Compliance of the Parties to the Kyoto Protocol in the first commitment period

This article provides an ex post analysis of the compliance of the Parties to the Kyoto Protocol during the first commitment period (2008–2012) based on the final data for national GHG emissions and exchanges in carbon units that became available at the end of 2015. On the domestic level, among the 36 countries that fully participated in the Kyoto Protocol, only nine countries emitted higher levels of GHGs than committed and therefore had to resort to flexibility mechanisms. On the international level – i.e. after the use of flexibility mechanisms – all Annex B Parties are in compliance. Countries implemented different compliance strategies: purchasing carbon units abroad, stimulating the domestic use of carbon credits by the private sector and incentivizing domestic emission reductions through climate policies.

Overall, the countries party to the Protocol surpassed their aggregate commitment by an average 2.4 GtCO₂e yr^–1. Of the possible explanations for this overachievement, ‘hot-air’ was estimated at 2.2 GtCO₂e yr^–1, while accounting rules for land use, land-use change and forestry (LULUCF) further removed 0.4 GtCO₂e yr^–1 from the net result excluding LULUCF. The hypothetical participation of the US and Canada would have reduced this overachievement by a net 1 GtCO₂e yr^–1. None of these factors – some of which may be deemed illegitimate – would therefore on its own have led to global non-compliance, even without use of the 0.3 GtCO₂e of annual emissions reductions generated by the Clean Development Mechanism. The impact of domestic policies and ‘carbon leakage’ – neither of which is quantitatively assessed here – should not be neglected either.

Policy relevance

Given the ongoing evolution of the international climate regime and the adoption of the Paris Agreement in December 2015, we believe that there is a need to evaluate the results of the first commitment period of the Kyoto Protocol. To our knowledge there has been no overarching quantitative ex post assessment of the Kyoto Protocol based on the final emissions data for 2008–2012, which became available in late 2015. This article attempts to fill this gap, focusing on the domestic and international compliance of the Parties to the Kyoto Protocol in the first commitment period.     

Scenarios for a 2 °C world: a trade-linked input–output model with high sector detail

In this study a scenario model is used to examine if foreseen technological developments are capable of reducing CO₂ emissions in 2050 to a level consistent with United Nations Framework Convention on Climate Change (UNFCCC) agreements, which aim at maximizing the temperature rise to 2 °C compared to pre-industrial levels. The model is based on a detailed global environmentally extended supply–use table (EE SUT) for the year 2000, called EXIOBASE. This global EE SUT allows calculating how the final demand in each region drives activities in production sectors, and hence related CO₂ emissions, in each region. Using this SUT framework, three scenarios have been constructed for the year 2050. The first is a business-as-usual scenario (BAU), which takes into account population, economic growth, and efficiency improvements. The second is a techno-scenario (TS), adding feasible and probable climate mitigation technologies to the BAU scenario. The third is the towards-2-degrees scenario (2DS), with a demand shift or growth reduction scenario added to the TS to create a 2 °C scenario. The emission results of the three scenarios are roughly in line with outcomes of typical scenarios from integrated assessment models. Our approach indicates that the 2 °C target seems difficult to reach with advanced CO₂ emission reduction technologies alone.

Policy relevance

The overall outlook in this scenario study is not optimistic. We show that CO₂ emissions from steel and cement production and air and sea transport will become dominant in 2050. They are difficult to reduce further. Using biofuels in air and sea transport will probably be problematic due to the fact that agricultural production largely will be needed to feed a rising global population and biofuel use for electricity production grows substantially in 2050. It seems that a more pervasive pressure towards emission reduction is required, also influencing the basic fabric of society in terms of types and volumes of energy use, materials use, and transport. Reducing envisaged growth levels, hence reducing global gross domestic product (GDP) per capita, might be one final contribution needed for moving to the 2 °C target, but is not on political agendas now.     

Convergence of per capita carbon dioxide emissions: implications and meta-analysis

There is a rich empirical literature testing whether per capita carbon dioxide emissions tend to converge over time and across countries. This article provides a meta-analysis of the results from this research, and discusses how carbon emissions convergence may be understood in, for instance, the presence of international knowledge spillovers and policy convergence. The results display evidence of either divergence or persistent gaps at the global level, but convergence of per capita carbon dioxide emissions between richer industrialized countries. However, the results appear sensitive to the choice of data sample and choice of convergence concept, e.g. stochastic convergence versus β-convergence. Moreover, peer-reviewed studies have a higher likelihood of reporting convergence in carbon dioxide emissions compared to non-refereed work.

