Green manufacturing and environmental productivity growth

Purpose: Due to stringent regulations on carbon emissions, green manufacturing has become a critical issue in manufacturers’ strategic planning. Manufacturers are greening production through carbon abatement activities. This study aims to investigate the factors that influence the effects of carbon abatement on environmental productivity growth. Design/methodology/approach Using data envelopment analysis with directional distance function, this study examines productivity growth associated with carbon abatement under regulated and unregulated production technologies. A pollution abatement index is constructed for determining the effects of carbon abatement on environmental productivity growth. Panel data of eighteen European countries in paper and pulp and coke sectors are collected for the analysis. Findings The empirical findings reveal that carbon abatement may positively or negatively affect environmental productivity growth which is dependent on the nature of technology in a sector, the innovation capabilities of a country and environmental regulations. Originality/value Conventional approaches in measuring productivity changes do not normally take undesired outputs (e.g. carbon emissions) into consideration. This study contributes to literature by constructing a pollution abatement index that considers productivity changes under a joint production technology (where both desired and undesired outputs are considered). The findings enhance current understandings on the effectiveness of carbon abatement activities and help managers establish corporate environmental strategies to adopt green manufacturing

The Political Economy of Carbon Securities and Environmental Policy

The costs of the current suboptimal carbon abatement policy are likely in the range of 3 to 6 trillion 2005 US dollars. Using methods from the political economy of environmental policy, the paper develops a new carbon abatement policy instrument, carbon securities. A carbon security entitles its owner to a fixed proportion of ex ante unknown total emissions. This creates an additional group of stakeholders on the side of the issue that has traditionally been underrepresented. The advantages over existing systems include an equilibrium carbon price closer to the social optimum, a more predictable environmental policy, and higher investment in abatement technologyCarbon abatement; environmental policy; global warming; interest groups; lobbying; policy instrument design; political process

The implicit cost of carbon abatement during the COVID-19 pandemic

This paper provides novel estimates of the implicit cost of carbon abatement associated with the COVID-19 crisis. We compare that to the costs from renewable investments that would lead to similar abatement. Focusing on the Spanish economy and its power sector, we combine machine learning and simulation tools to construct a precise counterfactual of market performance in absence of the crisis. Results suggest that power sector CO2 emissions fell by 4.13 Million Tons (about 11.5%) during 2020 due to the pandemic, less than half of the actual year-on-year emissions reductions. Investing in renewables to achieve similar carbon abatement would yield an implicit cost of 60-65 Euro/Ton of CO2. Conversely, the pandemic caused a substantial GDP loss in Spain, relative to the extent of overall carbon abatement. The resulting cost of carbon abatement associated with the pandemic thus exceeded 7 thousand Euro/Ton.This work has received funding from the European Research Council (ERC) under the European Union Horizon 2020 Research and Innovation Program (Grant Agreement No 772331

Reducing Deforestation and Trading Emissions: Economic Implications for the post-Kyoto Carbon Market

This paper quantitatively assesses the economic implications of crediting carbon abatement from reduced deforestation for the emissions market in 2020 by linking a numerical equilibrium model of the global carbon market with a dynamic partial equilibrium model of the forestry sector. We find that integrating avoided deforestation in international emissions trading considerably decreases the costs of post-Kyoto climate policy – even when accounting for conventional abatement options of developing countries under the CDM. At the same time, tropical rainforest regions receive substantial net revenues from exporting carbon-offset credits to the industrialized world. Moreover, reduced deforestation can increase environmental effectiveness by enabling industrialized countries to tighten their carbon constraints without increasing mitigation costs. Regarding uncertainties of this future carbon abatement option, we find both forestry transaction costs and deforestation baselines to play an important role for the post-Kyoto carbon market. --Climate Change,Kyoto Protocol,Emissions Trading,Deforestation

Small and beautiful? The programme of activities and the least developed countries

Most carbon abatement projects under the Kyoto Protocol's Clean Development Mechanism (CDM) have been implemented in rapidly industrializing countries, notably China and India. To support small carbon abatement projects and to promote decarbonization in the least developed countries, the Programme of Activities (PoA) modality was introduced. Are the determinants of project implementation different under the PoA from those of conventional CDM projects? To answer this question, we conduct a statistical analysis of the global distribution of CDM projects and PoAs during the years 2007–2012. In regard to country size, large countries clearly dominate both the CDM and PoA, suggesting that the PoA may do only little to facilitate project implementation in small countries. However, the number of PoAs has a strong negative association with a country's corruption level, while the importance of corruption for the CDM is much smaller. Moreover, per capita income has no effect on PoA implementation, while high wealth levels have a weak positive effect on CDM projects. Thus, the PoA modality seems to promote sustainable development in poor countries that have exceeded a certain threshold of good governance. In this regard, PoAs are directing carbon credits to new areas, as many had initially hoped

