Effective,efficient or equitable: using allowance allocations to mitigate emissions leakage

The European Union (EU), the US and Australia have each adopted, or are considering, free allocations to emissions-intensive, trade-exposed industries (EITEIs) in order to minimize emissions leakage and industrial offshoring resulting from climate policy. Differences in the design of these schemes, including how a country defines eligible EITEIs, the scale of allocation and the method of distribution, all have the potential to affect the outcomes of the programmes. In crafting their EITEI allocation formulas, policymakers in each country must balance three important priorities – the economic efficiency of the cap and trade programme, an equitable distribution of the programme's allowances and the effectiveness of the allocations in addressing leakage and competitiveness concerns. These three priorities provide a useful framework for considering the tradeoffs inherent in designing allocation schemes for EITEIs. Through this lens, policy approaches taken by the EU, US and Australia are evaluated with respect to four important questions of allocation policy design: the definition of EITEIs, the costs to be covered, the methodology for distributing allowances and the duration of free allocation.     

Certified emissions reductions and CDM limits: revenue and distributional aspects

The EU allows those installations that are subject to emissions trading to use a limited volume of certified emissions reductions (CERs), generated through the Clean Development Mechanism (CDM), to cover their own GHG emissions. These CERs can be used in addition to the EU allowances (EUAs), which were primarily allocated free to installations in Phase II of the EU Emissions Trading Scheme (EU ETS) from 2008 to 2012. For the year 2008, the CER limits, which are differentiated by EU Member State, created substantial arbitrage rents (due to the CER-EUA spread) of approximately EU€250 million. Different options for the allocation of this rent are discussed and it is found that, according to economic theory, making the right to use CERs tradable or the regulator pre-committing to buying CERs at the level of the relevant limit reduces the inefficiencies connected to the current regulation. Furthermore, auctioning these CER usage rights shifts the rents created through the CER-EUA spread to the Member State itself. The improved design and implementation of CDM limits justifies EU policy makers intervening to correct previously competition-distorting choices.     

Great expectations: can international emissions trading deliver an equitable climate regime?

Climate change equity debates tend to focus on achieving a fair and global ‘allocation’ of emission rights among countries. Allocation proposals typically envision, if implicitly, two purposes for international emissions trading. First, trading is expected to serve as a cost-effective means of promoting compliance with emissions targets. Second, trading is posited as a means to generate financial transfers, typically from industrialized to transitioning and developing countries.This article investigates the common assumption that international emissions trading will effectively serve both of these purposes. We conclude that the two purposes might not be mutually supportive, and that efforts to use international emissions trading as a financial transfer mechanism may potentially undermine cost-effectiveness goals. International emissions trading on a global scale would create new risks in terms of both cost-effectiveness and environmental performance, some of which will be challenging to manage. In particular, uncertainties over market prices and trading eligibility, coupled with the costs of participation, may together be the Achilles heel of some allocation proposals that entail large financial transfers from industrialized to developing countries. Any proposal for an ‘equitable’ allocation of emission allowances, we conclude, must be cognizant of the risks and costs implied by a reliance on international emissions trading. We offer some suggestions to this end.     

Relative detectability of greenhouse-gas and aerosol climate change signals

 The use of pattern correlations to compare observed temperature changes with predicted anthropogenic effects has greatly increased our confidence in the reality of these effects. Here we use synthetic observed data to determine the expected behavior of the pattern correlation statistic, R(t), and hence clarify some results obtained in previous studies. We show that, for the specific case considered here (near-surface temperature changes), even with a perfectly-known signal, expected values of R(t) currently should be only of order 0.3–0.5, as observed; that R(t) may show markedly non-linear variations in time; that the CO₂-alone signal pattern should be difficult to detect today primarily because of data coverage deficiencies; and why the signal due to combined CO₂-aerosol forcing is easier to detect than either the CO₂-alone or aerosol-alone signals. Finally, we show that little is to be gained at present by searching for a time-dependent signal compared with a representative constant signal pattern. Received: 24 June 1996/Revised: 3 March 1998     

Integrating agriculture and energy to assess GHG emissions reduction: a methodological approach