POLICY RELEVANCE

The empirical basis for an egalitarian rule of equal emissions per capita in the design of global climate agreements is not solid; this supports the need to move beyond single allocation rules, and increase knowledge about the impacts of combined scenarios. However, even in the context of the 2015 Paris Agreement with its emphasis on voluntary contributions and ‘national circumstances’, different equity-based principles could serve as useful points of reference for how the remaining carbon budget should be allocated.     

Air quality benefit of China’s mitigation target to peak its emission by 2030

In 2015, China committed to reducing its emission intensity per unit of gross domestic product by 60–65% from its 2005 rate and to peak its carbon emission by 2030. Problems related to local pollutants and haze are simultaneously worsening in China. This article focuses on the critical topic of co-controlling carbon emission and local air pollutants and evaluates the co-benefit of carbon mitigation in local pollutant reduction by using a partial equilibrium model that links carbon emission and local air pollutants at the technological level. Three conclusions can be drawn from the scenario analysis. First, in the reference scenario, energy consumption and carbon emission continue to increase and air quality is expected to deteriorate in the future. Therefore, current pollutant control measures should be improved. Second, local pollutants will be significantly reduced in the end-of-pipe control scenario, but the reduction will still be inadequate to fulfil the air quality target. Third, emissions of SO₂, NO_x, and PM_2.5 in 2030 will be reduced by 78.85%, 77.56%, and 83.32%, respectively, compared with the 2010 levels in the co-control scenario involving the peaking effort in China. Therefore, the air quality targets can also be achieved when the peaking target is fulfilled. The Nationally Determined Contribution (INDC) of China to peak its emission by 2030 is consistent with its domestic interest to improve local air quality.

POLICY RELEVANCE

China submitted its INDC to the United Nations Framework Convention on Climate Change in 2015 and has promised to peak its carbon emission by 2030. In recent years, China has also faced severe pressure to address its air pollution problem. Air quality is an important driving force to incentivize more ambitious mitigation measures that can contribute to the simultaneous reduction of carbon emission and air pollutants. Air quality benefit provides a strong justification for the INDC of China and the possibility of early peaking. Moreover, the co-benefit in China can be a reference for other developing countries that are facing the same challenge and can reinforce the initiative of these countries to promote ambitious mitigation actions.     

Benefit cost analysis,resilience and climate change

Applying a resilience theory framework, land transport funding in New Zealand is used to show how benefit cost analysis can reinforce a preference for maintaining existing economic and social systems when, instead, consideration of more socially disruptive options may be required. In this context, resilience is seen as the ability to maintain transport systems rather than the ability to reduce the probability of climate change. The latter role of resilience attempts to identify thresholds and regime shifts, and so critiques decision-making processes, while the former privileges social stability, thereby reducing the range of potentially useful emission mitigation options to be considered.

Policy relevance

Transitioning to a lower-carbon future requires policy formulation that challenges business-as-usual assumptions. Benefit cost analysis can be applied in ways that create barriers to such transitioning. The New Zealand case study identifies the conditions under which this can be the case. That benefit cost analysis could undermine the potential of resilience theory and application to identify low-carbon emission pathways is of concern to policy makers globally.     

The role of money and the financial sector in energy-economy models used for assessing climate and energy policy

This article outlines a critical gap in the assessment methodology used to estimate the macroeconomic costs and benefits of climate and energy policy, which could lead to misleading information being used for policy-making. We show that the Computable General Equilibrium (CGE) models that are typically used for assessing climate policy use assumptions about the financial system that sit at odds with the observed reality. These assumptions lead to ‘crowding out’ of capital and, because of the way the models are constructed, negative economic impacts (in terms of gross domestic product (GDP) and welfare) from climate policy in virtually all cases.

In contrast, macro-econometric models, which follow non-equilibrium economic theory and adopt a more empirical approach, apply a treatment of the financial system that is more consistent with reality. Although these models also have major limitations, they show that green investment need not crowd out investment in other parts of the economy – and may therefore offer an economic stimulus. Our conclusion is that improvements in both modelling approaches should be sought with some urgency – both to provide a better assessment of potential climate and energy policy and to improve understanding of the dynamics of the global financial system more generally.

