The impact of the EU Emissions Trading System on low-carbon technological change: the empirical evidence

This paper reviews the empirical literature analysing the effects of the EU Emissions Trading System (EU ETS) on low-carbon technological change. The emerging evidence is assessed, with references to both relevant economic concepts and the evolving regulation of the EU ETS through time. The two most robust indications of the literature are: a) the EU ETS appears to have been more effective in stimulating innovation of low-carbon technologies rather than their adoption; and b) free allocation (grandfathering) tended to hamper low-carbon investments in Phases I (2005-2007) and II (2008-2012). However, a complete general picture of the impact of the EU ETS on low-carbon technological change is missing. The main gap regards the lack of empirical evidence for Phase III (2013-2020). Especially econometric studies are few, due to the lack of suitable databases accessible to researchers - a problem that the relevant public authorities are urged to address. Thanks to the recent reforms of the EU ETS, the incentives for innovation and adoption of low-carbon technologies are probably stronger today than ever before

The causal factors of international inequality in CO2 emissions per capita : a regression-based inequality Decomposition Analysis

This paper uses the possibilities provided by the regression-based inequality decomposition (Fields in Res Labor Econ 22:1-38, 2003) to explore the contribution of different explanatory factors to international inequality in CO 2 emissions per capita. In contrast to previous emissions inequality decompositions, which were based on identity relationships, this methodology does not impose any a priori specific relationship. Thus, it allows an assessment of the contribution to inequality of different relevant variables. In short, the paper appraises the relative contributions of affluence, sectoral composition, demographic factors and climate. The analysis is applied to selected years of the period 1993-2007. The results show the important (though decreasing) share of the contribution of demographic factors, as well as a significant contribution of affluence and sectoral composition

Empirics of the International Inequality in CO2 Emissions Intensity : Explanatory Factors According to Complementary Decomposition Methodologies

The authors acknowledge support from XREAP (DGR)This paper analyses the international inequalities in (Formula presented.) emissions intensity for the period 1971-2009 and assesses explanatory factors. Group, additive and multiplicative methodologies of inequality decomposition are employed. The first allows us to understand the role of regional groups; the second allows us to investigate the role of different fossil energy sources (coal, oil and gas); and the third allows us to clarify the separated role of the carbonisation index and the energy intensity in the pattern observed for inequalities in (Formula presented.) intensities. The results show that, first, the reduction in global emissions intensity has coincided with a significant reduction in international inequality. Second, the bulk of this inequality and its reduction are attributed to differences between the groups of countries considered. Third, coal is the main energy source explaining these inequalities, although the growth in the relative contribution of gas is also remarkable. Fourth, the bulk of inequalities between countries and its decline are explained by differences in energy intensities, although there are significant differences in the patterns demonstrated by different groups of countries. The policy implications of these results are discussed

El efecto del mercado de emisiones europeo en las emisiones de la aviación en España

Since 2012, all air routes starting or finishing in the European Economic Area are included in the EU Emissions Trading system (ETS). Empirical evidence has shown that this policy instrument reduced emissions by 5 % as compared to the counterfactual at the EU level (Fageda & Teixidó, 2022). However, this effect is potentially heterogeneous across countries. Applying a difference-in-difference strategy, here we focus on Spain, a country with high speed rail deployment and with a significant tourism industry. We find that Spanish aviation emissions were up to 10 % lower because of the EU ETS, 13 % lower if there was a HSR connection and 11 % less when focusing only on tourist destinations. All these reductions in emissions were driven by a reduction in flights

The causal factors of international inequality in co2 emissions per capita: a regression-based inequality decomposition analysis [WP]

This paper uses the possibilities provided by the regression-based inequality decomposition (Fields, 2003) to explore the contribution of different explanatory factors to international inequality in CO2 emissions per capita. In contrast to previous emissions inequality decompositions, which were based on identity relationships (Duro and Padilla, 2006), this methodology does not impose any a priori specific relationship. Thus, it allows an assessment of the contribution to inequality of different relevant variables. In short, the paper appraises the relative contributions of affluence, sectoral composition, demographic factors and climate. The analysis is applied to selected years of the period 1993–2007. The results show the important (though decreasing) share of the contribution of demographic factors, as well as a significant contribution of affluence and sectoral composition

Free allocation rules in the EU Emissions Trading System: what does the empirical literature show?