A New Approach to Climate Change: A Consideration of Ancillary Benefits in Linking Regional Permit Trading Systems

In this paper, I investigate the economic efficiency of two major approaches to greenhouse gas reduction, and evaluate their respective benefits. First, I trace the path of action and thinking on addressing climate change from a global to a regional level. Second, I consider the major economic benefits of having a globally-integrated greenhouse gas abatement system. Third, I consider the economic benefits of regional approaches to climate change, with a focus on the ancillary benefits from greenhouse gas abatement. I conclude by reviewing the challenges to linking regional abatement systems into a cohesive network, and suggest a potential future approach to an economically-efficient abatement of greenhouse gas emissions

Leveraging private capital for climate mitigation: evidence from the clean development mechanism

To mitigate climate change, states must make significant investments into energy and other sectors. To solve this problem, scholars emphasize the importance of leveraging private capital. If states create institutional mechanisms that promote private investment, they can reduce the fiscal cost of carbon abatement. We examine the ability of different international institutional designs to leverage private capital in the context of the Kyoto Protocol's Clean Development Mechanism (CDM). Empirically, we analyze private capital investment in 3749 climate mitigation projects under the CDM, 2003–2011. Since the CDM allows both bilateral and unilateral implementation, we can compare the two modes of contracting within one context. Our model analyzes equilibrium private investment in climate mitigation. When the cost of mitigation is high, unilateral project implementation in one host country, without foreign collaboration, draws more investment than bilateral contracting, whereby foreign investors participate in the project

Carbon Abatement Costs: Why the Wide Range of Estimates?

Estimates of marginal abatement costs for reducing carbon emissions derived from major economic-energy models vary widely. Controlling for policy regimes, we use meta-analysis to examine the importance of structural modeling choices in explaining differences in estimates. The analysis indicates that particular assumptions about perfectly foresighted consumers and Armington trade elasticities generate lower estimates of marginal abatement costs. Other choices are associated with higher cost estimates, including perfectly mobile capital, inclusion of a backstop technology, and greater disaggregation among regions and sectors. Some features, such as greater technological detail, seem less significant. Understanding the importance of key modeling assumptions, as well as the way the models are used to estimate abatement costs, can help guide the development of consistent modeling practices for policy evaluation.climate models, carbon tax

Carbon Abatement Potential of Reforestation

This rapid review synthesises the literature from academic, policy and NGO sources on the carbon abatement potential of reforestation. The literature points to the significant potential to reduce carbon through reforestation, specifically if it is paired with good forest management and the reduction of deforestation. It is argued that these natural methods of carbon abatement, paired with lifestyle changes and advances in technology and farming could meet the requirements under the Paris Agreement. This review begins with the discussion of the potential of reforestation, followed by the cost analysis and reforestation practices. Samples of two countries are discussed in the case studies section, i.e.: Indonesia and Pakistan

When Can Carbon Abatement Policies Increase Welfare? The Fundamental Role of Distorted Factor Markets

This paper employs analytical and numerical general equilibrium models to assess the efficiency impacts of two policies to reduce U.S. carbon emissions — a revenue-neutral carbon tax and a non-auctioned carbon quota — taking into account the interactions between these policies and pre-existing tax distortions in factor markets. We show that tax interactions significantly raise the costs of both policies relative to what they would be in a first-best setting. In addition, we show that these interactions put the carbon quota at a significant efficiency disadvantage relative to the carbon tax: for example, the costs of reducing emissions by 10 percent are more than three times as high under the carbon quota as under the carbon tax. This disadvantage reflects the inability of the quota policy to generate revenue that can be used to reduce pre-existing distortionary taxes. Indeed, second-best considerations can limit the potential of a carbon quota to generate overall efficiency gains. Under our central values for parameters, a non-auctioned carbon quota (or set of grandfathered carbon emissions permits) cannot increase efficiency unless the marginal benefits from avoided future climate change are at least $17.8 per ton of carbon abatement. Most estimates of marginal environmental benefits are below this level. Thus, our analysis suggests that any carbon abatement by way of a non-auctioned quota will reduce efficiency. In contrast, our analysis indicates that a revenue-neutral carbon tax can be efficiency-improving so long as marginal environmental benefits are positive.