change mitigation focus on CO₂ emissions only, but the Kyoto Protocol refers to other greenhouse gases (GHG) as well as CO₂. These are CH₄, N₂O, HFCs, PFCs and SF₆. Taxation of multiple greenhouse gases improves the cost-effectiveness of climate change mitigation. It is not yet clear, however, what the effect is of multigas taxation on the distribution of the tax burden across income groups. This paper examines and compares distributional effects of a CO₂ tax and a comprehensive tax that covers all six GHG of the Kyoto Protocol. The study concentrates on the Netherlands in the year 2000. We established tax rates on the basis of marginal abatement cost curves and the Dutch policy target. The distributional effects have been determined by means of environmentally extended input−output analysis and data on consumer expenditures. Our results show that taxation of multiple GHG improves not only the cost-effectiveness of climate change mitigation, but also distributes the tax burden more equally across income groups as compared to a CO₂ tax. These findings are relevant for the debate on the role of non-CO₂ GHG in climate change mitigation.     

Endogenous Discounting and Climate Policy

Under risk of abrupt climate change, the occurrence hazard is added to the social discount rate. As a result, the social discount rate (1) increases and (2) turns endogenous to the global warming policy. The second effect bears profound policy implications that are magnified by economic growth. In particular, we find that greenhouse gases (GHG) emission should be terminated at a finite time so that the ensuing occurrence risk will vanish in the long run. Due to the public bad nature of the catastrophic risk, the second effect is ignored in a competitive allocation and unregulated economic growth will give rise to excessive emissions. In the long term, the GHG emission paths under the optimal and competitive growth regimes lie at the extreme ends of the range of feasible emissions.     

Transition of the Chinese Economy in the Face of Deep Greenhouse Gas Emissions Cuts in the Future

China joined the Paris Agreement, and the global 2°C and 1.5°C warming targets will be supported by China. In order to achieve these targets, China's CO₂ emissions need to be cut deeply by 2050. The present paper presents studies from the integrated policy assessment model for China (IPAC) team about the impact on China's economic development of deep cuts in greenhouse gas (GHG) emissions, in order to realize the Paris climate change targets. With the requirement of deep cuts in GHG emissions in China, China's economic development will also be impacted in moving toward a low‐carbon or zero‐carbon emission‐based economy by 2050. This means the Chinese economy needs a strong transition over the next three decades, a relatively short time. All sectors in the economy need to seek ways to reduce GHG emissions, and this could change activities, industry processes and technologies in order to make the deep cuts in GHG emissions happen. This is the meaning of the economic transition toward to a low‐carbon economy. The findings of the present paper include: a significant transition in the energy supply sector; a high rate of electrification in all end‐use sectors; and a technology transition in the transport sector. Transitions will also occur in the traditional industrial sectors, including steel making, cement manufacture, and the chemical sector. The availability of low‐cost renewable energy could change the allocation of industries, which could potentially have a strong impact on regional economic development. Deep cuts in CO₂ emissions in China need not be a burden for economic development, as the IPAC results show there will be a more than 1.5% increase of gross domestic product by 2050 in the deep cut scenario compared with the baseline scenario.     

Climate Policy with Multiple Sources and Sinks of Greenhouse Gases

This paper studies how inclusion of many sources, sinks and reservoirs -- a comprehensive approach -- affects climate policy, compared with a control merely of CO₂. Two questions of particular importance arise in such an analysis. One is how to aggregate the emissions of different climate gases, and the other is how to include all relevant measures in the analysis. To aggregate gases properly, an intertemporal analysis should be carried out. To assure that all relevant measures are included, we suggest that certain measures to reduce emissions of greenhouse gases are specified explicitly and evaluated together with indirect measures, such as carbon charges. A numerical analysis based on an optimal control model indicates that direct measures may play an important role in the design of climate policy, especially for the control of the emissions of greenhouse gases other than CO₂. Similar to other studies of the time-path for abatement efforts, the bulk of abatement should be taken by the end of the planning period. This result is significantly strengthened if gases with short life-times in the atmosphere, such as methane, are subject to control.     

