Energy prices and emissions trading: windfall profits from grandfathering?

Woerdman, Edwin; Couwenberg, Oscar; Nentjes, A.

doi:10.1007/s10657-009-9098-6

Cited by 70 publications

(3 citation statements)

References 23 publications

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“…Energy-intensive companies obtain a large number of emission permits through the grandfather rule and make profits through the carbon emission market (Woerdman et al, 2009). When 1 À λ < θ, the more relaxed emission intensity of the industry, the greater the profits of the firm i under the benchmarking rules, because the high-energy intensity reduces abatement costs.…”

Section: Results Comparingmentioning

confidence: 99%

Carbon allowance allocation rules under emission intensity regulation: Grandfathering versus benchmarking

Sun

Wang

2023

Manage Decis Econ

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This paper compares the impacts of grandfathering and benchmarking rules on firms' operating decisions, consumer surplus, and social welfare with different emission intensity limits. The findings suggest that with tight emission intensity limits, grandfathering rules are more effective in controlling carbon emissions and enhancing social welfare. Benchmarking rule with relaxed emission intensity can incentivize firms to increase output, lower product prices, and increase consumer surplus. Under relaxed intensity regulation, grandfathering rule can encourage more potential entrants to participate in the product market, and benchmarking rule can motivate firms to take more outputs, resulting higher consumer surplus and more carbon emissions.

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Section: Results Comparingmentioning

confidence: 99%

Carbon allowance allocation rules under emission intensity regulation: Grandfathering versus benchmarking

Sun

Wang

2023

Manage Decis Econ

View full text Add to dashboard Cite

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“…At the same time, Mayer Hillman and Tina Fawcett introduced the term Personal Carbon Allowances [10]. These two proposals, Tradable Energy Quotas and Personal Carbon Allowances, are the most discussed PCT proposals [11]; nonetheless, other PCT proposals have been brought forward by researchers [12][13][14][15][16][17][18]. As these contributions investigated optimal designs for PCT schemes, others have investigated the public acceptance of a PCT scheme [19] and how to best integrate a PCT scheme into policy agendas [20][21][22].…”

Section: Status Of Pct Modelingmentioning

confidence: 99%

Simulating Personal Carbon Trading (PCT) with an Agent-Based Model (ABM): Investigating Adaptive Reduction Rates and Path Dependence

2021

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A decade after the publication of seminal papers on personal carbon trading (PCT), few empirical studies on its implementation exist. Investigating how to design, set up and implement a PCT scheme for a community or country raises several difficulties. For instance, it is unclear how to introduce a reduction rate of CO2 allowances to ensure a steady decrease in CO2 emissions from households. Computational approaches have been introduced to address these challenges of PCT by providing an opportunity to test counterfactual scenarios. Among the benefits of an agent-based modeling approach (ABM) is the potential to directly address dynamic developments and introduce counterfactual situations. In this paper, we review existing modeling approaches and present an ABM for PCT. With simulations of an artificial population of 1000 and 30,000 agents, we address questions on the price and reduction rate of allowances. A key contribution of our model is the inclusion of an adaptive reduction rate, which reduces the yearly allocated amount of allowances depending on a set CO2 abatement target. The results confirm that increased emissions targets are related to higher allowance prices and a higher proportion of buying households. Our analysis also suggests a significant path dependence in the dynamics of allowance prices and availability, but that adaptive reduction rates have little impact on outcomes other than the price. We discuss data availability and computational challenges to modeling a PCT scheme with an ABM. Ideal data to populate an ABM on PCT are not available due to the lack of real-world implementations of a PCT. Nonetheless, meaningful insights about the dynamics and the focal variables in a PCT scheme can be generated by the exploratory use of an ABM.

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“…The free allocation will, at least for a couple more years, continue to provide a protection from carbon leakage, but also lower the incentive for switching away from the blast furnace and thus losing eligibility to the blast furnace benchmark. Regardless of the incentive provided by the EU ETS, evidence suggest that they still only form a marginal incentive to innovate for industries (Woerdman et al, 2009;Laing et al, 2013) rather than a raison d'être supporting any transition to lower emission intensity technology. Instead, from the industry association literature, the vision of 'zero fossil use' was inspired by both the climate law and the Paris agreement and reflection about how industry could fit into such a world.…”

Section: Direction Of Searchmentioning

confidence: 99%

Adopting hydrogen direct reduction for the Swedish steel industry: A technological innovation system (TIS) study

Kushnir

Hansen

Vogl

et al. 2020

Journal of Cleaner Production

114

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The Swedish steel industry stands before a potential transition to drastically lower its CO 2 emissions using direct hydrogen reduction instead of continuing with coke-based blast furnaces. Previous studies have identified hydrogen direct reduction as a promising option. We build upon earlier efforts by performing a technological innovation system study to systematically examine the barriers to a transition to hydrogen direct reduction and by providing deepened quantitative empirics to support the analysis. We also add extended paper and patent analysis methodology which is particularly useful for identifying actors and their interactions in a technological system. We conclude that while the innovation system is currently focused on such a transition, notable barriers remain, particularly in coordination of the surrounding technical infrastructure and the issue of maintaining legitimacy for such a transition in the likely event that policies to address cost pressures will be required to support this development.

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Energy prices and emissions trading: windfall profits from grandfathering?

Cited by 70 publications

References 23 publications

Carbon allowance allocation rules under emission intensity regulation: Grandfathering versus benchmarking

Carbon allowance allocation rules under emission intensity regulation: Grandfathering versus benchmarking

Simulating Personal Carbon Trading (PCT) with an Agent-Based Model (ABM): Investigating Adaptive Reduction Rates and Path Dependence

Adopting hydrogen direct reduction for the Swedish steel industry: A technological innovation system (TIS) study

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