Funding low-carbon investments in the absence of a carbon tax

Introducing a carbon tax is difficult, partly because it suggests that current generations have to make sacrifices for the benefit of future generations. However, the climate change externality could be corrected without such a sacrifice. It is possible to set a carbon value, and use it to create ‘carbon certificates’ that can be accepted as part of commercial banks’ legal reserves. These certificates can be distributed to low-carbon projects, and be exchanged by investors against concessional loans, reducing capital costs for low-carbon projects. As the issuance of carbon certificates would increase the quantity of money, it will either lead to accelerated inflation or induce the Central Bank to raise interest rates. Low-carbon projects will thus have access to cheaper loans at the expense of either ‘regular’ investors (in case of higher interest rates) or of lenders and depositors (in case of accelerated inflation). Within this scheme, mitigation expenditures are compensated by a reduction in regular investments, so that immediate consumption is maintained. It uses future generation wealth to pay for a hedge against climate change. This framework is not as efficient as a carbon tax but is politically easier to implement and represents an interesting step in the trajectory towards a low-carbon economy.     

Alternative climate policy pathways in the US

Although it is likely that the political–economic coalition required for implementing a federal cap-and-trade programme for GHGs in the US is now sufficiently strong, the structural impediments that have prevented its legislative passage remain impressively durable and can be expected to continue to lay waste to congressional proposals for the foreseeable future. Indeed, given the complex history of environmental policy gridlock in Washington since the early 1980s, any expectations that a cap-and-trade programme could have been realistically achieved through the traditional legislative passage in Congress are fundamentally misplaced. Building on previous research, it is argued that – as with most other forms of environmental policy in the US over the past three decades – a national carbon market is more plausible given alternative policy pathways, which if taken are capable of circumventing the Federal Congress altogether. In particular, the interaction between litigation against the federal government and the ‘rulemaking’ authority possessed by the Executive Branch provides the potential space for the current administration to unilaterally establish a model rule for a national carbon-trading programme.

Policy relevance

This article aims to contribute to American climate policy debates by re-thinking the policy mechanisms most capable of establishing a national carbon market in the US. By taking into account the array of structural factors that have prevented the legislative passage of such a programme in federal Congress, a range of alternative policy ‘pathways’ is considered that have historically allowed progressive environmental policies to endure in Washington (despite increased Congressional gridlock over the past few decades). Two specific alternative strategies and the relationship between them are assessed: the use of litigation to impose legal obligations on federal agencies to regulate effluents, and the use of executive authority to define the nature and scope of environmental regulation. The administration's current potential to unilaterally develop a model-rule for a cap-and-trade programme under the Clean Air Act is emphasized, and the political implications of such a strategy are considered.     

Korea’s approach to overcoming difficulties in adopting the emission trading scheme

In this study, we aim to describe the background for design characteristics of emissions trading schemes (ETS) in developing and emerging economies, with a particular focus on the case of Korea. These countries may face unique hardships such as fierce opposition from industry sectors, the presence of a power imbalance between the Ministry of Environment (MOE) and ministries that are in charge of supporting output growth, and the absence or incomplete development of financial markets and auctioning mechanisms. To overcome these hardships, the Korean government legislated laws that defined timelines for every stage of ETS development, established a strategic governance architecture to make up the weak position of the MOE, offered strong market-stabilizing measures focused on maintaining the allowance price below a certain level, and provided support packages to make the low-carbon transition easy by compensating for losses caused by the Korea Emissions Trading Scheme (KETS). Such policy instruments that made adoption of KETS easier could be obstacles to making it efficient.

Policy relevance

In the process of adopting a cap-and-trade system, both a developing economy and an emerging economy may face unique hardships, such as strong opposition from industry sectors, the presence of a power imbalance between the Ministry of Environment (MOE) and ministries that are in charge of supporting output growth, and the absence or incomplete development of financial markets and auctioning mechanisms. To make up for the weak base of Korea’s ETS, the government legislated laws that defined timelines for every stage of the ETS development, established a strategic governance architecture to make up for the weak position of the MOE, offered strong market-stabilizing measures focused on maintaining the allowance price below a certain level, and provided support packages to make the low-carbon transition easy by compensating for losses caused by the Korea’s ETS. Korea’s experiences can be shared with other developing economies that are considering adoption of a cap-and-trade scheme.     

Commitments through financial options: an alternative for delivering climate change obligations

Governments willing to commit themselves to maintain carbon prices at or above a certain level face the challenge that their commitments need to be credible both for investors in low-carbon technology and for foreign governments. This article argues that governments can make such commitments by issuing long-term put option contracts on the price of CO₂ allowances. This mechanism gives investors the right, but not the obligation, to sell allowances to the government at the strike price. From the investors' point of view, a government is therefore fully committed to a price floor for allowances in the future. This proposed approach alters the incentives that a government faces when considering noncompliance and serves to prevent non-compliance. The proposal fares well when assessed against criteria to determine its suitability in legitimacy, enforcement, proportionality, lack of interference from other contracting States, and transparency. It also allows for fine-tuning through the number and duration of issued options and the strike price. A robust contract structure is proposed to protect against government interference that might threaten the credibility of commitments.     

