Optimal Abatement in Dynamic Multipollutant Problems when Pollutants can be Complements or Substitutes

We analyze a dynamic multi-pollutant problem where abatement costs of several pollutants are not separable. The pollutants can be either technological substitutes or complements. Environmental damage is induced by the stock of accumulated pollution. We find that optimal emission paths are qualitatively different for substitutes and complements. We derive general properties governing optimal emission paths and present numerical examples to illustrate our main results. In particular we find that optimal emission paths need not be monotonic, even for highly symmetric pollutants. Finally, we describe a comparatively simple method to implement the optimal path without explicitly knowing its shape. --Multi-pollution,abatement technology,accumulating pollutants

Optimal Abatement in Dynamic Multi-Pollutant Problems When Pollutants can be Complements or Substitutes

We analyze a dynamic multi-pollutant problem where abatement costs of several pollutants are not separable. The pollutants can be either technological substitutes or complements. Environmental damage is induced by the stock of accumulated pollution. We find that optimal emission paths are qualitatively different for substitutes and complements. We derive general properties governing optimal emission paths and present numerical examples to illustrate our main results. In particular we find that optimal emission paths need not be monotonic, even for highly symmetric pollutants. Finally, we describe a comparatively simple method to implement the optimal path without explicitly knowing its shape. --Multi-pollution,abatement technology,accumulating pollutants

Hot Air for Sale: A Quantitative Assessment of Russia's Near-Term Climate Policy Options

Since January 1st the European Union has launched an EU-internal emissions trading scheme (EU ETS) for emission-intensive installations as the central pillar to comply with the Kyoto Protocol. The EU ETS may be linked at some time to a Kyoto emissions market where greenhouse gas emission allowances of signatory Kyoto countries can be traded. In this paper we investigate the implications of Russian market power for environmental effectiveness and regional compliance costs to the Kyoto Protocol taking into account potential linkages between the Kyoto emissions market and the EU ETS. We find that Russia may have incentives to join the EU ETS as long as the latter remains separated from the Kyoto international emissions market. In this case, Russia can exert monopolistic price discrimination between two separated markets thereby maximizing revenues from hot air sales. The EU will be able to substantially reduce compliance costs when it does not restrain itself to EU-internal emission regulation schemes. However, part of the gains from extra-EU emissions trading will come at the expense of environmental effectiveness as (more) hot air will be drawn in. --market power,hot air,climate policy

Macroeconomic Impacts of the Clean Development Mechanism: The Role of Investment Barriers and Regulations

This paper quantifies the macroeconomic impacts of the Clean Development Mechanism (CDM) under the Kyoto Protocol based on a computable general equilibrium (CGE) model of international trade and energy use. Employing project-based CDM supply data we assess the relative importance of transaction costs and investment risks as well as CDM regulations through supplementarity and additionality criteria. Our numerical results show that the macroeconomic impacts of transaction costs and investment risks are negligible: Given the large supply of cheap project-based emissions credits in developing countries, compliance to the Kyoto Protocol can be achieved at a very low cost. However, regulatory restrictions such as a supplementarity criterion can substantially curtail the potential efficiency gains from where-flexibility in climate policy. --Kyoto Protocol,Emissions Trading,Clean Development Mechanism,Computable General Equilibrium

Barriers to energy efficiency improvement: Empirical evidence from small-and-medium sized enterprises in China

This paper analyzes barriers for energy efficiency investments for small-and medium-sized enterprises (SMEs) in China. Based on a survey of 480 SMEs in Zhejiang Province, this study assesses financial, informational, and organizational barriers for energy efficiency investments in the SME sector. The conventional view has been that the lack of appropriate financing mechanisms particularly hinders SMEs to adopt cost-effective energy efficiency measures. As such, closing the financing gap for SMEs is seen as a prerequisite in order to promote energy efficiency in the sector. The econometric estimates of this study, however, suggest that access to information is an important determinant of investment outcomes, while this is less clear with respect to financial and organizational factors. More than 40 percent of enterprises in the sample declared that that they are not aware of energy saving equipments or practices in their respective business area, indicating that there are high transaction costs for SMEs to gather, assess, and apply information about energy saving potentials and relevant technologies. One implication is that the Chinese government may assume an active role in fostering the dissemination of energy-efficiency related information in the SME sector. --energy efficiency,SMEs,China,energy policies,information access

