Economic Analysis of the European Climate Policy: the European emissions trading scheme

The last two decades have experienced an increasing awareness about global warming, its causes, and potential effects on the ecosystem, in general, and on humankind, in particular. Global warming is nowadays recognized as one of the most impressive global negative externalities and market failures generated by the current economic system (Stern et al. 2006). In an attempt to safeguard against the risk of massive damage caused by a change in climate, the international, European and national institutions have committed to clear environmental goals aimed at stabilizing the global temperature at a non-dangerous level. In 2005, with the entry into force of the Kyoto Protocol, the ratifying Parties have committed to reduce by 2012 their emissions to 5.2% below the level of 1990. After having ratified the Kyoto Protocol, the European Commission (hereinafter EC) published the 2007 communication "Limiting Global Climate Change to 2° Celsius: The Way Ahead for 2020 and Beyond" in which it expressed its firm intention to enforce emissions reduction climate policies even beyond the terms of the Kyoto Protocol. At the end of 2008, the European Climate Package, which imposes a unilateral 20% emissions cut below the 1990 emissions level to be met by 2020, was finally approved.

Emissions Trading and the Polluter-Pays Principle : do Polluters Pay under Grandfathering?

Emissions trading is becoming increasingly popular in environmental law. Allowances to trade emissions can either be auctioned off or handed out free of charge by means of grandfathering. Although grandfathering is frequently used in emissions trading schemes, it is a popular view in the economic and legal literature that grandfathering is inconsistent with the polluter-pays principle. We come to a different, more nuanced view. The question of whether polluters pay under grandfathering depends on how the polluter-pays principle is interpreted. We present a taxonomy of interpretations. Based on an efficiency interpretation of the principle, consistency is demonstrated by emphasizing the economic impact of the opportunity costs of gratis allowances and the lump sum nature of the subsidy that is inherent to grandfathering. Inconsistency can only be claimed based on an equity interpretation of the polluter-pays principle. Allocating allowances free of charge means that polluting firms receive a capital gift making their shareholders richer, which may be perceived as unfair. We draw two conclusions. First, contrary to what some have claimed, grandfathering is compatible with an efficiency interpretation of the polluter-pays principle. Second, only auctioning is consistent with an extended form of this principle. Auctioning ensures not only that pollution costs are internalized (efficiency), but also that producers buy their allowances before they pass on those costs to consumers (equity)

Grandfathering, auctioning and Carbon Leakage: Assessing the inconsistencies of the new ETS Directive

The new ETS Directive defines three different allocation rules, granting exemption from auctioning to those sectors exposed to the risk of Carbon Leakage. This article analyses the inconsistencies that characterize this new allocation rule and it concludes that the methodology designed to assess the risk of Carbon Leakage is more politically driven than economically grounded. The results of the Carbon Leakage risk assessment reveal that grandfathering is going to be the dominant allocation rule during the third phase also. However, not only the exemption from auctioning is unlikely to mitigate Carbon Leakage, instead of improving the allocation transparency and granting harmonization of higher rules but also the new ETS allocation rule is likely to increase the distortions of competition, worsening rather than improving the harmonization within the ETS.Climate Package Carbon Leakage Auctioning

Economic analysis of the european climate policy: the european amissions trading scheme

The last two decades have experienced an increasing awareness about global warming, its causes, and potential effects on the ecosystem, in general, and on humankind, in particular. Global warming is nowadays recognized as one of the most impressive global negative externalities and market failures generated by the current economic system (Stern et al. 2006). In an attempt to safeguard against the risk of massive damage caused by a change in climate, the international, European and national institutions have committed to clear environmental goals aimed at stabilizing the global temperature at a non-dangerous level. In 2005, with the entry into force of the Kyoto Protocol, the ratifying Parties have committed to reduce by 2012 their emissions to 5.2% below the level of 1990. After having ratified the Kyoto Protocol, the European Commission (hereinafter EC) published the 2007 communication "Limiting Global Climate Change to 2° Celsius: The Way Ahead for 2020 and Beyond" in which it expressed its firm intention to enforce emissions reduction climate policies even beyond the terms of the Kyoto Protocol. At the end of 2008, the European Climate Package, which imposes a unilateral 20% emissions cut below the 1990 emissions level to be met by 2020, was finally approved.

The effect of price regulation on energy imbalances : a difference in differences design

Available online: 23 May 2019Providing adequate incentives to schedule energy programs accurately is a critical feature of liberalized electricity markets, particularly those with large shares of intermittent, renewable energy resources. In this regard, two main regulatory approaches are widely adopted in Europe. The single pricing scheme rewards or penalizes market agents according to the impact of their individual imbalances on the system imbalance. The dual pricing scheme penalizes (at best does not reward) all individual energy imbalances. This study theoretically identifies and then provides supporting empirical evidence of potential inconsistencies between market agents' balancing responsibility and the economic incentives provided by these pricing rules (de facto, opportunities for arbitrage in sequential markets). The causal effect of imbalance price regulations on the volume of the energy imbalances is investigated by exploiting a quasi-experimental change in regulation in the Italian power system. A difference-in-differences design provides robust evidence that the volume of intentional imbalances significantly decreases when moving from a single to dual pricing scheme. We conclude that the economic incentives of a dual pricing scheme are better aligned with a market agent's responsibility to be balanced and worth of further consideration from a policy perspective

