Making Cap-and-Trade Work:<i>Lessons from the European Union Experience</i>

Matisoff, Daniel C.

doi:10.1080/00139150903479530

Cited by 15 publications

(24 citation statements)

References 6 publications

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“…The proposition above would imply that marginal abatement costs are higher for processes where emissions occur in a complex process compared to simpler processes. A similar statement was made before by Matiso (2010).…”

Section: Complexity Of Processes and Technological Heterogeneitysupporting

confidence: 80%

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The Impact of Informational Costs in Quantity Regulation of Pollutants: The Case of the European Emissions Trading Scheme

Heindl¹

2011

SSRN Journal

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Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:http://ftp.zew.de/pub/zew-docs/dp/dp11040.pdf Non-Technical SummaryThe Kyoto Protocol mandates a reduction of greenhouse gas emissions to countervail climate change. As a consequence, the EU has introduced the European Emissions Trading Scheme (EU ETS) to achieve a reduction of CO 2 emissions of 21% on average among energy producers and energy intensive industries until 2020. The regulated firms are heterogeneous in terms of annual emissions levels and employed technology. Since there are currently no end-of-pipe technologies available for CO 2 abatement, firms have to optimize processes or invent new technologies in many cases to achieve emission reductions. If emissions occur as a byproduct of complex processes as it is often the case in the EU ETS, firms will face informational costs when searching for abatement options or when evaluating costs for abatement. This is in contrast to other regulatory schemes, like the US SO 2 trading scheme. Within the US SO 2 trading scheme one specific technology was regulated, namely the combustion of fossil fuels for energy production. Moreover, when the SO 2 trading scheme was introduced there were mature end-of-pipe technologies available on markets (i.e. scrubbers), offering abatement options at low informational costs.In this paper we present a model that highlights the importance of technological complexity and firm-size in environmental regulation. If regulated firms emit a relatively small amount of pollutants, possible efficiency gains from abatement are also relatively small. If there are high informational costs for abatement options and costs to be identified because of complex technology, small emitters might face a threshold for searching for abatement technology. This could effectively hamper the implementation of existing abatement technologies and the invention of new ones.The model presented in this paper has several implications for the optimal design of environmental regulation, i.e. if regulated technological processes are complex, as in the case of greenhouse gas abatement. Induced technological change can be hampered if regulated sources emit only small amounts of pollutants. The problem can be resolved if informational costs for abatement options and the discovery of abatement costs are reduced, e.g. by strengthening collaboration in research and development, fostering and incentivizing technological transfer, strengthening markets for abatement te...

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Section: Complexity Of Processes and Technological Heterogeneitysupporting

confidence: 80%

“…Highly complex processes might require more eort for optimization (Matiso, 2010). This is especially important if there are no marketable abatement options, like in the case of greenhouse gases, where currently no end-of-pipe technology exists.…”

Section: Introductionmentioning

confidence: 99%

The Impact of Informational Costs in Quantity Regulation of Pollutants: The Case of the European Emissions Trading Scheme

Heindl¹

2011

SSRN Journal

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“…While the use of an average price for allowances goes some way towards compensating for this effect, predicting developments in the need for allowances still remains somewhat problematic. (see, e.g., [3,5,7,11,35])…”

Section: Discussionmentioning

confidence: 99%

“…Some energy-intensive industries whose competitiveness was judged to be at risk and who are therefore potentially prone to carbon leakage may be exempted [7,[12][13][14][15].…”

Section: The European Union Emissions Trading Schemementioning

confidence: 99%

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Allocation of Emission Allowances within the European Union Emissions Trading Scheme to the Waste Sector

Braschel¹,

Posch²,

Pusterhofer³

2013

LCE

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The present study develops an approach explicitly to cover the waste sector under the Emissions Trading Scheme of the European Union (EU ETS). The objective is to analyze various allocation possibilities and the resulting monetary burdens for the waste sector. Three different allocation variants for allocating emission allowances and their financial burden to the waste sector are developed. These variants support implementation within the EU ETS in the third trading period from 2013 to 2020. The respective distributions of emission allowances to the Austrian waste sector are estimated for each variant calculated. Allowances vary depending on specific industry, the relative share of free and purchased allowances, and the relative costs entailed in additional purchase. Although the present paper focuses explicitly on the Austrian waste sector, in principle, the calculation procedure is applicable to waste sectors in other developed countries as well.

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Emissions permit allocation and strategic firm behavior: Evidence from the oil sector in the European Union emissions trading scheme

Patnaik

2020

Bus Strat Env

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With the growing urgency of climate change, governments around the world are increasingly implementing new regulations for greenhouse gases. This trend elevates the importance of examining how firms engage in strategic efforts to influence regulations before they are in place and how they respond once they are in effect (i.e., their ex‐ante and ex‐post strategic behavior). This paper examines the outcomes of such strategic efforts by multinational and domestic oil companies within the European Union emissions trading scheme. An analysis of a panel dataset of oil firms (2008–2012) shows that on average the outcome of ex‐ante strategies did not differ significantly between multinational companies (MNCs) and domestic firms. However, the findings indicate that among those firms that received positive net benefits from the new climate policy, domestic firms were able to maximize these benefits better than MNCs through their ex‐post strategies. In contrast, among the firms that faced net costs due to the policy, MNCs were able to minimize these costs better than domestic firms, ex‐post. This paper advances our understanding of whether and to what extent MNCs differ from domestic firms in their economic outcomes stemming from strategic behavior related to emissions trading. This question is especially pertinent for regulations related to climate change, which is one of humanity's grand challenges and has important consequences for our economic, social, and political systems.

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Making Cap-and-Trade Work:Lessons from the European Union Experience

Cited by 15 publications

References 6 publications

The Impact of Informational Costs in Quantity Regulation of Pollutants: The Case of the European Emissions Trading Scheme

The Impact of Informational Costs in Quantity Regulation of Pollutants: The Case of the European Emissions Trading Scheme

Allocation of Emission Allowances within the European Union Emissions Trading Scheme to the Waste Sector

Emissions permit allocation and strategic firm behavior: Evidence from the oil sector in the European Union emissions trading scheme

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