This paper analyses the rules for free allocation in the EU Emissions Trading System (EU ETS). The analysis draws on the empirical evidence emerging from two literature strands. One group of studies sheds light on the following questions: how efficient are free allocation rules in minimizing the risk of carbon leakage? Have they become more efficient over the trading periods? What are the technical limits to making them more efficient? Further: is firm behaviour neutral to allowance allocation? Did specific provisions induce strategic behaviour with unintended effects? Studies from the second group estimate sectoral pass-through rates for the costs imposed by the EU ETS. Taking cost pass-through into account is necessary for properly targeting free allocation. The difficulty of accurately quantifying sectoral differences in cost pass-through ability is the main obstacle to achieving further efficiency in allowance allocation. The new rules defined in the reform for Phase IV (2021-2030) make some progress in this direction nevertheless. In any case, with carbon prices expected to rise and the total volume of allowances shrinking, free allocation - however efficient may it be - cannot be the only or main measure for preventing carbon leakage in the future

Major Reforms in Electricity Pricing: Evidence from a Quasiexperiment

The global energy mix is being redefined, and with it the power industry’s cost structure. In many countries, electricity-pricing systems are being revamped so as to guarantee fixed-cost recovery, often by raising the fixed charge of two-part tariff (TPT) schemes. However, consumer misperception of TPTs threatens to undermine the policy’s outcome and puts the sector’s much-needed transformation in jeopardy. We conduct a quasi-experiment with data from a major electricity price reform recently implemented in Spain and find robust evidence that consumers are failing to distinguish between fixed and marginal costs. As a result, the policy goal of cost recovery is not being achieve

The influence of population aging on global climate policy

We study the connection between the demographic transition to an aging population and global climate policy ambition in the outcomes from recent international agreements on climate change: We test whether the share of the elderly in a population is a significant determinant of the quantity and ambition of a country's policy actions against climate change. We use different indicators of climate policy ambition as measured by the Nationally Determined Contributions (NDC) of the Paris Agreement as updated in the Glasgow Climate Pact. We also use the number of climate change laws passed in a country to further test robustness of main results. We resort to instrumental variables as part of our identification strategy to account for potential endogeneity. Our econometric results indicate a negative association between the share of the elderly and both policy ambition in climate agreements and the intensity of regulatory initiatives to fight climate change. This suggests that the increasing political influence of the older population as a consequence of aging hinders climate policy ambition. Policy implications are discussed

The political economy of the Paris agreement. Income inequality and climate policy [WP]

We empirically assess how both between-country inequality and within-country inequality relate to climate policy ambition as defined by NDC pledges of the Paris Agreement (COP21). We exploit the difference between high and low ambition targets submitted by parties to construct a climate policy ambition index. We find that both inequalities shape countries’ pledges: First, low income countries tend to be more ambitious in setting their pledges when external support is received. Second, within-country inequality is associated with (i) lower mitigation ambition in low and middle-low-income countries, and with (ii) higher mitigation ambition, although none statistically significant, for upper-high and high-income countries. Despite we cannot claim any causal mechanism, our results are discussed in terms of climate policy being a superior good in rich countries and elites benefiting from emitting economic activities in poorer countrie

Ecological Footprint Inequality : a methodological review and some results

Scarcities of environmental services are no longer merely a remote hypothesis. Consequently, analysis of their inequalities between nations becomes of paramount importance for the achievement of sustainability in terms either of international policy, or of Universalist ethical principles of equity. This paper aims, on the one hand, at revising methodological aspects of the inequality measurement of certain environmental data and, on the other, at extending the scarce empirical evidence relating to the international distribution of Ecological Footprint (EF), by using a longer EF time series. Most of the techniques currently important in the literature are revised and then tested on EF data with interesting results. We look in depth at Lorenz dominance analyses and consider the underlying properties of different inequality indices. Those indices which fit best with environmental inequality measurements are CV2 and GE(2) because of their neutrality property, however a trade-off may occur when subgroup decompositions are performed. A weighting factor decomposition method is proposed in order to isolate weighting factor changes in inequality growth rates. Finally, the only non-ambiguous way of decomposing inequality by source is the natural decomposition of CV2, which additionally allows the interpretation of marginal term contributions. Empirically, this paper contributes to the environmental inequality measurement of EF: this inequality has been quite stable and its change over time is due to per capita vector changes rather than population changes. Almost the entirety of the EF inequality is explainable by differences in the means between the countries of the World Bank group. This finding suggests that international environmental agreements should be attempted on a regional basis in an attempt to achieve greater consensus between the parties involved. Additionally, source decomposition warns of the dangers of confining CO2 emissions reduction to crop-based energies because of the implications for basic needs satisfaction