POLICY RELEVANCE

This article discusses the treatment of the financial system in the macroeconomic models that are used in assessments of climate and energy policy. It shows major limitations in approach that could result in misleading information being provided to policy-makers.     

What if negative emission technologies fail at scale? Implications of the Paris Agreement for big emitting nations

A cumulative emissions approach is increasingly used to inform mitigation policy. However, there are different interpretations of what ‘2°C’ implies. Here it is argued that cost-optimization models, commonly used to inform policy, typically underplay the urgency of 2°C mitigation. The alignment within many scenarios of optimistic assumptions on negative emissions technologies (NETs), with implausibly early peak emission dates and incremental short-term mitigation, delivers outcomes commensurate with 2°C commitments. In contrast, considering equity and socio-technical barriers to change, suggests a more challenging short-term agenda. To understand these different interpretations, short-term CO₂ trends of the largest CO₂ emitters, are assessed in relation to a constrained CO₂ budget, coupled with a ‘what if’ assumption that negative emissions technologies fail at scale. The outcomes raise profound questions around high-level framings of mitigation policy. The article concludes that applying even weak equity criteria, challenges the feasibility of maintaining a 50% chance of avoiding 2°C without urgent mitigation efforts in the short-term. This highlights a need for greater engagement with: (1) the equity dimension of the Paris Agreement, (2) the sensitivity of constrained carbon budgets to short-term trends and (3) the climate risks for society posed by an almost ubiquitous inclusion of NETs within 2°C scenarios.

POLICY RELEVANCE

Since the Paris meeting, there is increased awareness that most policy ‘solutions’ commensurate with 2°C include widespread deployment of negative emissions technologies (NETs). Yet much less is understood about that option’s feasibility, compared with near-term efforts to curb energy demand. Moreover, the many different ways in which key information is synthesized for policy makers, clouds the ability of policy makers to make informed decisions. This article presents an alternative approach to consider what the Paris Agreement implies, if NETs are unable to deliver more carbon sinks than sources. It illustrates the scale of the climate challenge for policy makers, particularly if the Agreement’s aim to address ‘equity’ is accounted for. Here it is argued that much more attention needs to be paid to what CO₂ reductions can be achieved in the short-term, rather than taking a risk that could render the Paris Agreement’s policy goals unachievable.     

Public perception of climate engineering and carbon capture and storage in Germany: survey evidence

Climate engineering (CE) and carbon capture and storage are controversial options for addressing climate change. This study compares public perception in Germany of three specific measures: solar radiation management (SRM) via stratospheric sulphate injection, large-scale afforestation, and carbon capture and storage sub-seabed (CCS-S). In a survey experiment we find that afforestation is most readily accepted as a measure for addressing climate change, followed by CCS-S and lastly SRM, which is widely rejected. Providing additional information decreases acceptance for all measures, but their ranking remains unchanged. The acceptance of all three measures is especially influenced by the perceived seriousness of climate change and by trust in institutions. Also, respondents dislike the measures more if they perceive them as a way of shirking responsibility for emissions or as an unconscionable manipulation of nature. Women react more negatively to information than men, whereas the level of education or the degree of intuitive vs reflective decision making does not influence the reaction to information.

POLICY RELEVANCE

Current projections suggest that the use of climate engineering (CE) technologies or carbon capture and storage (CCS) is necessary if global warming is to be kept well below 2°C. Our article focuses on the perspective of the general public and thus supplements the dialogue between policymakers, interest groups, and scientists on how to address climate change. We show that in Germany public acceptance of potentially effective measures such as SRM or CCS-S is low and decreases even more when additional information is provided. This implies that lack of public acceptance may turn out to be a bottleneck for future implementation. Ongoing research and development in connection with CCS-S and SRM requires continuous communication with, and involvement of, the public in order to obtain feedback and assess the public’s reservations about the measures. The low level of acceptance also implies that emission reduction should remain a priority in climate policy.     

