Implementing Europe's climate targets at the regional level

Having agreed upon a binding emissions reduction path by 2020, the EU plays a leading role in international climate policy. The EU currently pursues a dual approach through an Emissions Trading Scheme (ETS) at the EU level and also via national targets in sectors not covered by the ETS. The latter include the buildings sector, transportation, agriculture, and waste. Emissions from these sectors are mainly subject to policies at provincial and local levels. A method is presented for elaborating and implementing a long-term climate policy process up to 2030 for the regional (provincial) level. Building on regional GHG inventory data, a set of indicators for each sector is developed in order to arrive at a target path consistent with the deduced regional GHG reduction requirement. Policy measures and their implementation are then settled subsequent to this process. Quantitative regional targets are found to be a prerequisite for the formation of regional climate policy as they increase participant responsibility and commitment. A five-step process of stakeholder participation ensures effective implementation of regional climate action plans. Insights from an exemplary European region are drawn upon, and policy issues are discussed in both quantitative and institutional terms.     

Strengthening bottom-up and top-down climate governance

Although the UN and EU focus their climate policies on the prevention of a 2 °C global mean temperature rise, it has been estimated that a rise of at least 4?°C is more likely. Given the political climate of inaction, there is a need to instigate a bottom-up approach so as to build domestic support for future climate treaties, empower citizens, and motivate leaders to take action. A review is provided of the predominant top-down cap-and-trade policies in place – the Kyoto Protocol and EU Emissions Trading Scheme (EU ETS) – with a focus on the grandfathering of emissions entitlements and the possibility of offsetting emissions. These policies are evaluated according to two criteria of justice and it is concluded that they fail to satisfy them. Some suggestions as to how the EU ETS can be improved so as to enable robust climate action are also offered.

Policy relevance

The current supranational climate policy has not been successful and global leaders have postponed the adoption of a meaningful successor to the Kyoto Protocol. In view of this inaction, bottom-up approaches with regard to climate policy should be further developed. It is argued that two of the main top-down policies, grandfathering and offsetting, impede the avowed goals of EU climate policy and pose significant ethical dilemmas with regard to participatory and intergenerational justice. In order to provide a more robust EU climate policy, the EU should inter alia provide a long-term perspective for investors, reduce the volatility of the carbon price, and prepare for the possibility of carbon leakage.     

The differentiated impact of emissions trading system based on company size

Most countries implementing an emissions trading system (ETS), such as EU member states, California in the US, or South Korea, are generally targeting large sized companies, which consume energy above a specific threshold. However, previous studies using computable general equilibrium (CGE) models have analyzed climate policies without considering company size. This may have led to inaccurate results because the impacts of climate policy would differ depending on the coverage of regulated companies. Accordingly, this study examines the environmental and economic impacts of greenhouse gas emission reduction policies, assuming policy results vary by firm size, as covered by the Korean emission trading system. To this end, a CGE model with a separate social accounting matrix based on company size is used to compare three scenarios that reflect different types of carbon pricing methods. The results show that greenhouse gases will be reduced to a lower extent and utility will decrease more if mitigation policies are only imposed to large companies.

Key policy insights

• Carbon pricing policies should consider the different impacts on companies of different sizes and industry sectors.

• Without considering the different sizes of companies covered by an ETS, the expected carbon price and its economic impact will be underestimated.

• Small and medium-sized companies will face more negative impacts than large companies in some industry sectors under an ETS, even if the mitigation burden is only faced by large companies.

