The Italian Position in the Energy and Climate Change Negotiations

Climate change, security and cost of energy supplies, and the competitiveness of firms and economies have been focal points of the general political and economic policy debate in recent years. This article examines the choices in this field made at global level with the Kyoto Protocol and in Europe with the more recent “20-20-20” package from the standpoints of the Italian national interests and the negotiating stance adopted by our Government in European and international forums. The European negotiations on renewable energy sources, the reduction of emissions in the sectors with and without emissions trading schemes, automobile emissions, the auctioning of emission rights, and the identification of industries exposed to the risk of delocalization (carbon leakage) are described in detail, including background data not previously available, and the reasons for Italy’s positions set forth. The principle guiding Italian negotiators has been to balance the various policy aims, in an effort to ensure that the necessary action against climate change does not have excessive repercussions on growth and employment. The principle is all the more valid in the global talks on the regime that will succeed the Kyoto Protocol when it expires on 1 January 2013. Without a credible global agreement entailing an equivalent commitment, or sectoral agreements, instruments will be needed to prevent Europe’s climate commitment from producing an unfair competitive disadvantage, with potentially serious social and economic consequences but no appreciable environmental advantage.Climate Change; Energy; UNFCCC; ETS; Emissions Trading Scheme; Auctioning; European Union; Italy; Carbon Leakage; Carbon pricing

The Environmental Integrity of the CDM: A Legal Analysis of its Institutional and Procedural Shortcomings

There is growing concern that a significant proportion of Clean Development Mechanism (CDM) credits (CERs) do not reflect real emission reductions and that the mechanism is inadequate to assist developing countries in their transition towards a low-carbon economy. Hence, any decision to maintain the CDM in its current form within a post-2012 climate agreement has to be considered with great care. This study examines, in particular, how the baseline and the additionality requirements have been interpreted and sheds some light on the verification process and the oversight by the Executive Body (EB). Finally, it shows that the CDM is inadequate to foster significant policy reforms, which are a prerequisite for any meaningful change in the emission trends of developing countries

The Italian Position in the Energy and Climate Change Negotiations

Climate change, security and cost of energy supplies, and the competitiveness of firms and economies have been focal points of the general political and economic policy debate in recent years. This article examines the choices in this field made at global level with the Kyoto Protocol and in Europe with the more recent “20-20-20” package from the standpoints of the Italian national interests and the negotiating stance adopted by our Government in European and international forums. The European negotiations on renewable energy sources, the reduction of emissions in the sectors with and without emissions trading schemes, automobile emissions, the auctioning of emission rights, and the identification of industries exposed to the risk of delocalization (carbon leakage) are described in detail, including background data not previously available, and the reasons for Italy’s positions set forth. The principle guiding Italian negotiators has been to balance the various policy aims, in an effort to ensure that the necessary action against climate change does not have excessive repercussions on growth and employment. The principle is all the more valid in the global talks on the regime that will succeed the Kyoto Protocol when it expires on 1 January 2013. Without a credible global agreement entailing an equivalent commitment, or sectoral agreements, instruments will be needed to prevent Europe’s climate commitment from producing an unfair competitive disadvantage, with potentially serious social and economic consequences but no appreciable environmental advantage

Capping Carbon

This article addresses the problem of how to set caps for a cap-and-trade program, a key problem in pending legislation addressing global climate disruption. Previous scholarship on emissions trading programs focuses overwhelmingly on trading’s advantages and sometimes wrongly portrays environmental improvement as an automatic byproduct of adopting a cap-and-trade approach. A trading program’s success, however, depends critically upon timely and effective cap setting. This article shows that often regulators have employed a best available technology (BAT) approach to cap setting for trading programs, i.e., setting the cap at a level that regulated polluters can achieve with government-identified technology. This descriptive claim suggests that trading does not necessarily provide an antidote to the problems associated with BAT regulation, as the literature often claims; instead trading programs often constitute a form of BAT regulation in many respects. The rest of the article explores this insight’s implications. Analytically, this article reviews three ways to establish aggregate caps, effects-based, cost-benefit based, and technology-based cap setting. It shows that each of these approaches has theoretical and practical advantages and disadvantages, but only effects-based cap setting frees the regulator from the need to evaluate technologies in order to establish a cap. Since trading does not automatically transcend BAT, this article provides recommendations on how to improve cap setting both generally and in the climate disruption context. It suggests that in the climate disruption context a legislative effects-based approach offers an attractive and viable cap-setting method. But normative acceptance of effects-based caps requires some adjustments in how we think about costs, mainly a recognition that they are neither fixed nor predictable, but can change as a result of a cap-and-trade program. This article also shows that auctions can play an important role in facilitating avoidance of the problems of administrative delay and strife that accompanied BAT regulation. While commentators usually agree that auctions offer economic advantages, the literature has not paid sufficient attention to their administrative advantages. We should think of auctions as essential to effective cap setting, not just as a nice way of avoiding unattractive distributional consequences like windfall profits. But this article also explores how the possibility of BAT-like administrative delay should influence criteria and administrative procedures for agency distribution of allowances to firms. Finally, this article makes recommendation on how cap-setting decisions can circumvent favoritism toward existing sources and the difficulty of revising limits once establishes - both BAT problems that can arise under trading as well. Thus, jettisoning the notion that trading automatically avoids problems traditionally associated with BAT leads to a set of useful insights about how to set caps

The Italian Position in the Energy and Climate Change Negotiations

Climate change, security and cost of energy supplies, and the competitiveness of firms and economies have been focal points of the general political and economic policy debate in recent years. This article examines the choices in this field made at global level with the Kyoto Protocol and in Europe with the more recent “20-20-20” package from the standpoints of the Italian national interests and the negotiating stance adopted by our Government in European and international forums. The European negotiations on renewable energy sources, the reduction of emissions in the sectors with and without emissions trading schemes, automobile emissions, the auctioning of emission rights, and the identification of industries exposed to the risk of delocalization (carbon leakage) are described in detail, including background data not previously available, and the reasons for Italy’s positions set forth. The principle guiding Italian negotiators has been to balance the various policy aims, in an effort to ensure that the necessary action against climate change does not have excessive repercussions on growth and employment. The principle is all the more valid in the global talks on the regime that will succeed the Kyoto Protocol when it expires on 1 January 2013. Without a credible global agreement entailing an equivalent commitment, or sectoral agreements, instruments will be needed to prevent Europe’s climate commitment from producing an unfair competitive disadvantage, with potentially serious social and economic consequences but no appreciable environmental advantage