Economics Is Not Enough: The “Old Model” of Cap and Trade

2016 ◽  
Author(s):  
Leigh Raymond
Keyword(s):  
Initial Phase ◽  
Emissions Trading ◽  
Policy Design ◽  
Eu Ets ◽  
Cap And Trade ◽  
Political Actors ◽  
Improve Energy Efficiency ◽  
Public Benefit ◽  
Electricity Deregulation ◽  
Trading Program

This chapter describes the “old” model of cap-and-trade policy design that largely controlled emissions trading policy from its origins in the 1970s through the 1990s, under which emissions trading programs were adopted reluctantly, and “grandfathered” emissions allowances to current emitters at no cost. It also describes some important events starting in the 1990s that helped lay the groundwork for the sudden switch to auctions in RGGI, including: greater attention to allocation rules by political actors, new precedents such as spectrum rights auctions and severance taxes on some nature resources, new political and economic pressures from electricity deregulation, and the emergence of “public benefit” charges and programs to improve energy efficiency for consumers. In addition, this period saw the emergence of new polluter pays and public ownership normative frames in the context of emissions allowances. At the same time, the chapter documents how these initial changes were insufficient to successfully promote allowance auctions in the development of two prominent cap and trade programs: the initial phase of the EU ETS from 1998-2005, and the NOx Budget emissions trading program from 1994-2005.

scholarly journals To Trade or Not To Trade? Criteria for Applying Cap and Trade

2001 ◽  
Vol 1 ◽  
pp. 953-957 ◽  
Author(s):  
Stephanie Benkovic ◽  
Joseph Kruger
Keyword(s):  
Emissions Trading ◽  
Environmental Problem ◽  
Cost Effective ◽  
Cap And Trade ◽  
Policy Tool ◽  
Effective Manner ◽  
Effective Policy ◽  
Foreign Governments ◽  
Trading Program ◽  
The U.S

The use of emissions trading (cap and trade) is gaining worldwide recognition as an extremely effective policy tool. The U.S. Sulfur Dioxide (SO2) Emissions Trading Program has achieved an unprecedented level of environmental protection in a cost-effective manner. The successful results of the program have led domestic and foreign governments to consider the application of cap and trade to address other air quality issues. Certain analyses are particularly important in determining whether or not cap and trade is an appropriate policy tool. This paper offers a set of questions that can be used as criteria for determining whether or not cap and trade is the preferred policy approach to an environmental problem.

Communicating about Carbon Taxes and Emissions Trading Programs

2017 ◽  
Author(s):  
Erick Lachapelle
Keyword(s):  
Emissions Trading ◽  
Public Support ◽  
Ghg Emissions ◽  
Policy Instruments ◽  
Carbon Price ◽  
Carbon Taxes ◽  
Cap And Trade ◽  
Policy Makers ◽  
The Public ◽  
Trading Program

In debates surrounding policy options for mitigating greenhouse gas (GHG) emissions, economists of various political stripes are near unanimous in their advocacy of putting a price on carbon, whether through a tax or emissions trading program. Due to the visible costs imposed on industry and consumers, however, these policies have been resisted by carbon-intensive industries and by an ideologically divided public, producing incentives for vote-seeking politicians to avoid implementing comprehensive and stringent carbon prices within their own borders. In this highly politicized environment, and considering the more recent diffusion of market-based instruments across political jurisdictions around the world, researchers have sought to identify the conditions most favorable to implementing carbon taxes and cap-and-trade programs, the correlates of public support for these policies, and the extent to which different communication strategies may help build public support. How do experts, political leaders, and members of the public understand these policy instruments, and what specific approaches have been most successful in persuading policy makers and the public to support a price on carbon? In places that have yet to implement a carbon price, what can communication strategists learn from existing research and the experience of other jurisdictions where such policies have been successfully implemented? In places where carbon taxes or carbon cap-and-trade programs exist, how are the benefits of these policies best communicated to ensure the durability of carbon pricing policies over time?

scholarly journals Emissions Trading Hybrids: The Case of the EU ETS

2019 ◽  
Vol 15 (1) ◽  
Author(s):  
Edwin Woerdman ◽  
Andries Nentjes
Keyword(s):  
Emissions Trading ◽  
Production Capacity ◽  
Performance Standard ◽  
Eu Ets ◽  
The European Union ◽  
Cap And Trade ◽  
Trading System ◽  
Standard Rate ◽  
High Level ◽  
The Eu

Abstract We argue that the European Union Emissions Trading System (EU ETS) has evolved into a hybrid of two design variants, allowance trading (cap-and-trade) and credit trading (performance standard rate trading), with an added feature of industry support to minimize carbon leakage. In particular the current rules tying free allowances to production capacity expansion, plant closure and capacity use have transformed the efficient cap-and-trade program that stood at the origins of the EU ETS into a system that even surpasses credit trading in paying hidden product subsidies to firms. This combination of rules encourages an inefficiently high level of investment in production capacity and an inefficiently high output in industries exposed to international competition. The result is a sub-optimal EU Emissions Trading ‘Hybrid’ (which we therefore label as ‘EU ETH’).