Capital Malleability, Emission Leakage and the Cost of Partial Climate Policies: General Equilibrium Analysis of the European Union Emission Trading System

Computable general equilibrium (CGE) models are the premier analytical platform for assessing the economic impacts of climate change mitigation. But these models tend to treat physical capital as “malleable”, capable of reallocation among sectors over the time-period for which equilibrium is solved. Because the extent to which capital adjustment costs might dampen reallocation is not well understood, there is concern that CGE assessments understate the true costs of greenhouse gas (GHG) reduction policies. This paper uses a multi-region, multi-sector CGE model to investigate cap-and-trade schemes, such as the European Union Emission Trading System which cover a subset of the economy, elucidating the effects of capital malleability on GHG abatement, the potential for emission leakage from abating to non-abating sectors, and the impacts on welfare. To simplify the complex interactions being simulated within the CGE model, that analysis is complemented with an analytical model. A partial climate policy results in negative internal carbon leakage, with emissions declining not only in capped sectors but also in non-regulated ones. This result is stronger when capital is intersectorally mobile. Interestingly, in partial climate policy settings capital malleability can amplify or attenuate welfare losses depending on the attributes of the economy.     

碳税对我国的影响及其政策响应

二氧化碳(CO2)是引起全球气候变化的最重要的温室气体(GHG)之一。温室气体的减排是当前国际社会普遍关注的热点环境问题。碳税常常被认为是成本有效的碳减排政策工具,目前已有一些国家征收碳税或能源税。文章介绍了碳税的理论基础及其在一些国家的征收实践,总结和分析了国内外一些学者关于实施碳税对温室气体减排、对经济和能源系统的影响的研究结果,并在此基础上讨论了我国对碳税制度的政策响应和对策。     

The Stochastic Convergence of CO<Subscript>2</Subscript> Emissions: A Long Memory Approach

In response to equity concerns surrounding the spatial distribution of CO₂ emissions and assumptions of CO₂ convergence within some climate models, this paper examines the convergence of CO₂ emissions within the OECD over the period 1870–2004. More specifically, using the Local Whittle estimator and its variants we examine whether relative per capita CO₂ emissions are fractionally integrated, that is they are long memory processes which, although highly persistant, may revert to the mean/trend in the long run. Our results suggest that CO₂ emissions within 13 out of 18 OECD countries are indeed fractionally integrated implying that they converge over time, albeit slowly. Interestingly though, the countries whose emissions are not found to be fractionally integrated are some of the highest polluters within the OECD, at least in per capita terms. Our results have implications both for future studies of CO₂ convergence and for climate policy.     

Time Preference, Stock Externalities and Strategic Reactions

This paper examines the relationship between the rateof time preference and strategic reactions in dealing with climate change caused by anthropogenic greenhouse gas (GHG) emissions. Treating climate change as stock externalities, the RICE model (Nordhaus and Yang [1996]) is employed in this paper for simulation studies. The simulation results show that when regions' rate of time preference in evaluating climatechange is sufficiently low, the paths of efficient GHGemission reduction measurement and the inefficient Nash equilibrium outcome are close. The paper also provides general interpretations of such phenomena. Finally, the implications of a low rate of time preference on GHG emission reduction policies are discussed.     

The Ancillary Benefits from Climate Policy in the United States

This study investigates the benefits to human health that would occur in the United States (US) due to reductions in local air pollutant emissions stemming from a federal policy to reduce greenhouse gas emissions. In order to measure the impacts of reduced emissions of local pollutants, this study considers the Warner-Lieberman bill (S.2191) of 2007 and the paper considers the impacts of reduced emissions in the transport and electric power sectors. This analysis provides strong evidence that climate change policy in the US will generate significant returns to society in excess of the benefits due to climate stabilization. The total health-related co-benefits associated with a representative climate policy over the years 2010–2030 range between 103 billion and103 billion and 1.2 trillion in present value terms. Much of the co-benefit stems from between 32,000 and 189,000 avoided premature mortalities associated with exposure to PM_2.5 and O₃. Most of the co-benefits are due to reduced emissions of SO₂ from coal-fired power plants since these are an important contribution to ambient concentrations of PM_2.5. Among the most important determinants of co-benefits is the relationship between climate policy and existing policies governing SO₂ discharges from coal-fired power generation capacity. If SO₂ emissions are permitted to remain at current levels, total co-benefits are cut by 65%. We find that the co-benefit per ton of CO₂ emissions ranges between 1 and1 and 77 depending on modeling assumptions and year.     