     

Dynamics of energy sector and GHG emissions in Saudi Arabia

The energy sector is the main contributor to GHG emissions in Saudi Arabia. The tremendous growth of GHG emissions poses serious challenges for the Kingdom in terms of their reduction targets, and also the mitigation of the associated climate changes. The rising trend of population and urbanization affects the energy demand, which results in a faster rate of increase in GHG emissions. The major energy sector sources that contribute to GHG emissions include the electricity generation, road transport, desalination plants, petroleum refining, petrochemical, cement, iron and steel, and fertilizer industries. In recent years, the energy sector has become the major source, accounting for more than 90% of national CO₂ emissions. Although a substantial amount of research has been conducted on renewable energy resources, a sustainable shift from petroleum resources is yet to be achieved. Public awareness, access to energy-efficient technology, and the development and implementation of a legislative framework, energy pricing policies, and renewable and alternative energy policies are not mature enough to ensure a significant reduction in GHG emissions from the energy sector. An innovative and integrated solution that best serves the Kingdom's long-term needs and exploits potential indigenous, renewable, and alternative energy resources while maintaining its sustainable development stride is essential.

Policy relevance

The main contributor to GHG emissions in Saudi Arabia is the energy sector that accounts for more than 90% of the national CO₂ emissions. Tremendous growth of GHG emissions poses serious challenges for the Kingdom in their reduction and mitigating the associated climate changes. This study examines the changing patterns of different activities associated with energy sector, the pertinent challenges, and the opportunities that promise reduction of GHG emissions while providing national energy and economic security. The importance of achieving timely, sustained, and increasing reductions in GHG emissions means that a combination of policies may be needed. This study points to the long-term importance of making near- and medium-term policy choices on a well-informed, strategic basis. This analytical paper is expected to provide useful information to the national policy makers and other decision makers. It may also contribute to the GHG emission inventories and the climate change negotiations.     

Assessing the EU ETS with a bottom-up,multi-sector model

The European Emissions Trading System (EU ETS) is the central pillar of the EU response against climate change. This trading mechanism is considered, from the theoretical point of view, as the most cost-effective method to reduce GHG. However, previous studies show that the agents who participate in these markets may behave in a way that may lead to inefficient CO₂ prices, creating doubts about the static and dynamic efficiency of the system. This article analyses these possible anomalies by first trying to model the ETS in a more realistic way, addressing some of the limitations of previous models, and second, by comparing the results with real market transactions. For this, a bottom-up, multi-sector model has been built, which represents the EU ETS in an integrated, cross-sectoral way, paying particular attention to the interactions among the most emissions intensive industries. The results show the benefits of this modelling approach and how it better reflects real market conditions. Some preliminary conclusions regarding the behaviour of the agents in the ETS market are also presented.

POLICY RELEVANCE

Low allowance prices in the EU ETS have put into question the dynamic efficiency of the EU ETS system, prompting various ideas for structural reform. However, determining the right reform also requires estimating correctly how agents will respond to it. This article proposes a tool to realistically simulate the EU ETS under the assumption of rational agents, and compare it to real market outcomes, in order to understand better the behaviour of agents in this carbon market, and therefore how to design better policies.     

Health co-benefits and the development of climate change mitigation policies in the European Union

The 2015 Paris Agreement requires increasingly ambitious emissions reduction efforts from its member countries. Accounting for ancillary positive health outcomes (health co-benefits) that result from implementing climate change mitigation policies can provide Parties to the Paris Agreement with a sound rationale for introducing stronger mitigation strategies. Despite this recognition, a knowledge gap exists on the role of health co-benefits in the development of climate change mitigation policies. To address this gap, the case study presented here investigates the role of health co-benefits in the development of European Union (EU) climate change mitigation policies through analysis and consideration of semi-structured interview data, government documents, journal articles and media releases. We find that while health co-benefits are an explicit consideration in the development of EU climate change mitigation policies, their influence on final policy outcomes has been limited. Our analysis suggests that whilst health co-benefits are a key driver of air pollution mitigation policies, climate mitigation policies are primarily driven by other factors, including economic costs and energy implications.

Key policy insights

• Health co-benefits are quantified and monetized as part of the development of EU climate change mitigation policies but their influence on the final policies agreed upon is limited.

• Barriers, such as the immediate economic costs associated with climate action, inhibit the influence of health co-benefits on the development of mitigation policies.

• Health co-benefits primarily drive the development of EU air pollution mitigation policies.