Agriculture is responsible for approximately 25% of anthropogenic global GHG emissions. This significant share highlights the fundamental importance of the agricultural sector in the global GHG emissions reduction challenge. This article develops and tests a methodology for the integration of agricultural and energy systems modelling. The goal of the research is to extend an energy systems modelling approach to agriculture in order to provide richer insights into the dynamics and interactions between the two (e.g. in competition for land-use). We build Agri-TIMES, an agricultural systems module using the TIMES energy systems modelling framework, to model the effect of livestock emissions and explore emissions reduction options. The research focuses on Ireland, which is an interesting test case for two reasons: first, agriculture currently accounts for about 30% of Ireland's GHG emissions, significantly higher than other industrialized countries yet comparable with global levels (here including emissions associated with other land-use change and forestation); second, Ireland is both a complete and reasonably sized agricultural system to act as a test case for this new approach. This article describes the methodology used, the data requirements, and technical assumptions made to facilitate the modelling. It also presents results to illustrate the approach and provide associated initial insights.

Policy relevance

Most of the policy focus with regard to climate mitigation targets has been on reducing energy-related CO₂ emissions, which is understandable as they represent by far the largest source of emissions. Non-energy-related GHG emissions – largely from agriculture, industrial processes, and waste – have received significantly less attention in policy discourse. Going forward, however, if significant cuts are made in energy-related CO₂ emissions, the role of non-energy-related GHG emissions will grow in importance. It is therefore crucial that climate mitigation analyses and strategies are not limited to the energy system. This article shows the value of using integrated energy and agriculture techno-economic modelling techniques to draw evidence for new comprehensive climate policy strategies able to discern between the full range of technical solutions available. It enables the production of economy-wide least-cost climate mitigation pathways.     

Methane and the greenhouse-gas footprint of natural gas from shale formations

We evaluate the greenhouse gas footprint of natural gas obtained by high-volume hydraulic fracturing from shale formations, focusing on methane emissions. Natural gas is composed largely of methane, and 3.6% to 7.9% of the methane from shale-gas production escapes to the atmosphere in venting and leaks over the life-time of a well. These methane emissions are at least 30% more than and perhaps more than twice as great as those from conventional gas. The higher emissions from shale gas occur at the time wells are hydraulically fractured—as methane escapes from flow-back return fluids—and during drill out following the fracturing. Methane is a powerful greenhouse gas, with a global warming potential that is far greater than that of carbon dioxide, particularly over the time horizon of the first few decades following emission. Methane contributes substantially to the greenhouse gas footprint of shale gas on shorter time scales, dominating it on a 20-year time horizon. The footprint for shale gas is greater than that for conventional gas or oil when viewed on any time horizon, but particularly so over 20 years. Compared to coal, the footprint of shale gas is at least 20% greater and perhaps more than twice as great on the 20-year horizon and is comparable when compared over 100 years.     

The emissions responsibility accounting of multinational enterprises for an efficient climate policy

The achievement of global warming limits below 2 °C and 1.5 °C requires deeper involvement of nonstate and subnational actors. In this paper, we focus on multinational enterprises (MNEs) and propose a new technology-adjusted investment-based emission accounting (TIBA) system that considers the technology gap between parent companies and their foreign affiliates. Specifically, TIBA rewards the home regions that transfer clean technology to host regions through MNEs to reduce global emissions and penalizes home regions that expand with high emission intensities through MNEs to increase global emissions. Under the TIBA system, the economies with high outward foreign direct investment stocks are assigned significantly higher responsibilities of emissions than under the production-based accounting (PBA), such as the United States, major European economies, Japan, and Canada. However, the increases in responsibilities differ sharply, depending on their investing regions and industries, as well as the technology transfers. Moreover, our measurements suggest that ideal technology transfers under TIBA would reduce emissions by up to 3,762 Mt, accounting for ∼16% of global Carbon Dioxide emissions from industrial processes involving fossil fuel combustion in 2016. This implies that there is room for improvement in low-carbon technology transfers through MNEs to combat global climate change. Thus, we argue that TIBA targets an efficient policy that highlights the role of MNEs.     