The design of optimal climate policy with air pollution co-benefits

This paper develops a model of an optimal regulatory program for greenhouse gases (GHGs) emissions that accommodates the benefits due to reductions of co-pollutants including: sulfur dioxide (SO₂), nitrogen oxides (NO_x), volatile organic compounds (VOC), and fine particulate matter (PM_2.5). Employing per ton damage estimates for the co-pollutants produced by an integrated assessment model, co-pollutant damage estimates per ton carbon dioxide equivalent (CO₂e) are developed for over 10,000 sources of GHGs in the lower 48 states including both transportation sources and electric power generation. For coal-fired electric power generation, the co-pollutant damages are larger in magnitude than recent peer-reviewed estimates of the marginal damage for GHGs. The co-pollutant damage per ton CO₂e varies considerably across source types and source location. The paper estimates the welfare gain from adopting a policy that encompasses the spatially variant co-pollutant damage to be between $1 million and $85 million annually. The range depends on the slope of the marginal abatement cost curve. The paper also shows that a distortionary aggregate emission cap reduces the advantage of differentiated policy. Provided an excessively strict cap, the spatially differentiated policy may reduce aggregate welfare. This result has important implications for GHG policy in the United States; although co-pollutant benefits of abating GHGs have been shown to be significant in magnitude, tailoring climate policy to reflect these source-specific co-benefits is not necessarily socially beneficial. This bolsters arguments for upstream policy designs.     

Greenhouse gas policy and California electricity prices

California has adopted a policy of mandatory reductions in greenhouse gas (GHG) emissions to 1990 levels by the year 2020. (California Legislature (2006) Assembly Bill 32, the Global Warming Solutions Act of 2006, California Air Resources Board (2008) Climate change draft scoping plan, Sect. 2) Electricity utilities will need to recover related expenses, such as for the purchase of emissions permits. Economists often assume that raising usage prices for the commodity is the best way to recoup such expenses. However, regulated usage prices to California residential customers already exceed the cost of electricity generation plus a plausible externality cost for carbon dioxide (CO₂) emissions. Instead, recovering compliance expenses through usage insensitive charges could avoid causing unnecessary economic harm to consumers.     

Forward-looking versus recursive-dynamic modeling in climate policy analysis: A comparison

This paper develops a multi-regional general equilibrium model for climate policy analysis based on the latest version of the MIT Emissions Prediction and Policy Analysis (EPPA) model. We develop two versions so that we can solve the model either as a fully inter-temporal optimization problem (forward-looking, perfect foresight) or recursively. The standard EPPA model on which these models are based is solved recursively, and it is necessary to simplify some aspects of it to make inter-temporal solution possible. The forward-looking capability allows one to better address economic and policy issues such as borrowing and banking of GHG allowances, efficiency implications of environmental tax recycling, endogenous depletion of fossil resources, international capital flows, and optimal emissions abatement paths among others. To evaluate the solution approaches, we benchmark each version to the same macroeconomic path, and then compare the behavior of the two versions under a climate policy that restricts greenhouse gas emissions. We find that the energy sector and CO₂ price behavior are similar in both versions (in the recursive version of the model we force the inter-temporal theoretical efficiency result that abatement through time should be allocated such that the CO₂ price rises at the interest rate.) The main difference that arises is that the macroeconomic costs are substantially lower in the forward-looking version of the model, since it allows consumption shifting as an additional avenue of adjustment to the policy. On the other hand, the simplifications required for solving the model as an optimization problem, such as dropping the full vintaging of the capital stock and fewer explicit technological options, likely have effects on the results. Moreover, inter-temporal optimization with perfect foresight poorly represents the real economy where agents face high levels of uncertainty that likely lead to higher costs than if they knew the future with certainty. We conclude that while the forward-looking model has value for some problems, the recursive model produces similar behavior in the energy sector and provides greater flexibility in the details of the system that can be represented.     

