A Tax-Based Approach to Slowing Global Climate Change

In this paper, we discuss the design of carbon dioxide (CO2) taxes at the domestic and international level and the choice of taxes versus a cap-and-trade system. A strong case can be made for taxes on uncertainty, fiscal, and distributional grounds, though this critically hinges on policy specifics and how revenues are used. The efficient near-term tax is at least $5–$20 per ton of CO2 and the tax should be imposed upstream with incentives for downstream sequestration and abatement of other greenhouse gases. At the international level, a key challenge is the possibility that emissions taxes might be undermined through offsetting changes in other energy policies.Global climate change, CO2 tax, cap-and-trade, policy design

Climate policies for road transport revisited (I): Evaluation of the current framework

The global rise of greenhouse gas (GHG) emissions and its potentially devastating consequences require a comprehensive regulatory framework for reducing emissions, including those from the transport sector. Alternative fuels and technologies have been promoted as means for reducing the carbon intensity of the transport sector. However, the overall transport policy framework in major world economies is geared towards the use of conventional fossil fuels. This paper evaluates the effectiveness and efficiency of current climate policies for road transport that (1) target fuel producers and/or car manufacturers, and (2) influence use of alternative fuels and technologies. With diversifying fuel supply chains, carbon intensity of fuels and energy efficiency of vehicles cannot be regulated by a single instrument. We demonstrate that vehicles are best regulated across all fuels in terms of energy per distance. We conclude that price-based policies and a cap on total emissions are essential for alleviating rebound effects and perverse incentives of fuel efficiency standards and low carbon fuel standards. In tandem with existing policy tools, cap and price signal policies incentivize all emissions reduction options. Design and effects of cap and trade in the transport sector are investigated in the companion article (Flachsland et al., 2010).Fuel efficiency standards, low carbon fuel standards, climate change

Analysis of U.S. Greenhouse Gas Tax Proposals

Abstract in HTML and technical report in PDF available on the MIT Joint Program on the Science and Policy of Global Change website (http://mit.edu/globalchange/www/).The U.S. Congress is considering a set of bills designed to limit the nation’s greenhouse gas (GHG) emissions. Several of these proposals call for a cap-and-trade system; others propose an emissions tax. This paper complements the analysis by Paltsev et al. (2007) of cap-and-trade bills and applies the MIT Emissions Prediction and Policy Analysis (EPPA) model to carry out an analysis of the tax proposals. Several lessons emerge from this analysis. First, a low starting tax rate combined with a low rate of growth in the tax rate will not reduce emissions significantly. Second, the costs of GHG reductions are reduced with the inclusion of non-CO2 gases in the carbon tax scheme. The costs of the Larson plan, for example, fall by 20% with inclusion of the other GHGs. Third, welfare costs of the policies can be affected by the rate of growth of the tax, even after controlling for cumulative emissions. Fourth, a carbon tax – like any form of carbon pricing – is regressive. However, general equilibrium considerations suggest that the short-run measured regressivity may be overstated. A portion of the carbon tax is passed back to workers, owners of equity, and resource owners. To the extent that relatively wealthy resource and equity owners bear some fraction of the tax burden, the regressivity will be reduced. Additionally, the regressivity can be offset with a carefully designed rebate of some or all of the revenue. Finally, the carbon tax bills that have been proposed or submitted are for the most part comparable to many of the carbon cap-and-trade proposals that have been suggested. Thus the choice between a carbon tax and cap-and-trade system can be made on the basis of considerations other than their effectiveness at reducing emissions over some control period. Either approach (or some hybrid of the two approaches) can be equally effective at reducing GHG emissions in the United States.This study received funding from the MIT Joint Program on the Science and Policy of Global Change, which is supported by a consortium of government, industry and foundation sponsors

Designing Climate Mitigation Policy

This paper provides an exhaustive review of critical issues in the design of climate mitigation policy by pulling together key findings and controversies from diverse literatures on mitigation costs, damage valuation, policy instrument choice, technological innovation, and international climate policy. We begin with the broadest issue of how high assessments suggest the near and medium term price on greenhouse gases would need to be, both under cost-effective stabilization of global climate and under net benefit maximization or Pigouvian emissions pricing. The remainder of the paper focuses on the appropriate scope of regulation, issues in policy instrument choice, complementary technology policy, and international policy architectures.global warming damages, mitigation cost, climate policy, instrument choice, technology policy