Projecting impacts of carbon dioxide emission reductions in the US electric power sector: evidence from a data-rich approach

Conditional forecasts of US economic and energy sector activity are developed using information from a dynamic, data-rich environment. The forecasts are conditional on a path for carbon dioxide emissions outlined in the US Environmental Protection Agency’s Clean Power Plan (CPP) and are estimated based on a factor-augmented autoregressive framework. Results suggest that overall growth will be slower under the CPP than it would otherwise; however, economic growth and CO₂ reductions can be achieved simultaneously. There are little differences between unconditional (business-as-usual) and conditional forecasts of the variables in the early part of the forecast period; the impacts of the CPP are small while the constraints on carbon dioxide are less stringent. The results serve as a data-driven complement to structural analyses of policy change in the energy sector.     

Impacts of different diffusion scenarios for mitigation technology options and of model representations regarding renewables intermittency on evaluations of CO2 emissions reductions

This paper evaluated the impacts of climate change mitigation technology options on CO₂ emission reductions and the effects of model representations regarding renewable intermittency on the assessment of reduction by using a world energy systems model. First, different diffusion scenarios for carbon dioxide capture and storage (CCS), nuclear power, and wind power and solar PV are selected from EMF27 scenarios to analyze their impacts on CO₂ emission reductions. These technologies are important for reducing CO₂ intensity of electricity, and the impacts of their diffusion levels on mitigation costs are significant, according to the analyses. Availability of CCS in particular, among the three kinds of technologies, has a large impact on the marginal CO₂ abatement cost. In order to analyze effects of model representations regarding renewables intermittency, four different representations are assumed within the model. A simplistic model representation that does not take into consideration the intermittency of wind power and solar PV evaluates larger contributions of the energy sources than those evaluated by a model representation that takes intermittency into consideration. Appropriate consideration of renewables intermittency within global energy systems models will be important for realistic evaluations of climate change mitigation scenarios.     

Potential emissions of CO2 and methane from proved reserves of fossil fuels: An alternative analysis

Scientists have argued that no more than 275 GtC (IPCC, 2013) of the world’s reserves of fossil fuels of 746 GtC can be produced in this century if the world is to restrict anthropogenic climate change to ≤2 °C. This has raised concerns about the risk of these reserves becoming “stranded assets” and creating a dangerous “carbon bubble” with serious impacts on global financial markets, leading in turn to discussions of appropriate investor and consumer actions. However, previous studies have not always clearly distinguished between reserves and resources, nor differentiated reserves held by investor-owned and state-owned companies with the capital, infrastructure, and capacity to develop them in the short term from those held by nation-states that may or may not have such capacity. This paper analyzes the potential emissions of CO₂ and methane from the proved reserves as reported by the world's largest producers of oil, natural gas, and coal. We focus on the seventy companies and eight government-run industries that produced 63% of the world’s fossil fuels from 1750 to 2010 (Heede, 2014), and have the technological and financial capacity to develop these reserves. While any reserve analysis is subject to uncertainty, we demonstrate that production of these reported reserves will result in emissions of 440 GtC of carbon dioxide, or 160% of the remaining 275 GtC carbon budget. Of the 440 GtC total, the 42 investor-owned oil, gas, and coal companies hold reserves with potential emissions of 44 GtC (16% of the remaining carbon budget, hereafter RCB), whereas the 28 state-owned entities possess reserves of 210 GtC (76% of the RCB). This analysis suggests that what may be needed to prevent dangerous anthropogenic interference (DAI) with the climate system differs when one considers the state-owned entities vs. the investor-owned entities. For the former, there is a profound risk involved simply in the prospect of their extracting their proved reserves. For the latter, the risk arises not so much from their relatively small proved reserves, but from their on-going exploration and development of new fossil fuel resources. For preventing DAI overall, effective action must include the state-owned companies, the investor-owned companies, and governments. However, given that the majority of the world's reserves are coal resources owned by governments with little capacity to extract them in the near term, we suggest that the more immediate urgency lies with the private sector, and that investor and consumer pressure should focus on phasing out these companies’ on-going exploration programs.     