Global impact of a climate treaty if the Human Development Index replaces GDP as a welfare proxy

This study explores the implications of shifting the narrative of climate policy evaluation from one of costs/benefits or economic growth to a message of improving social welfare. Focusing on the costs of mitigation and the associated impacts on gross domestic product (GDP) may translate into a widespread concern that a climate agreement will be very costly. This article considers the well-known Human Development Index (HDI) as an alternative criterion for judging the welfare effects of climate policy. We estimate what the maximum possible annual average increase in HDI welfare per tons of CO₂ would be within the carbon budget associated with limiting warming to 2°C over the period 2015–2050. Emission pathways are determined by a policy that allows the HDI of poor countries and their emissions to increase under a business-as-usual development path, while countries with a high HDI value (>0.8) have to restrain their emissions to ensure that the global temperature rise does not exceed 2°C. For comparison, the well-known multi-regional RICE model is used to assess GDP growth under the same climate change policy goals.

Policy relevance

This is the first study that shifts the narrative of climate policy evaluation from one of GDP growth to a message of improving social welfare, as captured by the HDI. This could make it easier for political leaders and climate negotiators to publicly commit themselves to ambitious carbon emission reduction goals, such as limiting global warming to 2°C, as in the (non-binding) agreement made at COP 21 in Paris in 2015. We find that if impacts are framed in terms of growth in HDI per t CO₂ emission per capita instead of in GDP, the HDI of poor countries and their emissions are allowed to increase under a business-as-usual development path, whereas countries with a high HDI (>0.8) must control emissions so that global temperature rise remains within 2°C. Importantly, a climate agreement is more attractive for rich countries under the HDI than the GDP frame. This is good news, as these countries have to make the major contribution to emissions reductions.     

Assessing the ambition of post-2020 climate targets: a comprehensive framework

One of the most fundamental questions surrounding the new Paris Agreement is whether countries’ proposals to reduce GHG emissions after 2020 are equally ambitious, considering differences in circumstances between countries. We review a variety of approaches to assess the ambition of the GHG emission reduction proposals by countries. The approaches are applied illustratively to the mitigation part of the post-2020 climate proposals (nationally determined contributions, or NDCs) by China, the EU, and the US. The analysis reveals several clear trends, even though the results differ per individual assessment approach. We recommend that such a comprehensive ambition assessment framework, employing a large variety of approaches, is used in the future to capture a wide spectrum of perspectives on ambition.

POLICY RELEVANCE

Assessing the ambition of the national climate proposals is particularly important as the Paris Agreement asks for regular reviews of national contributions, keeping in mind that countries raise their ambition over time. Such an assessment will be an important part of the regular global stocktake that will take place every five years, starting with a ‘light’ version in 2018. However, comprehensive methods to assess the proposals are lacking. This article provides such a comprehensive assessment framework.     

Defining deep decarbonization pathways for Switzerland: an economic evaluation

This article simulates deep decarbonization pathways for a small open economy that lacks the usual avenues for large CO₂ reductions – heavy industry and power generation. A computable general equilibrium model is used to assess the energy and economic impacts of the transition to only one ton of CO₂ emissions per capita in 2050. This represents a 76% reduction with respect to 1990 levels, while the population is expected to be 46% larger and GPD to increase by 90%. The article discusses several options and scenarios that are compatible with this emissions target and compares them with a reference scenario that extrapolates already-decided climate and energy policy instruments. We show that the ambitious target is attainable at moderate welfare costs, even if it needs very high carbon prices, and that these costs are lower when either CO₂ can be captured and sequestered or electricity consumption can be taxed sufficiently to stabilize it.

Policy relevance

In the context of COP 21, all countries must propose intended contributions that involve deep decarbonization of their economy over the next decades. This article defines and analyses such pathways for Switzerland, taking into consideration the existing energy demand and supply and also already-defined climate policies. It draws several scenarios that are compatible with a target of 1 ton of CO₂ emissions per capita in 2050. This objective is very challenging, especially with the nuclear phase out decided after the disaster in Fukushima and the political decision to balance electricity trade. Nevertheless, it is possible to design several feasible pathways that are based on different options. The economic cost is significant but affordable for the Swiss economy. The insights are relevant not only for Switzerland, but also for other industrialized countries when defining their INDCs.     