Water Governance Challenges: Managing Competition and Scarcity for Hunger and Poverty Reduction and Environmental Sustainability

human development, water, sanitation

Emissions Trading in Practice : A Handbook on Design and Implementation

Currently, about 46 national jurisdictions and 35 cities, states, and regions, representing almost a quarter of global greenhouse gas (GHG) emissions, are putting a price on carbon as a central component of their efforts to reduce emissions and place their growth trajectory on a more sustainable footing. An increasing number of these jurisdictions are approaching carbon pricing through the design and implementation of Emissions Trading Systems (ETS). As of 2021, ETSs were operating across four continents in 38 countries, 18 states or provinces, and six cities covering over 40 percent of global gross domestic product (GDP), and additional systems are under development. This handbook sets out a 10-step process for designing and implementing an ETS. These steps are interdependent, and the choices made at each step will have important repercussions for decisions in the other steps. In practice the process of ETS design will be iterative rather than linear. The need to adjust and adapt policies over time is reflected in the update of this handbook, which was first released in 2016. New insights, approaches, and designs have proliferated adjusting the way ETSs operate and further developing our understanding of them

Closing the Gap: A Comparison of Approaches to Encourage Early Greenhouse Gas Emission Reductions

Das Kyoto-Protokoll zur UN-Klimarahmenkonvention setzt verbindliche Treibhausgasemissionsziele f�r Industriel�nder, die allerdings erst im Zeitraum 2008-2012 gelten. Da f�r die Zeit bis 2008 mit einem erheblichen Emissionsanstieg zu rechnen ist, wird �ber Ans�tze nachgedacht, schon vorher Anreize f�r Emissionsverringerungen zu setzen. Fr�hzeitige Emissionsverringerung reduziert das Risiko, klimatische Schwellenwerte zu �berschreiten, die nichtlineare Ver�nderungen im Klimasystem ausl�sen. Au�erdem wird der normale Investitionszyklus ausgenutzt, indem Neuinvestitionen emissions�rmer ausfallen. Dies verursacht keine oder nur geringe Kosten. Dazu bedarf es konkreter Anreize, die unterschiedlich ausfallen k�nnen. W�hrend in Nordamerika eine freiwillige vorzeitige Anrechnung von Emissionsverringerungsma�nahmen auf die Verpflichtungen des Kyoto-Protokolls diskutiert wird, werden in Europa konkrete marktwirtschaftliche Instrumente wie Emissions- oder Energiesteuer sowie Emissionsrechtshandel geplant und teilweise bereits umgesetzt. Die vorzeitige Anrechnung erzeugt einen Anreiz zur Emissionsverringerung in den erfa�ten Sektoren. Allerdings wirkt dieser Anreiz nur indirekt, da der Preis f�r Emissionsrechte von der Wahrscheinlichkeit der Umsetzung des Kyoto-Protokolls und davon abh�ngt, ob und in welchem Ma�e das Unternehmen zuk�nftigen Regulierungen unterworfen sein wird. Entscheidend ist nun die Wahl des Referenzszenarios, das zur Berechnung der Anzahl der Emissionsrechte herangezogen wird. In den nordamerikanischen Vorschl�gen werden dazu h�chst unterschiedliche Verfahren angewandt. Die Ber�cksichtigung bereits erfolgter Verringerungen sowie von Verringerungen im Ausland und Kohlenstoffspeicherung in Biomasse ist umstritten. Die Bestimmung des Referenzszenarios f�hrt unweigerlich dazu, da� manche Verringerungen nicht angerechnet werden; beispielsweise solche aus ver�ndertem Konsumverhalten. Vorzeitige Anrechnung f�hrt zu Umverteilungseffekten, die enorme Gr��enordnungen erreichen k�nnen. Jede Zuteilung von Emissionsrechten zwingt die Nichtteilnehmer zu h�heren Anstrengungen w�hrend der Zielperiode. Dabei handelt es sich voraussichtlich um die Unternehmen mit den h�chsten Verringerungskosten. Diese Effekte wirken desto st�rker, je h�her der Anteil von Emissionsrechten ist, der f�r vergangene oder fiktive Emissionsverringerungen ausgegeben wurde. Vorzeitige Anrechnung ist also ein Instrument mit deutlichen Schw�chen. Marktorientierte Instrumente sind eindeutig vorzuziehen. Auch kommt die vorzeitige Anrechnung nicht mit einfachen Regeln aus; der f�r ihre Einf�hrung notwendige Regelungsaufwand sollte lieber in die Schaffung von Anreizsystemen investiert werden, die bruchlos in die Zielperiode des Kyoto-Protokolls einm�nden. Falls diese jedoch politisch nicht durchsetzbar erscheinen, ist die vorzeitige Anrechnung dem Verzicht auf jegliche Klimapolitik vorzuziehen.Environmental Economics and Policy,