The effect of price regulation on energy imbalances: a DiD Design

Providing adequate incentives to schedule energy programs accurately is a critical feature of liberalized electricity markets, particularly those with large shares of intermittent, renewable energy resources. In this regard, two main regulatory approaches are widely adopted in Europe. The single pricing scheme rewards or penalizes market agents according to the impact of their individual imbalances on the system imbalance. The dual pricing scheme penalizes (at best does not reward) all individual energy imbalances. This study theoretically identifies and then provides supporting empirical evidence of potential inconsistencies between market agents' balancing responsibility and the economic incentives provided by these pricing rules (de facto, opportunities for arbitrage in sequential markets). The causal effect of imbalance price regulations on the volume of the energy imbalances is investigated by exploiting a quasi-experimental change in regulation in the Italian power system. A difference-in-differences design provides robust evidence that the volume of intentional imbalances significantly decreases when moving from a single to dual pricing scheme. We conclude that the economic incentives of a dual pricing scheme are better aligned with a market agent's responsibility to be balanced and worth of further consideration from a policy perspective

Financial support to innovation: The role of European development financial institutions

We analyse the role of European development financial institutions (DFIs) in supporting innovation by empirically investigating the impact of their participation as investors in equity deals on target firms' patenting activity. We build a unique international data set of deals and firm-level data in the years 2007–2019. Econometric results highlight the positive contribution of DFIs in mobilizing finance to support innovation, and the magnitude of this effect is amplified when DFIs act in partnership with other investors. This represents novel evidence on the innovative-oriented mission driving their activity. These new findings point to the recent role of DFIs in sharing the management of EU financial instruments, implementing programmes to strengthen the longer-term support of finance for enterprises, and boosting innovation and growth

A quasi-experimental design to assess the innovative impact of public procurement: An application to the Italian space industry

A growing number of empirical studies have shown that public procurement can be a relevant demand-side innovation policy. We assess the impact of public procurement on firms’ innovation in the space industry. This is an important field of application because it widely uses public procurement and the procuring space agencies have distinctive characteristics, namely innovation-oriented mandate, relevant internal competences and professional skills. Specifically, we focus on the procurement activity of the Italian Space Agency over a 15-years period. We assess the causal impact of public procurement on suppliers’ patenting activity by implementing a novel quasi-experimental design. Our approach allows addressing the endogeneity issues and potential estimation biases stemming from both the procurement selection process and its time heterogeneity. By combining matching techniques with a staggered diff-in-diff approach, we find that, after the beginning of the procurement collaboration, the supplier firms have increased on average their patent applications by roughly 10% compared to the control group. Such effect is increasing in time and persists for several years after the beginning of the procurement relationship

Emissions Trading and the Polluter-Pays Principle: Do Polluters Pay under Grandfathering?

Emissions trading is becoming increasingly popular in environmental law. Allowances to trade emissions can either be auctioned off or handed out free of charge by means of grandfathering. Although grandfathering is frequently used in emissions trading schemes, it is a popular view in the economic and legal literature that grandfathering is inconsistent with the polluter-pays principle. We come to a different, more nuanced view. The question of whether polluters pay under grandfathering depends on how the polluter-pays principle is interpreted. We present a taxonomy of interpretations. Based on an efficiency interpretation of the principle, consistency is demonstrated by emphasizing the economic impact of the opportunity costs of gratis allowances and the lump sum nature of the subsidy that is inherent to grandfathering. Inconsistency can only be claimed based on an equity interpretation of the polluter-pays principle. Allocating allowances free of charge means that polluting firms receive a capital gift making their shareholders richer, which may be perceived as unfair. We draw two conclusions. First, contrary to what some have claimed, grandfathering is compatible with an efficiency interpretation of the polluter-pays principle. Second, only auctioning is consistent with an extended form of this principle. Auctioning ensures not only that pollution costs are internalized (efficiency), but also that producers buy their allowances before they pass on those costs to consumers (equity).

L’OT nella prospettiva di un’analisi costi-benefici sul settore spazio: i satelliti Cosmo-Skymed dell’ASI

Nell’ultimo decennio, un crescente numero di immagini satellitari ad alta risoluzione si è reso accessibile per amministrazioni pubbliche, policymakers e scienziati, incrementando la quantità e la qualità di informazioni disponibili. L’osservazione terrestre fornisce informazioni preziose sia al settore pubblico che a quello privato, consentendo di affrontare – al tempo stesso e con strumenti nuovi – sfide sociali globali come il cambiamento climatico e l’inquinamento dell’aria o applicazioni locali quali l’implementazione di tecniche di agricoltura di precisione e monitoraggio delle infrastrutture urbane e di trasporto. Il presente articolo si propone, attraverso lo studio della letteratura che utilizza dati di osservazione terrestre e un’analisi bibliografica relativa a Cosmo SkyMed (CSM), di aprire la strada ad una efficace valutazione dell’impatto socioeconomico dell’attività dell’Agenzia Spaziale Italiana (ASI) con riguardo alla creazione di prodotti e servizi innovativi generati dall’Osservazione Terrestre. Buona parte dei benefici legati alla disponibilità di dati di osservazione della terra restano potenziali, inespressi e sottovalutati. La presente analisi prevede l’identificazione delle barriere organizzative e istituzionali che limitano il pieno sfruttamento delle informazioni da dati OT, così come la formulazione di solide raccomandazioni di policy al fine di valorizzare il settore downstream spaziale italiano, soprattutto in materia di economia pubblica e fiscal compliance (e.g. accertamento degli abusivismi edilizi)