• The separation of responsibility for GHG and non-GHG emissions across Directorate Generals has decoupled climate change and air pollution mitigation policies, with consequences for the integration of health co-benefits in climate policy.

     

Distributional choices in EU climate policy: 20 years of policy practice

The distributional choices of the EU in three policy phases, spanning 20 years, are examined: the negotiations on emissions reduction targets for the EU15 under the first commitment period of the Kyoto Protocol, the negotiation of National Allocation Plans for Phase II of the EU Emissions Trading Scheme (ETS) between 2008 and 2012, and the formulation of the 2008 Climate and Energy Package for the period 2013–2020. A flexible and pragmatic framework, consisting of the normative principles of capacity, responsibility, equality, and need, is used to elucidate the indicators and policies used in deciding how the EU Member States are to share the cost of meeting climate policy objectives. The analysis extends the literature by applying a common analytical framework across the three different policy phases and provides a structured basis for the assessment of what the EU and other jurisdictions can learn from them.

Policy relevance

Distributing the cost of climate policy is a key policy concern, both at the domestic and international level. The EU has more than 20 years of policy experience with such distributional choices and is also preparing the next steps of its policy, where distributional choices will again be central. A framework is developed to assess the modalities and rationale for EU distributional choices in order to inform the future climate policy of the EU and other jurisdictions.     

Analysing the interaction between emission trading and renewable electricity support in TIMES

As the number of instruments applied in the area of energy and climate policy is rising, the issue of policy interaction needs to be explored further. This article analyses the interdependencies between the EU Emissions Trading Scheme (EU ETS) and the German feed-in tariffs (FITs) for renewable electricity in a quantitative manner using a bottom-up energy system model. Flexible modelling approaches are presented for both instruments, with which all impacts on the energy system can be evaluated endogenously. It is shown that national climate policy measures can have an effect on the supranational emissions trading system by increasing emission reduction in the German electricity sector by up to 79 MtCO₂ in 2030. As a result, emission certificate prices decline by between 1.9 €/tCO₂ and 6.1 €/tCO₂ and the burden sharing between participating countries changes, but no additional emission reduction is achieved at the European level. This also implies, however, that the cost efficiency of such a cap-and-trade system is distorted, with additional costs of the FIT system of up to €320 billion compared with lower costs for ETS emission certificates of between €44 billion and €57 billion (cumulated over the period 2013–2020).

Policy relevance

In order to fulfil ambitious emission reduction targets a large variety of climate policy instruments are being implemented in Europe. While some, like the EU ETS, directly address CO₂ emissions, others aim to promote specific low-carbon technologies. The quantitative analysis of the interactions between the EU ETS and the German FIT scheme for renewable sources in electricity generation presented in this article helps to understand the importance of such interaction effects. Even though justifications can be found for the implementation of both types of instrument, the impact of the widespread use of support mechanisms for renewable electricity in Europe needs to be taken into account when fixing the reduction targets for the EU ETS in order to ensure a credible long-term investment signal.     

The impact of the Tokyo Metropolitan Emissions Trading Scheme on reducing greenhouse gas emissions: findings from a facility-based study

This paper provides a detailed analysis of the Tokyo Metropolitan Emissions Trading Scheme (Tokyo ETS), Japan’s first emissions trading scheme with mandatory cap initiated by the government of Tokyo. Unlike trading schemes in other countries, the Tokyo ETS covers indirect emissions from the commercial sector. It is well known that a variety of market barriers impede full realization of energy efficiency opportunities, especially in the commercial sector. Experiences with the Tokyo ETS should therefore provide important lessons for the design of climate change mitigation policies, especially when targeting the commercial sector. The emissions from covered entities have been drastically reduced from those at the scheme’s outset, with an average 14% reduction as of the end of the first commitment period of five years (2010–2014) compared with 2009 levels. This paper shows that the Tokyo ETS alone did not cause these reductions; there were other drivers. Among them, the energy savings triggered by the Great East Japan Earthquake in 2011 were crucial. The contribution of credit trading, in contrast, was limited since most of the covered entities reduced emissions by themselves. Through an investigation of official reports, an assessment of the emissions data from the covered entities compared to those of uncovered entities and in-depth interviews with firms covered by the scheme, this paper confirms that the main drivers of emissions reductions by covered entities were separate from the ETS. In fact, the advisory aspect of the scheme seems to be much more important in encouraging energy-saving actions.