Power,coalitions and institutional change in South African climate policy

This paper examines power relations, coalitions and conflicts that drive and hinder institutional change in South African climate policy. The analysis finds that the most contested climate policies are those that create distributional conflicts where powerful, non-poor actors will potentially experience real losses to their fossil fuel-based operations. This finding opposes the assumption of competing objectives between emissions and poverty reduction. Yet, actors use discourse that relates to potentially competing objectives between emissions reductions, jobs, poverty reduction and economic welfare.

The analysis relates to the broader questions on how to address public policy problems that affect the two objectives of mitigating climate change and simultaneously boosting socio-economic development. South Africa is a middle-income country that represents the challenge of accommodating simultaneous efforts for emissions and poverty reduction.

Institutional change has been constrained especially in the process towards establishing climate budgets and a carbon tax. The opposing coalitions have succeeded in delaying the implementation of these processes, as a result of unequal power relations. Institutional change in South African climate policy can be predominantly characterized as layering with elements of policy innovation. New policies build on existing regulations in all three cases of climate policy examined: the climate change response white paper, the carbon tax and the renewable energy programme. Unbalanced power relations between coalitions of support in government and civil society and opposition mainly from the affected industry result in very fragile institutional change.

Key policy insights

• The South African government has managed to drive institutional change in climate policy significantly over the past 7 years.

• Powerful coalitions of coal-related industries and their lobbies have constrained institutional change and managed to delay the implementation of carbon pricing measures.

• A successfully managed renewable energy programme has started to transform a coal- and nuclear-powered electricity sector towards integrating sustainable energy technologies. The programme is vulnerable to intergovernmental opposition and requires management at the highest political levels.

• Potential conflict with poverty reduction measures is not a major concern that actively hinders institutional change towards climate objectives. Predominantly non-poor actors frequently use poverty-related discourse to elevate their interests to issues of public concern.

     

Mainstreaming climate change adaptation into inland aquaculture policies in Thailand

While there have been many pilot projects on adaptation undertaken in the fisheries and aquaculture sector, state policies are only just beginning to address let alone refer to climate change. This study explores the climate-related content, climate sensitivities, and opportunities to incorporate climate change concerns in a set of aquaculture policies by the government of Thailand. The analysis is based on content analysis of policy documents and in-depth interviews with 14 officials that had roles in the design or implementation of 8 Department of Fisheries policies. The Aquaculture Master Plan 2011–2016 and the now abandoned Tilapia Strategy refer directly to climate variability or change. The Master Plan also suggests measures or strategies, such as investment in research, and the transfer of technologies, which would be helpful to sustainability and adaptation. Other policies suggest, or at the very least include, practices which could contribute to strengthening management of climate-related risks, for example: a registration policy included provisions for compensation; extension programme policy recognizes the importance of extreme events; and a standards policy gives guidance on site selection and water management. Most existing aquaculture policies appear to be sensitive to the impacts of climate change; for instance, the zoning policy is sensitive to spatial shifts in climate. Stakeholders had ideas on how policies could be made more robust; in the case of zoning, by periodically reviewing boundaries and adjusting them as necessary.

POLICY RELEVANCE

This study is one of the first evaluations of the coverage and sensitivity of aquaculture policies to climate change. It shows that while existing policies in Thailand are beginning to refer explicitly to climate change, they do not yet include much in the way of adaptation responses, underlining the need for identifying entry points as has been done in this analysis. Further mainstreaming is one option; another possibility is to adopt a more segregated approach, at least initially, and to collect various policy ideas under a new strategic policy for the aquaculture sector as a whole.     

Review of the experience with monitoring uncertainty requirements in the Clean Development Mechanism

In order to ensure the environmental integrity of carbon offset projects, emission reductions certified under the Clean Development Mechanism (CDM) have to be ‘real, measurable and additional’, which is ensured, inter alia, through the monitoring, reporting and verification (MRV) process. MRV, however, comes at a cost that ranges from several cents to €1.20 and above per tCO₂e depending on the project type. This article analyses monitoring uncertainty requirements for carbon offset projects with a particular focus on the trade-off between monitoring stringency and cost. To this end, existing literature is reviewed, overarching monitoring guidelines, as well as the ten most-used methodologies are scrutinized, and finally three case studies are analysed. It is shown that there is indeed a trade-off between the stringency and the cost of monitoring, which if not addressed properly may become a major barrier for the implementation of offset projects in some sectors. It is then demonstrated that this trade-off has not been systematically addressed in the overarching CDM guidelines and that there are only limited incentives to reduce monitoring uncertainty. Some methodologies and calculation tools as well as some other offset standards, however, do incorporate provisions for a trade-off between monitoring costs and stringency. These provisions may take the form of discounting emissions reductions based on the level of monitoring uncertainty – or more implicitly through allowing a project developer to choose between monitoring a given parameter and using a conservative default value.