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.     

Environmental and economic impacts of trade barriers: The example of China–US trade friction

The new age of trade wars could simultaneously affect the worldwide distribution pattern of the economy and environmental emissions. However, previous studies have focused on economic impacts, and on trade liberalization, while little is known about the equilibrium effects of trade barriers on the environment. Using a global computable general equilibrium model and taking the recent anti-trade policies of the Trump administration as an example, this study investigates the possible socio-economic and environmental effects of trade friction. Specifically, this study explores how the implemented six rounds of China–US trade friction and its different long-term development trends affect regional economic output, GHG and air pollutant emissions. Results show that trade barriers harm both countries’ economies and such losses have a certain permanence, while non-participants can benefit indirectly. Trade friction decreases participants’ GHG emissions, modifies global GHG emission distribution patterns, and leads to improved air quality in most countries. If governments continue to impose tariffs, global GHG emissions could counterfactually decrease by up to 5%. However, the change in trade patterns is not conducive to clean energy development in the less-developed regions, including the Middle East, Africa, and Latin America, and emission reductions from trade friction are insufficient to avoid catastrophic climate change.     

GHG Registries: Participation and Performance Under the Canadian Voluntary Climate Challenge Program

Between 1994 and 2004, the Voluntary Challenge and Registry (VCR) played an important role in Canadian climate change policy. In this paper, we examine the decision of firms to participate in the VCR, the extent of their involvement, and then ask if greenhouse gas emissions are related to past VCR participation. As an information provision program, we find evidence that firms may participate in VCR to signal their environmental responsibility to regulators and to some extent investors, but not to consumers. We also find that past involvement in the VCR is a strong and significant determinant of current involvement in the registry. Greenhouse gas emissions reported to the Mandatory Greenhouse Gas Reporting Program in 2004, however, do not appear to be different between VCR reporters and non-reporters. GHG emissions are observed to be significantly lower among firms that are smaller, emit fewer toxic releases, use more renewable energy sources, are intermediate good producers, and are located in Quebec, Ontario, and Manitoba.     

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.     

Regional burden sharing of GHG mitigation policies in a decentralized federation

The distribution of the burden of cost of GHG mitigation policies is a contentious issue. This is particularly true among regional jurisdictions within a federal country with decentralized power. The regional allocation of emissions permits could hinder the political feasibility of national GHG mitigation policies. We build a multi-region computable general equilibrium (CGE) model to assess the implications of different burden sharing rules in a hypothetical national GHG abatement policy with a market-based instrument. In addition to assessing the impacts of regional permit allocation rules that entail inter-regional transfers of wealth, we consider a particular emissions allocation scheme, called ‘no prior entitlement’ (NPE), that avoids such transfers. The insights derived from the simulations suggest that the NPE policy avoids the politically contentious issues of inter-regional transfers of scarcity rents. Its welfare impact lies between those in the entitlement-based permit allocation schemes.     

The environmental Kuznets curve after 25 years

The environmental Kuznets curve (EKC) has been the dominant approach among economists to modeling aggregate pollution emissions and ambient concentrations over the last quarter century. Despite this, the EKC was criticized almost from the start and decomposition approaches have been more popular in other disciplines working on global climate change. More recently, convergence approaches to modeling emissions have become popular. This paper reviews the history of the EKC and alternative approaches. Applying an approach that synthesizes the EKC and convergence approaches, I show that convergence is important for explaining both pollution emissions and concentrations. On the other hand, economic growth has a strong positive effect on carbon dioxide, sulfur dioxide, and industrial greenhouse gas (GHG) emissions, but weaker effects on non-industrial GHG emissions and concentrations of particulates. Negative time effects are important for sulfur and industrial and non-industrial GHG emissions. Even for particulate concentrations, economic growth only reduces pollution at very high income levels. Future research should focus on developing and testing alternative theoretical models and investigating the non-growth drivers of pollution reduction.