Key policy insights

• Most of the observed emission reductions were not caused by the Tokyo ETS alone.

• An advisory instrument was crucial to the effectiveness of the Tokyo ETS.

• The experience of the Tokyo ETS suggests that making full use of the advantages of emissions trading is difficult in the case of the commercial sector.

• Price signals have not provided a stimulus to climate change mitigation actions, which implies that establishing a cap to yield effective carbon prices poses a challenge.

     

Climate change response in Europe: what’s the reality? Analysis of adaptation and mitigation plans from 200 urban areas in 11 countries

Urban areas are pivotal to global adaptation and mitigation efforts. But how do cities actually perform in terms of climate change response? This study sheds light on the state of urban climate change adaptation and mitigation planning across Europe. Europe is an excellent test case given its advanced environmental policies and high urbanization. We performed a detailed analysis of 200 large and medium-sized cities across 11 European countries and analysed the cities’ climate change adaptation and mitigation plans. We investigate the regional distribution of plans, adaptation and mitigation foci and the extent to which planned greenhouse gas (GHG) reductions contribute to national and international climate objectives. To our knowledge, it is the first study of its kind as it does not rely on self-assessment (questionnaires or social surveys). Our results show that 35 % of European cities studied have no dedicated mitigation plan and 72 % have no adaptation plan. No city has an adaptation plan without a mitigation plan. One quarter of the cities have both an adaptation and a mitigation plan and set quantitative GHG reduction targets, but those vary extensively in scope and ambition. Furthermore, we show that if the planned actions within cities are nationally representative the 11 countries investigated would achieve a 37 % reduction in GHG emissions by 2050, translating into a 27 % reduction in GHG emissions for the EU as a whole. However, the actions would often be insufficient to reach national targets and fall short of the 80 % reduction in GHG emissions recommended to avoid global mean temperature rising by 2 °C above pre-industrial levels.     

International and national climate policies for aviation: a review

Aviation constitutes about 2.5% of all energy-related CO₂ emissions and in addition there are non-CO₂ effects. In 2016, the ICAO decided to implement a Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) and in 2017 the EU decided on faster emission reductions in its Emissions Trading System (EU ETS), which since 2012 includes the aviation sector. The effects of these policies on the expected development of air travel emissions from 2017 to 2030 have been analyzed. For the sample country Sweden, the analysis shows that when emissions reductions in other sectors are attributed to the aviation sector as a result of the EU ETS and CORSIA, carbon emissions are expected to reduce by ?0.8% per year (however if non-CO₂ emissions are included in the analysis, then emissions will increase). This is much less than what is needed to achieve the 2°C target. Our analysis of potential national aviation policy instruments shows that there are legally feasible options that could mitigate emissions in addition to the EU ETS and CORSIA. Distance-based air passenger taxes are common among EU Member States and through increased ticket prices these taxes can reduce demand for air travel and thus reduce emissions. Tax on jet fuel is an option for domestic aviation and for international aviation if bilateral agreements are concluded. A quota obligation for biofuels is a third option.

Key policy insights

• Existing international climate policies for aviation will not deliver any major emission reductions.

• Policymakers who want to significantly push the aviation sector to contribute to meeting the 2°C target need to work towards putting in place tougher international policy instruments in the long term, and simultaneously implement temporary national policy instruments in the near-term.

• Distance-based air passenger taxes, carbon taxes on jet fuel and quota obligations for biofuels are available national policy options; if they are gradually increased, and harmonized with other countries, they can help to significantly reduce emissions.