Tackeling the barriers to Climate Friendly Investment

This paper develops a better understanding of what may be understood as a barrier to climate friendly investment and suggests to tool that could be used in appropriate policy design. In addition to an overview of the broader conceptual definitions of a barrier, the paper develops a definition of a barrier to adaptation and mitigation investment according to economic mechanisms that lead to the decreased attractiveness of the investment (relative to the hypothetical case of functioning markets) leading to the market imperfections as well as the impact on the risk and return profile. This illustrates that in general barriers may be addressed to correct the market imperfection or compensating the investor. The decomposition of the barriers along the market imperfection and investor’s perception enable to suggests a tool to suggest the design for the require policy change

Optimal Abatement in Dynamic Multi-Pollutant Problems When Pollutants can be Complements or Substitutes

We analyze a dynamic multi-pollutant problem where abatement costs of several pollutants are not separable. The pollutants can be either technological substitutes or complements. Environmental damage is induced by the stock of accumulated pollution. We find that optimal emission paths are qualitatively different for substitutes and complements. We derive general properties governing optimal emission paths and present numerical examples to illustrate our main results. In particular we find that optimal emission paths need not be monotonic, even for highly symmetric pollutants. Finally, we describe a comparatively simple method to implement the optimal path without explicitly knowing its shape

A European perspective on recent trends in U.S. climate policy

Without participation of the United States, the world’s largest emitter of greenhouse gases, mitigation of global climate change seems hardly conceivable. Despite the U.S. rejection of the Kyoto Protocol and the reluctance of the Bush administration to engage in Post-Kyoto negotiations, recent developments suggest that the U.S. position towards climate policy might change in the medium run. This study provides an overview on current trends in U.S. climate policy. Besides the main elements of national climate policy proposals and state-level initiatives the climate contents in the U.S. presidential candidates’ agendas are outlined. Based on this overview recent trends in U.S. climate policy are related to the European approach to combat climate change. Furthermore, we elaborate on the aspects which may be important for Europe to design its own domestic and international climate policy in-term goal of stabilizing greenhouse gas concentrations

Hot Air for Sale : A Quantitative Assessment of Russia's Near-Term Climate Policy Options

Since January 1st the European Union has launched an EU-internal emissions trading scheme (EU ETS) for emission-intensive installations as the central pillar to comply with the Kyoto Protocol. The EU ETS may be linked at some time to a Kyoto emissions market where greenhouse gas emission allowances of signatory Kyoto countries can be traded. In this paper we investigate the implications of Russian market power for environmental effectiveness and regional compliance costs to the Kyoto Protocol taking into account potential linkages between the Kyoto emissions market and the EU ETS. We find that Russia may have incentives to join the EU ETS as long as the latter remains separated from the Kyoto international emissions market. In this case, Russia can exert monopolistic price discrimination between two separated markets thereby maximizing revenues from hot air sales. The EU will be able to substantially reduce compliance costs when it does not restrain itself to EU-internal emission regulation schemes. However, part of the gains from extra-EU emissions trading will come at the expense of environmental effectiveness as (more) hot air will be drawn in

Clean and Productive? Evidence from the German Manufacturing Industry

We analyze the productivity effects of environmental (green) investment as well as of environmental expenditures and energy expenditures. For this purpose, we follow a production function approach where we account for these investment and expenditure categories as inputs. Based on a panel dataset for the German manufacturing industry between 1996 and 2002 we find that both environmental and energy expenditures do not contribute to production growth. In contrast, environmental investment positively impinges upon production growth as a productivity driver. We thus conclude that environmental regulation should stimulate investment in order to be compatible with economic goals such as productivity. --environmental performance,environmental regulation,productivity