An application of an efficient non-hydrostatic mesoscale model

This paper deals with a non-hydrostatic mesoscale model that achieves full vectorization on computers like the CYBER 205. The model formulation ensures the conservation of all fluxes and takes into account the terrain inhomogeneities by the aid of suitable transformations. The diagnostic equation for the pressure change is solved using a very efficient vectorized elliptic solver. By imposing appropriate boundary conditions no additional precautions at the boundaries are necessary to achieve meaningful results. As an application, the steady-state inviscid flow over a single mountain is simulated.     

Inter-trading permanent emissions credits and rented temporary carbon emissions offsets: some issues and alternatives

Permit trading among polluting parties is now firmly established as a policy tool in a range of environmental policy areas. The Kyoto Protocol accepts the principle that sequestration of carbon in the terrestrial biosphere can be used to offset emissions of carbon from fossil fuel combustion and outlines mechanisms. Although the lack of guaranteed permanence of biological offsets is often viewed as a defect, this paper argues that the absence of guaranteed permanence need not be a fundamental problem. We view carbon emissions as a liability issue. One purpose of an emissions credit system is to provide the emitter with a means to satisfy the carbon liability associated with her firm’s (or country’s) release of carbon into the atmosphere. We have developed and here expand on a rental approach, in which sequestered carbon is explicitly treated as temporary: the emitter temporarily satisfies his liability by temporarily “parking” his liability, for a fee, in a terrestrial carbon reservoir, or “sink,” such as a forest or agricultural soil. Finally, the paper relates the value of permanent and temporary sequestration and argues that both instruments are tradable and have a high degree of substitutability that allows them to interact in markets.     

Inter-trading permanent emissions credits and rented temporary carbon emissions offsets: some issues and alternatives

Permit trading among polluting parties is now firmly established as a policy tool in a range of environmental policy areas. The Kyoto Protocol accepts the principle that sequestration of carbon in the terrestrial biosphere can be used to offset emissions of carbon from fossil fuel combustion and outlines mechanisms. Although the lack of guaranteed permanence of biological offsets is often viewed as a defect, this paper argues that the absence of guaranteed permanence need not be a fundamental problem. We view carbon emissions as a liability issue. One purpose of an emissions credit system is to provide the emitter with a means to satisfy the carbon liability associated with her firm's (or country's) release of carbon into the atmosphere. We have developed and here expand on a rental approach, in which sequestered carbon is explicitly treated as temporary: the emitter temporarily satisfies his liability by temporarily “parking” his liability, for a fee, in a terrestrial carbon reservoir, or “sink,” such as a forest or agricultural soil. Finally, the paper relates the value of permanent and temporary sequestration and argues that both instruments are tradable and have a high degree of substitutability that allows them to interact in markets.     

An incentive mechanism for reducing emissions from conversion of intact and non-intact forests

This paper presents a new accounting mechanism in the context of the UNFCCC issue on reducing emissions from deforestation in developing countries, including technical options for determining baselines of forest conversions. This proposal builds on the recent scientific achievements related to the estimation of tropical deforestation rates and to the assessment of ‘intact’ forest areas. The distinction between ‘intact’ and ‘non intact’ forests used here arises from experience with satellite-based deforestation measurements and allows accounting for carbon losses from forest degradation. The proposed accounting system would use forest area conversion rates as input data. An optimal technical solution to set baselines would be to use historical average figures during the time period from 1990 to 2005. The system introduces two different schemes to account for preserved carbon: one for countries with high forest conversion rates where the desired outcome would be a reduction in their rates, and another for countries with low rates. A ‘global’ baseline rate would be used to discriminate between these two country categories (high and low rates). For the hypothetical accounting period 2013–2017 and considering 72% of the total tropical forest domain for which data are available, the scenario of a 10% reduction of the high rates and of the preservation of low rates would result in approximately 1.6 billion tCO₂ of avoided emissions. The resulting benefits of this reduction would be shared between those high-rate countries which reduced deforestation and those low-rate countries which did not increase their deforestation over an agreed threshold (e.g., half of “global” baseline rate).     