     

Carbon taxes and greenhouse gas emissions trading systems: what have we learned?

Systematic evidence relating to the performance of carbon pricing – carbon taxes and greenhouse gas (GHG) emissions trading systems (ETSs) – is sparse. In 2015, 17 ETSs were operational in 55 jurisdictions while 18 jurisdictions collected a carbon tax. The papers in this special thematic section review the performance of many of these instruments over the 2005–2015 period. The performance of existing carbon taxes and GHG ETSs can help policy makers make informed choices about whether to introduce these instruments and to improve their design. The purpose of carbon pricing instruments is to reduce GHG emissions cost effectively. Assessing their performance is difficult because emissions are also affected by other policies and exogenous factors such as economic conditions. Carbon taxes in Europe prior to 2008 and in British Columbia reduced emissions from business-as-usual but actual emissions continued to rise. Since 2008 emissions subject to European carbon taxes have declined, but in most countries, other mitigation policies have probably contributed more to the reductions than the carbon taxes. Emissions subject to ETSs, with the exception of four systems without emissions caps, have declined. The ETSs contributed to the emissions reductions, but their share of the overall reduction is not known. Most tax rates are low relative to levels thought to be needed to achieve climate change objectives. Few jurisdictions regularly adjust their tax rates. All ETSs have accumulated surplus allowances and implemented measures to reduce these surpluses. The largest ETSs now specify annual reductions in their emissions cap several years into the future. Emissions trading system allowance prices are generally lower than the tax rates.

Key policy insights

• Theoretical discussions usually portray carbon taxes and GHG ETSs as alternatives. In practice, a jurisdiction often implements both instruments to address emissions by different sources.

• Designs of ETSs have evolved based on experience shared bilaterally and via dedicated institutions.

• Carbon tax designs, in contrast, have hardly evolved and there are no institutions dedicated to sharing experience.

• Every jurisdiction with an ETS and/or carbon tax also has other policies that affect its GHG emissions.

     

Russia's 2020 GHG emissions target: Emission trends and implementation

This article provides an overview of the recent modelling results on Russia's GHG emission trends, and reviews the success of mitigation policies in order to establish whether Russia's domestic target seems feasible. Various Russian GHG emission scenarios indicate that Russia's domestic target – emissions 25% below the 1990 level by 2020 – is not far from the business-as-usual emissions trajectory. In particular, two factors could deliver the required emissions reductions: the currently declining gross domestic product (GDP) growth and ongoing domestic mitigation policies. The former is more likely to secure the target level of emissions, because GDP growth has been contracting significantly in comparison to earlier forecasts of 3–5% annual growth, and this trend is expected to continue. The latter option – success with domestic mitigation measures – seems less likely, given the various meta-barriers to policy implementation, and the marginality of mitigation policies, problems with law-making processes, bureaucratic tradition, and informality of legislative and implementation systems.

Policy relevance

This article provides an assessment of the stringency of Russia's domestically set emissions limitation target by 2020 and the chances of Russia, the fourth largest GHG emitter in the world, achieving it. We base our assessment on a number of recent key sources that analyse Russia's GHG emission paths by applying socio-economic models, which have only been available in the Russian language prior to this publication. This knowledge is applicable for use by other negotiation parties to compare Russia's efforts to mitigate climate change to their own, and thus makes a contribution to facilitating a more equal burden-sharing of climate commitments under the future climate change agreement.     