Sectoral targets for developing countries: combining ‘common but differentiated re-sponsibilities’ with ‘meaningful participation’

Although a global cap-and-trade system is seen by many researchers as the most cost-efficient solution to reduce greenhouse gas (GHG) emissions, the governments of developing countries refuse to enter into such a system in the short term. Many scholars and stakeholders, including the European Commission, have thus proposed various types of commitments for developing countries that appear less stringent, such as sectoral approaches. A macroeconomic assessment of such a sectoral approach is provided for developing countries. Two policy scenarios in particular are assessed, in which developed countries continue with Kyoto-type absolute commitments, while developing countries adopt an emissions trading system limited to electricity generation and linked to developed countries' cap-and-trade systems. In the first scenario, CO₂ allowances are auctioned by the government, which distributes its revenues as a lump sum to households. In a second scenario, the auction revenues are used to reduce taxes on, or to give subsidies to, electricity generation. The quantitative analysis, conducted with a hybrid general equilibrium model, shows that such options provide almost as much emissions reduction as a global cap-and-trade system. Moreover, in the second sectoral scenario, GDP losses in developing countries are much lower than with a global cap-and-trade system, as is also the effect on the electricity price.     

Historic versus output-based allocation of GHG tradable allowances: a comparison

Two ways of allocating greenhouse gas (GHG) allowances are compared: historic allocation (HA) based solely on past information, and output-based allocation (OBA) based on an allocation proportional to the current output level. The advantages and problems of each allocation method are considered and compared. It is essential to distinguish the sectors sheltered from international competition (e.g. power generation) from the exposed sectors. In the sheltered sectors, OBA entails a much higher overall cost because it provides too little incentive to reduce the production of the polluting goods. HA does not suffer from this drawback but its distributional impact is highly unfair. Hence in these sectors neither of these two ways of freely allocating allowances can be supported, and auctioning should be favoured. However, in the exposed sectors, OBA is an option worth considering because it reduces carbon leakage, although it also suffers from some drawbacks compared with auctioning.     

Numerical Simulation Study on the Impacts of Tropospheric O3 and CO2 Concentration Changes on Winter Wheat.Part I: Model Description

Ozone is well documented as the air pollutant most damaging to agricultural crops and other plants.It is reported that tropospheric O3 concentration increases rapidly in recent 20 years. Evaluating and predicting impacts of ozone concentration changes on crops are drawing great attention in the scientific community. In China, main study method about this filed is controlled experiments, for example, Open Top Chambers. But numerical simulation study about impacts of ozone on crops with crop model was developed slowly, what is more, the study about combined impacts of ozone and carbon dioxide has not been reported.The improved agroecosystem model is presented to evaluate simultaneously impacts of tropospheric O3 and CO2 concentration changes on crops in the paper by integrating algorithms about impacts of ozone on photosynthesis with an existing agroecosystem biogeochemical model (named as DNDC). The main physiological processes of crop growth (phenology, leaf area index, photosynthesis, respiration, assimilated allocation and so on) in the former DNDC are kept. The algorithms about impacts of ozone on photosynthesis and winter wheat leaf are added in the modified DNDC model in order to reveal impacts of ozone and carbon dioxide on growth, development, and yield formation of winter wheat by coupling the simulation about impacts of carbon dioxide on photosynthesis of winter wheat which exists in the former DNDC. In the paper, firstly assimilate allocation algorithms and some genetic parameters (such as daily thermal time of every development stage) were modified in order that DNDC can be applicable in North China. Secondly impacts of ozone on crops were simulated with two different methods-one was impacts of ozone on light use efficiency , and the other was direct effects of ozone on leaves photosynthesis. The latter simulated results are closer to experiment measurements through comparing their simulating results. At last the method of direct impacts of ozone on leaf growth is adopted and the coe cients about impacts of ozone on leaf growth and death are ascertained. Effects of climate changes, increasing ozone, and carbon dioxide concentration on agroecosystem are tried to be simulated numerically in the study which is considered to be advanced and credible.     

The birth of the Paratethys during the Early Oligocene: From Tethys to an ancient Black Sea analogue?

Deeper water black shales, overlain by coccolith-bearing marlstones representing the incipient Paratethys (example: Early Oligocene; Austrian Molasse Basin), have sedimentary characteristics similar to those of the Holocene Black Sea since 7500 years bp. Framboid pyrite size, biomarker and C–N-isotope data additionally indicate that isolation of the Paratethys resulted in Black Sea-type characteristics during nannoplankton zone NP 23.In contrast to the estuarine circulation across the Bosphorus since 7500 years bp, marine conditions prevailed in the incipient Paratethys during NP 21/22. Nitrogen was fixed and low organic carbon accumulation rates prevailed. In both settings a vertical density water-column stratification was accompanied by photic zone anoxia, and by anaerobic methane oxidation in the Paratethys. In the Paratethys increased run off, starting in NP 22, led to estuarine circulation during NP 23. During this period cyclic blooms of calcareous nannoplankton resulted in high calcite accumulation rates which diluted the coeval clay sedimentation. Similar sedimentary features in the Black Sea and the Paratethys during the earliest Oligocene are result from opposite paleoceanographic developments, both leading to estuarine circulation patterns. In the Black Sea, permanent photic zone anoxic conditions were established 7500 years bp in response to the first invasion of saline Mediterranean waters into the former freshwater lake. In contrast, brackish surface water in the Paratethys resulted from nutrient-rich freshwater diluting the marine water body.