When Cap-and-Trade Works

2018 ◽  
pp. 125-162
Author(s):  
Barry G. Rabe
Keyword(s):  
Climate Change ◽  
Energy Efficiency ◽  
Renewable Energy ◽  
Sulfur Dioxide ◽  
Greenhouse Gas ◽  
Emissions Trading ◽  
Political Support ◽  
Cap And Trade ◽  
Sulfur Dioxide Emissions ◽  
Trading Program

Cap-and-trade has also faced numerous political challenges but also includes some more successful cases. Some of the experience of the American sulfur dioxide emissions trading program has been replicated for carbon in the case of the Regional Greenhouse Gas Initiative. This alliance among nine Northeastern states has retained political support for more than a decade and also pioneered a system to auction allowances to generate revenue. These funds are then concentrated on expansion of energy efficiency and renewable energy in the region, thereby further addressing climate change and also building a broader base of political support.

scholarly journals Linking the EU ETS with California’s Cap-and-Trade Program

2020 ◽  
Vol 4 (4) ◽  
pp. 9-45
Author(s):  
Edwin Woerdman ◽  
Manolis Kotzampasakis
Keyword(s):  
Emissions Trading ◽  
Law And Economics ◽  
The United States ◽  
Carbon Markets ◽  
Eu Ets ◽  
The European Union ◽  
Economic Literature ◽  
Cap And Trade ◽  
Trading Systems ◽  
The Eu

Aim: This paper aims to evaluate the legal barriers and policy obstacles to linking the European Union Emissions Trading System (EU ETS) with California’s Cap-and-Trade Program in the United States, and to identify potential legal solutions to overcome them, by taking a law and economics perspective.   Design / research methods: A qualitative law and economics analysis is performed by combining the legal-dogmatic method with insights from economic theory. Primary sources are the respective legal frameworks, ETS regulations, past linking agreements and relevant case law. Secondary sources include the relevant legal and economic literature, as well as policy documents, reports and press releases.   Conclusions / findings: An EU-California linkage of emissions trading systems (ETSs) is legally feasible on the basis of an informal agreement, through reciprocal amendments to the respective ETS-regulations. Potential barriers could emerge, in particular from misaligned provisions regarding price containment measures and offsets. A gradual implementation of certain mutually beneficial ETS reforms, possibly in conjunction with initially restricted linkage, can provide momentum for transcending these barriers.   Originality / value of the article: To date, no linking has taken place between emissions trading systems from different continents. This paper contributes to the legal-economic literature on linking the EU ETS with California’s Cap-and-Trade Program by performing an up-to-date analysis of its associated barriers and by providing concrete legal suggestions to possibly overcome them. Such a transatlantic linkage could enhance the cost-effectiveness of climate policy and contribute to the bottom-up expansion of carbon markets worldwide.

Emissions Trading at Work

2011 ◽  
pp. 291-320
Author(s):  
Bernd Mack ◽  
Sabina Salkic
Keyword(s):  
Large Scale ◽  
Emissions Trading ◽  
Price Discovery ◽  
Supply And Demand ◽  
Secondary Market ◽  
Eu Ets ◽  
Cap And Trade ◽  
Institutional Uncertainty ◽  
Market Infrastructure ◽  
The Eu

After introducing the foundations of cap-and-trade markets, the authors of this chapter confirm that the market architecture of the EU ETS is working and that secondary market trading is functioning. But they also illustrate frictions in price discovery and variability in pricing relations. This leads to the conclusion that efficiency and integrity of the emissions markets are particularly susceptible to institutional uncertainty and supply and demand constraints. Against this background the authors set out recommendations for integrating auctioning into the existing market infrastructure and institutions. This way, large-scale auctioning could ensure a smooth and effective supply of the underlying emission allowances into the markets.

Other Applications of the Public Benefit Model and Normative Reframing

2016 ◽  
Author(s):  
Leigh Raymond
Keyword(s):  
Climate Change ◽  
Carbon Tax ◽  
Eu Ets ◽  
Cap And Trade ◽  
Policy Changes ◽  
The Public ◽  
Public Benefit ◽  
Climate Policies ◽  
Potential Applications ◽  
The U.S

After RGGI’s implementation in 2008, a series of political set backs led some to declare cap and trade “dead.” This chapter rejects the asserted demise of cap and trade, arguing that the public benefit model for climate policies offers the best hope for political progress. The chapter reviews post-2008 climate policies, noting thatdespite a few prominent failures,cap and trade with auction has become the most common approach to addressing climate change. In addition, the chapter documents how three policies—the EU ETS, California’s cap and trade program, and RGGI—used the public benefit frame to resist political challenges and strengthen their emissions goals. The chapter then describes additional potential applications for the public benefit model, including carbon tax policies and the new Clean Power Plan regulations promulgated by the U.S. EPA in 2015. As uses of the public benefit frame expand, the chapter notes, a key question for the future will be what types of policy designs will be perceived as “fitting” with the norms that constitute the frame. Finally, the chapter discusses how normative framing could improve the ability to understand and predict other sudden policy changes beyond the topic of climate change.

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