National climate change mitigation legislation,strategy and targets: a global update

Global climate change governance has changed substantially in the last decade, with a shift in focus from negotiating globally agreed greenhouse gas (GHG) reduction targets to nationally determined contributions, as enshrined in the 2015 Paris Agreement. This paper analyses trends in adoption of national climate legislation and strategies, GHG targets, and renewable and energy efficiency targets in almost all UNFCCC Parties, focusing on the period from 2007 to 2017. The uniqueness and added value of this paper reside in its broad sweep of countries, the more than decade-long coverage and the use of objective metrics rather than normative judgements. Key results show that national climate legislation and strategies witnessed a strong increase in the first half of the assessed decade, likely due to the political lead up to the Copenhagen Climate Conference in 2009, but have somewhat stagnated in recent years, currently covering 70% of global GHG emissions (almost 50% of countries). In comparison, the coverage of GHG targets increased considerably in the run up to adoption of the Paris Agreement and 89% of global GHG emissions are currently covered by such targets. Renewable energy targets saw a steady spread, with 79% of the global GHG emissions covered in 2017 compared to 45% in 2007, with a steep increase in developing countries.

Key policy insights

• The number of countries that have national legislation and strategies in place increased strongly up to 2012, but the increase has levelled off in recent years, now covering 70% of global emissions by 2017 (48% of countries and 76% of global population).

• Economy-wide GHG reduction targets witnessed a strong increase in the build up to 2015 and are adopted by countries covering 89% of global GHG emissions (76% not counting USA) and 90% of global population (86% not counting USA) in 2017.

• Renewable energy targets saw a steady increase throughout the last decade with coverage of countries in 2017 comparable to that of GHG targets.

• Key shifts in national measures coincide with landmark international events – an increase in legislation and strategy in the build-up to the Copenhagen Climate Conference and an increase in targets around the Paris Agreement – emphasizing the importance of the international process to maintaining national momentum.

     

Interactions between European agricultural policy and climate change: a Slovenian case study

This article analyses the interactions between agricultural policy measures in the EU and the factors affecting GHG emissions from agriculture on the one hand, and the adaptation of agriculture to climate change on the other. To this end, the article uses Slovenia as a case study, assessing the extent to which Slovenian agricultural policy is responding to the challenges of climate change. All agricultural policy measures related to the 2007–2013 programming period were analysed according to a new methodological approach that is based on a qualitative (expert evaluation) and a quantitative (budgetary transfers validation) assessment. A panel of experts reached consensus on the key factors through which individual measures affect climate change, in which direction and how significantly. Data on budgetary funds for each measure were used as weights to assess their relative importance. The results show that there are not many measures in (Slovenian) agricultural policy that are directly aimed at reducing GHG emissions from agriculture or at adaptation to climate change. Nevertheless, most affect climate change, and their impact is far from negligible. Current measures have both positive and negative impacts, but overall the positive impacts prevail. Measures that involve many beneficiaries and more budgetary funds had the strongest impact on aggregate assessments. In light of climate change, agricultural policy should pay more attention to measures that are aimed at raising the efficiency of animal production, as it is the principal source of GHG emissions from agriculture.

Policy relevance

Agricultural policy must respond to climate challenges and climate change impact assessment must be included in the process of forming European agricultural policy. Agricultural policy measures that contribute to the reduction of emissions and adaptation, whilst acting in synergy with other environmental, economic and social goals, should be promoted. The approach used in this study combines qualitative and quantitative data, yielding an objective assessment of the climate impact of agricultural policy measures and providing policy makers with a tool for either ex ante or ex post evaluations of climate-relevant policy measures.     

The impact of administrative transaction costs in the EU emissions trading system

This article empirically investigates the impact of transaction costs for monitoring, reporting, and verification (MRV) of emissions on companies regulated by the EU Emissions Trading System (EU ETS) in Germany. Based on a unique panel dataset, we investigate if MRV costs are dependent on the amount of annual emissions of regulated companies and if there are differences in transaction costs between economic sectors. The results indicate that administrative costs are dependent on the amount of annual emissions for larger companies, which has implications for the economic efficiency of the EU ETS. The most important finding, however, is that there are significant differences in MRV transaction costs dependent on the type and size of companies. This implies the existence of considerable economies of scale. Overall, the EU ETS could benefit from reforms by means of a push towards upstream regulation as this would likely increase administrative efficiency.