Policy relevance

The CDM Executive Board acknowledged that monitoring uncertainty has not been treated in a consistent manner and the draft standard on uncertainty was subsequently presented in May 2013. This article supports the implementation of this standard for more comprehensive, yet cost-efficient accounting for monitoring uncertainty in carbon offset projects. Moreover, in the light of the ongoing discussions on the New Market Mechanisms as well as the operationalization of the Green Climate Fund and different national mitigation policies, the CDM experience provides valuable insights with regards to the treatment of monitoring uncertainty and constitutes a solid basis for designing uncertainty requirements for new mechanisms to mitigate climate change.     

Beyond carbon pricing: policy levers for negative emissions technologies

This paper explores policies for Negative Emissions Technologies (NETs), in an attempt to move beyond the supply-side focus of the majority of NETs research, as well as the current dominance of carbon pricing as the main NETs policy proposal. The paper identifies a number of existing policies from four key areas – energy/transport, agriculture, sub-soil, and oceans – which will have an impact on three NETs: Bioenergy with Carbon Capture and Storage (BECCS), Direct Air Capture (DAC), and terrestrial Enhanced Rock Weathering (ERW). We propose that non-climate co-benefits may be valuable in terms of the policy ‘demand pull’ for NETs; in particular, we find that ERW may provide multiple co-benefits which can be mandated through existing policy structures. However, interaction with numerous policy areas may also create barriers, particularly where there is tension between the priorities of different government departments. On the basis of existing and analogous policies from a range of geographical contexts and scales, this paper proposes four options for NETs policy that could be reasonably implemented in the near-term. We also argue that ERW demonstrates the importance of scale and framing, because the policy environment depends on whether it is framed as a soil amendment at local scales or as a climate stabilization technique at international scale.

Key policy insights

• Co-benefits may assist the ‘demand pull’ for novel technologies by providing multiple policy angles for incentivisation rather than relying on a ‘fix-all’ policy such as a high carbon price.

• DAC with storage might be overly reliant on a high carbon price, because it only provides one core benefit – that of atmospheric carbon reduction.

• ERW may provide multiple co-benefits which can be mandated through existing policy structures, but should focus on using waste rock rather than mining virgin material.

• We propose four near-term options for NETs policy: funding for small-scale BECCS demonstration and an international biomass certification mechanism; small-scale loans for ERW on farms and promotion of locally-sourced rock residues; amendment of fertilizer subsidy schemes to include silicate rock; and a clearer framework for licensing sub-soil access for CO₂ storage.

     

Characteristics of forest carbon credit transactions in the voluntary carbon market

The voluntary carbon market allows participants to go beyond regulatory carbon offsetting. Recent developments have improved the transparency and credibility of voluntary carbon trading, and forest carbon credit transactions constitute more than half of trade volume. Its workings, however, have not been sufficiently explored in the literature. This study analyses the characteristics of forest carbon credit transactions in the voluntary carbon market using frequency analysis and logistic regression analysis. The results reveal that the co-benefits of forest carbon projects are an important factor influencing carbon credit transactions. From the higher transaction ratio of credits from CCB Standards-labelled projects and projects using co-benefit-oriented standards, it can be inferred that credits with potential for co-benefits (e.g. fostered corporate social responsibility, social cohesion of local communities and voluntary leadership, and positive environmental impacts) are preferred to those focusing exclusively on emission reduction in the voluntary carbon market. The findings of this study suggest that developing co-benefits is important for strengthening the market competitiveness of forest carbon credits in the voluntary carbon market. Additionally, unlike the compliance carbon market, in the voluntary carbon market stringent carbon standards do not always guarantee credit transaction performance.