Structural Transformation in South Africa: The Challenges of Inclusive Industrial Development in a Middle-Income Country

Taking South Africa as an important case study of the challenges of structural transformation, the book offers a new micro-meso level framework and evidence linking country-specific and global dynamics of change, with a focus on the current challenges and opportunities faced by middle-income countries. Detailed analyses of industry groupings and interests in South Africa reveal the complex set of interlocking country-specific factors which have hampered structural transformation over several decades, but also the emerging productive areas and opportunities for structural change. The structural transformation trajectory of South Africa presents a unique country case, given its industrial structure, concentration, and highly internationalized economy, as well as the objective of black economic empowerment. The book links these micro-meso dynamics to the global forces driving economic, institutional, and social change. These include digital industrialization, global value-chain consolidation, financialization, and environmental and other sustainability challenges which are reshaping structural transformation dynamics across middle-income countries like South Africa. While these new drivers of change are disrupting existing industries and interests in some areas, in others they are reinforcing existing trends and configurations of power. The book analyses the ways in which both the domestic and global drivers of structural transformation shape—and, in some cases, are shaped by—a country’s political settlement and its evolution. By focusing on the political economy of structural transformation, the book disentangles the specific dynamics underlying the South African experience of the middle-income country conundrum. In so doing, it brings to light the broader challenges faced by similar countries in achieving structural transformation via industrial policies

Structural Transformation in South Africa

Taking South Africa as an important case study of the challenges of structural transformation, the book offers a new micro-meso level framework and evidence linking country-specific and global dynamics of change, with a focus on the current challenges and opportunities faced by middle-income countries. Detailed analyses of industry groupings and interests in South Africa reveal the complex set of interlocking country-specific factors which have hampered structural transformation over several decades, but also the emerging productive areas and opportunities for structural change. The structural transformation trajectory of South Africa presents a unique country case, given its industrial structure, concentration, and highly internationalized economy, as well as the objective of black economic empowerment. The book links these micro-meso dynamics to the global forces driving economic, institutional, and social change. These include digital industrialization, global value-chain consolidation, financialization, and environmental and other sustainability challenges which are reshaping structural transformation dynamics across middle-income countries like South Africa. While these new drivers of change are disrupting existing industries and interests in some areas, in others they are reinforcing existing trends and configurations of power. The book analyses the ways in which both the domestic and global drivers of structural transformation shape—and, in some cases, are shaped by—a country’s political settlement and its evolution. By focusing on the political economy of structural transformation, the book disentangles the specific dynamics underlying the South African experience of the middle-income country conundrum. In so doing, it brings to light the broader challenges faced by similar countries in achieving structural transformation via industrial policies

POLICY OPTIONS TO REDUCE IRELAND’S GREENHOUSE GAS EMISSIONS. ESRI RESEARCH SERIES NUMBER 9 JULY 2009

Owing to the economic recession from 2008 Ireland is likely to meet its commitments for 2008-2012 under the Kyoto Protocol to reduce its greenhouse gas emissions. Nevertheless, the longer term targets that the European Union has set for 2020 are still stringent. Those sectors of the Irish economy that participate in the EU Emissions Trading Scheme (EU ETS) must reduce their emissions by 21 per cent below their 2005 levels. The remainder, and bulk, of Ireland’s emissions must reduce by 20 per cent on their 2005 level. In quantity terms, this is a target of some 56 million tonnes of carbon dioxide equivalent (CO2e) in 2020, compared to the approximately 69 million tonnes emitted in 2007. Forecasting is particularly difficult under changing economic conditions, but on the basis of plausible assumptions, known policies and trends prevailing up to April 2009, emissions in 2020 could be marginally higher than their 2005 level without additional policies and measures. If there is a broader international commitment agreed under the UN Framework Convention on Climate Change, the European commitment will strengthen to a reduction of 30 per cent. Although Ireland’s reductions are insignificant in global terms, it can make a promising contribution to global efforts by showing how worthwhile an efficient approach to climate policy can be