Policy relevance statement

Transaction costs are, among other things, an important aspect of market-based climate policy design. A policy instrument with low transaction costs is preferred over instruments with larger transaction costs under equal conditions. This is occasionally referred to as administrative efficiency, and its importance was acknowledged in directive 2009/29/EC of the European Commission. Thoughtful empirical examination of transaction costs is essential in order to inform about the extent and impact of these costs. This article provides an analysis of transaction costs for monitoring, reporting, and verification (MRV) of emissions in the EU ETS. It is shown that administrative costs will likely have negative effects on the cost efficiency of the EU ETS. However, the most relevant finding is that small companies (<250 employees) or firms emitting small amounts of carbon dioxide per year face far higher average transaction costs compared with larger firms or emitters. Thus, there is a tendency for the EU ETS to cause MRV transaction costs that are disadvantageous for small companies. A regulation that is more upstream-oriented could mitigate this negative effect to some extent. The EU ETS could initiate a reform that is targeted on putting a price on the carbon content of fossil fuels instead of directly regulating emissions in a so-called ‘end-of-the-pipe’ way at the installation level.     

Brazil beyond 2020: from deforestation to the energy challenge

The main assumptions and findings are presented on a comparative analysis of three GHG long-term emissions scenarios for Brazil. Since 1990, land-use change has been the most important source of GHG emissions in the country. The voluntary goals to limit Brazilian GHG emissions pledged a reduction in between 36.1% and 38.9% of GHG emissions projected to 2020, to be 6–10% lower than in 2005. Brazil is in a good position to meet the voluntary mitigation goals pledged to the United Nations Framework Convention on Climate Change (UNFCCC) up to 2020: recent efforts to reduce deforestation have been successful and avoided deforestation will form the bulk of the emissions reduction commitment. In 2020, if governmental mitigation goals are met, then GHG emissions from the energy system would become the largest in the country. After 2020, if no additional mitigation actions are implemented, GHG emissions will increase again in the period 2020–2030, due to population and economic growth driving energy demand, supply and GHG emissions. However, Brazil is in a strong position to take a lead in low-carbon economic and social development due to its huge endowment of renewable energy resources allowing for additional mitigation actions to be adopted after 2020.

Policy relevance

The period beyond 2020 is now relevant in climate policy due to the Durban Platform agreeing a ‘protocol, legal instrument or agreed outcome with legal force’ that will have effect from 2020. After 2020, Brazil will be in a situation more similar to other industrialized countries, faced with a new challenge of economic development with low GHG energy-related emissions, requiring the adoption of mitigation policies and measures targeted at the energy system. Unlike the mitigation actions in the land-use change sector, where most of the funding will come from the national budgets due to sovereignty concerns, the huge financial resources needed to develop low-carbon transport and energy infrastructure could benefit from soft loans channelled to the country through nationally appropriate mitigation actions (NAMAs).     

Potential impact of albedo incorporation in boreal forest sector climate change policy effectiveness

Forests have an important role to play in climate change mitigation through carbon sequestration and wood supply. However, the lower albedo of mature forests compared to bare land implies that focusing only on GHG accounting may lead to biased estimates of forestry's total climatic impacts. An economic model with a high degree of detail of the Norwegian forestry and forest industries is used to simulate GHG fluxes and albedo impacts for the next decades. Albedo is incorporated in a carbon tax/subsidy scheme in the Norwegian forest sector using a partial, spatial equilibrium model. While a price of EU€100/tCO₂e that targets GHG fluxes only results in reduced harvests, the same price including albedo leads to harvest levels that are five times higher in the first five years, with 39% of the national productive forest land base being cleared. The results suggest that policies that only consider GHG fluxes and ignore changes in albedo will not lead to an optimal use of the forest sector for climate change mitigation.