An economic approach to adaptation: illustrations from Europe

Policy makers are still struggling to find a rational and effective way to handle adaptation to climate change. This paper discusses a more strategic, economic approach to public adaptation and compares it with adaptation practice in Europe. An economic approach to adaptation involves setting priorities, both spatially (where to adapt) and inter-temporally (when to adapt). The paper reviews what we know about Europe’s geographic adaptation priorities. On inter-temporal priorities, it recommends fast-tracking two types of action: Win-win measures that yield an immediate return, such as water efficiency, and strategic decisions on infrastructure and spatial planning that have long-term consequences for Europe’s vulnerability profile. An economic approach to adaptation involves careful project design to ensure adaptation measures are cost-effective and flexible in the light of climate uncertainty (how to adapt). The final element of an economic approach to adaptation is the division of labour between the state and private actors (who should adapt). The paper argues that the traditional functions of the state—the provision of public goods, creation of an enabling environment and protection of the vulnerable—also apply to adaptation.     

An efficient PBL model for global circulation models-design and validation

An efficient, pianetary boundary layer (PBL) model is developed and validated with empirical data for applications in general circulation models (GCMs). The purpose of this PBL model is to establish the turbulent surface fluxes as a function of the principal external PBL parameters in a numerically efficient way. It consists of a surface layer and a mixed layer matched together with the conditions of constant momentum and heat flux at the interface. An algebraic solution to the mean momentum equations describes the mixed-layer velocity profile and thus determines the surface wind vector. The velocity profile is globally valid by incorporating the effect of variable Coriolis force without becoming singular at the equator. Turbulent diffusion depends on atmospheric stability and is modeled in the surface layer by a drag law and with first-order closure in the mixed layer. Radiative cooling in the stably stratified PBL is considered in a simple manner. The coupled system is solved by an iterative method. In order to preserve the computational efficiency of the large-scale model, the PBL model is implemented into the GISS GCM by means of look-up tables with the bulk PBL Richardson number, PBL depth, neutral drag coefficient, and latitude as independent variables.A validation of the PBL model with observed data in the form of Rossby number similarity theory shows that the internal feedback mechanisms are represented correctly. The model, however, underpredicted the sensible heat-flux. A subsequent correction in the turbulence parameterization yields better agreement with the empirical data. The behavior of the principal internal PBL quantities is presented for a range of thermal stabilities and latitudes.     

The Shared Socioeconomic Pathways and their energy,land use,and greenhouse gas emissions implications: An overview

This paper presents the overview of the Shared Socioeconomic Pathways (SSPs) and their energy, land use, and emissions implications. The SSPs are part of a new scenario framework, established by the climate change research community in order to facilitate the integrated analysis of future climate impacts, vulnerabilities, adaptation, and mitigation. The pathways were developed over the last years as a joint community effort and describe plausible major global developments that together would lead in the future to different challenges for mitigation and adaptation to climate change. The SSPs are based on five narratives describing alternative socio-economic developments, including sustainable development, regional rivalry, inequality, fossil-fueled development, and middle-of-the-road development. The long-term demographic and economic projections of the SSPs depict a wide uncertainty range consistent with the scenario literature. A multi-model approach was used for the elaboration of the energy, land-use and the emissions trajectories of SSP-based scenarios. The baseline scenarios lead to global energy consumption of 400–1200 EJ in 2100, and feature vastly different land-use dynamics, ranging from a possible reduction in cropland area up to a massive expansion by more than 700 million hectares by 2100. The associated annual CO₂ emissions of the baseline scenarios range from about 25 GtCO₂ to more than 120 GtCO₂ per year by 2100. With respect to mitigation, we find that associated costs strongly depend on three factors: (1) the policy assumptions, (2) the socio-economic narrative, and (3) the stringency of the target. The carbon price for reaching the target of 2.6 W/m² that is consistent with a temperature change limit of 2 °C, differs in our analysis thus by about a factor of three across the SSP marker scenarios. Moreover, many models could not reach this target from the SSPs with high mitigation challenges. While the SSPs were designed to represent different mitigation and adaptation challenges, the resulting narratives and quantifications span a wide range of different futures broadly representative of the current literature. This allows their subsequent use and development in new assessments and research projects. Critical next steps for the community scenario process will, among others, involve regional and sectoral extensions, further elaboration of the adaptation and impacts dimension, as well as employing the SSP scenarios with the new generation of earth system models as part of the 6th climate model intercomparison project (CMIP6).