POLICY RELEVANCE

After UNFCCC COP-21, the global society agreed to acknowledge various forms of international carbon crediting mechanisms, and noted the significance of greenhouse gas emissions reduction for sustainable development and environmental integrity through the Paris Agreement. Moreover, the agreement encouraged both REDD+ activities in developing countries and supports from developed countries. Additionally, co-benefits of forest carbon projects are important for credit transaction in the global voluntary carbon market. Under the new climate regime, co-benefits of forest carbon projects are expected to gain attention in the carbon market. To promote the social, economic, and environmental co-benefits of forest carbon projects, the introduction of an objective co-benefit assessment and certification system should be reviewed at the national level.     

Challenges to the development of carbon markets in China

China has introduced several pilot emission trading schemes to build the basis for a national scheme. The potential scale of this initiative raises prospects for a regional carbon trading network as a way to further engage other major Asian economies. However, the Chinese carbon markets rest upon a unique political-economic context and institutional environment that are likely to limit their development and viability. This article offers an overview of such structural economic and political constraints. Four main challenges are identified, namely, inadequate domestic demand, limited financial involvement, incomplete regulatory infrastructure, and excessive government intervention. The first two challenges concern economic dimensions and may be partially addressed by the incentives created by the newly introduced emission trading schemes. The other two are more deeply entrenched in the dominant political system and governing practice. They require fundamental changes to the ways in which the state and the market interact. The success of China's carbon market reform depends crucially on the ability of the ongoing efforts to transform the distorted state–market relationship.

Policy relevance

The burgeoning carbon markets offer opportunities for emissions mitigation at lower costs and enable circulation of a new form of capital, i.e. carbon credits, across borders. China accounts for a gigantic share of global GHG emissions and has the potential to significantly scale up these opportunities. There are clear implications for market developers and participants worldwide, including climate policy makers who attempt to link their emission trading schemes to other schemes, firms who seek to take advantage of the inexpensive carbon offsets generated in developing countries, international financial institutions who endeavour to establish their business in an emerging major carbon market, etc. This article can inform their decisions by identifying key issues that may undermine their ability to achieve these goals. Policy makers and stakeholders will benefit from this analysis, which shows how the Chinese carbon markets operate in ways that may be different from their experience elsewhere.     

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.     

Modelling long-term HFC emissions from India's residential air-conditioning sector: exploring implications of alternative refrigerants,best practices,and a sustainable lifestyle within an integrated assessment modelling framework

India's growing role in the global climate debate makes it imperative to analyse emission reduction policies and strategies across a range of GHGs, especially for under-researched non-CO₂ gases. Hydrofluorocarbons' (HFCs) usage in cooling equipment and subsequent emissions are expected to increase dramatically in India with the phase-out of hydrochlorofluorocarbons (HCFCs) as coolants in air-conditioning equipment. We focus on the residential air-conditioning sector in India and analyse a suite of HFC and alternative coolant gas scenarios for understanding the implications for GHG emissions from this sector within an integrated assessment modelling framework. We find that, if unabated, HFC410A emissions will contribute to 36% of the total global warming impact from the residential air-conditioner sector in India in 2050, irrespective of the future economic growth trajectory, and the remaining 64% is from energy to power residential air-conditioners. A move towards more efficient, low global warming potential (GWP) alternative refrigerants will significantly reduce the cumulative global warming footprint of this sector by 37% during the period 2010–2050, due to gains both from energy efficiency as well as low GWP alternatives. Best practices for reducing direct emissions are important, but only of limited utility, and if a sustainable lifestyle is adopted by consumers with lower floorspace, low GWP refrigerants, and higher building envelope efficiencies, cumulative emissions during 2010–2050 can be reduced by 46% compared to the Reference scenario.

Policy relevance

Our analysis has important implications for Indian climate policy. We highlight that the Indian government's amendment proposal to the Montreal Protocol is a strong signal to the Indian market that the transition away from high GWP refrigerants towards low/zero GWP alternatives will happen sooner or later. The Bureau of Energy Efficiency should extend building energy conservation code policy to residential buildings immediately, and the government should mandate it. Government authorities should set guidelines and mandate reporting of data related to air-conditioner coolant recharge frequency and recovery of scrapped air-conditioner units. For contentious issues like flammability where there is no consensus within the industry, the government needs to undertake an independent technical assessment that can provide unbiased and reliable information to the market.