Policy relevance

Bare land reflects a larger share of incoming solar energy than dense forest and thus has higher albedo. Earlier research has suggested that changes in albedo caused by management of boreal forest may be as important as carbon fluxes for the forest's overall global warming impacts. The presented analysis is the first attempt to link albedo to national-scale forest climate policies. A policy with subsidies to forest owners that generate carbon sequestration and taxes levied on carbon emissions leads to a reduced forest harvest. However, including albedo in the policy alongside carbon fluxes yields very different results, causing initial harvest levels to increase substantially. The inclusion of albedo impacts will make harvests more beneficial for climate change mitigation as compared to a carbon-only policy. Hence, it is likely that carbon policies that ignore albedo will not lead to optimal forest management for climate change mitigation.     

Electricity regulation in the Chinese national emissions trading scheme (ETS): lessons for carbon leakage and linkage with the EU ETS

Carbon leakage is central to the discussion on how to mitigate climate change. The current carbon leakage literature focuses largely on industrial production, and less attention has been given to carbon leakage from the electricity sector (the largest source of carbon emissions in China). Moreover, very few studies have examined in detail electricity regulation in the Chinese national emissions trading system (which leads, for example, to double counting) or addressed its implications for potential linkage between the EU and Chinese emissions trading systems (ETSs). This article seeks to fill this gap by analysing the problem of ‘carbon leakage’ from the electricity sector under the China ETS. Specifically, a Law & Economics approach is applied to scrutinize legal documents on electricity/carbon regulation and examine the economic incentive structures of stakeholders in the inter-/intra-regional electricity markets. Two forms of ‘electricity carbon leakage’ are identified and further supported by legal evidence and practical cases. Moreover, the article assesses the environmental and economic implications for the EU of potential linkage between the world’s two largest ETSs. In response, policy suggestions are proposed to address electricity carbon leakage, differentiating leakage according to its sources.

Key policy insights

• Electricity carbon leakage in China remains a serious issue that has yet to receive sufficient attention.

• Such leakage arises from the current electricity/carbon regulatory framework in China and jeopardizes mitigation efforts.

• With the US retreat on climate efforts, evidence suggests that EU officials are looking to China and expect an expanded carbon market to reinforce EU global climate leadership.

• Given that the Chinese ETS will be twice the size of the EU ETS, a small amount of carbon leakage in China could have significant repercussions. Electricity carbon leakage should thus be considered in any future EU–China linking negotiations.

     

Carbon pricing in practice: a review of existing emissions trading systems

This article analyses the implementation of emissions trading systems (ETSs) in eight jurisdictions: the EU, Switzerland, the Regional Greenhouse Gas Initiative (RGGI) and California in the US, Québec in Canada, New Zealand, the Republic of Korea and pilot schemes in China. The article clarifies what is working, what isn’t and why, when it comes to the practice of implementing an ETS. The eight ETSs are evaluated against five main criteria: environmental effectiveness, economic efficiency, market management, revenue management and stakeholder engagement. Within each of these categories, ETS attributes ? including abatement cost, stringency of the cap, improved allocation practices over time and the trajectory of price stability ? are assessed for each system. Institutional learning, administrative prudence, appropriate carbon revenue management and stakeholder engagement are identified as key ingredients for successful ETS regimes. Recent implementation of ETSs in regions including California, Québec and South Korea indicates significant institutional learning from prior systems, especially the EU ETS, with these regions implementing more robust administrative and regulatory structures suitable for handling unique national and sub-national opportunities and constraints. The analysis also shows that there is potential for a ‘double dividend’ in emissions reductions even with a modest carbon price, provided the cap tightens over time and a portion of the auctioned revenues are reinvested in other emissions-reduction activities. Knowledge gaps exist in understanding the interaction of pricing instruments with other climate policy instruments and how governments manage these policies to achieve optimum emissions reductions with lower administrative costs.

Key policy insights

• Countries are learning from each other on ETS implementation.

• Administrative and regulatory structures of ETS jurisdictions appear to evolve and become more robust in every ETS analysed.

• A ‘double dividend’ for emissions reductions may also exist in cases where mitigation occurs as a result of the ETS policy and when auction revenues are reinvested in other emissions-reduction activities.