This paper develops a better understanding of what may be understood as a barrier to climate friendly investment and suggests to tool that could be used in appropriate policy design. In addition to an overview of the broader conceptual definitions of a barrier, the paper develops a definition of a barrier to adaptation and mitigation investment according to economic mechanisms that lead to the decreased attractiveness of the investment (relative to the hypothetical case of functioning markets) leading to the market imperfections as well as the impact on the risk and return profile. This illustrates that in general barriers may be addressed to correct the market imperfection or compensating the investor. The decomposition of the barriers along the market imperfection and investor's perception enable to suggests a tool to suggest the design for the require policy change.
Without participation of the United States, the world?s largest emitter of greenhouse gases, mitigation of global climate change seems hardly conceivable. Despite the U.S. rejection of the Kyoto Protocol and the reluctance of the Bush administration to engage in Post-Kyoto negotiations, recent developments suggest that the U.S. position towards climate policy might change in the medium run. This study provides an overview on current trends in U.S. climate policy. Besides the main elements of national climate policy proposals and state-level initiatives the climate contents in the U.S. presidential candidates? agendas are outlined. Based on this overview recent trends in U.S. climate policy are related to the European approach to combat climate change. Furthermore, we elaborate on the aspects which may be important for Europe to design its own domestic and international climate policy in order to achieve the long-term goal of stabilizing greenhouse gas concentrations.
Since January 1st the European Union has launched an EU-internal emissions trading scheme (EU ETS) for emission-intensive installations as the central pillar to comply with the Kyoto Protocol. The EU ETS may be linked at some time to a Kyoto emissions market where greenhouse gas emission allowances of signatory Kyoto countries can be traded. In this paper we investigate the implications of Russian market power for environmental effectiveness and regional compliance costs to the Kyoto Protocol taking into account potential linkages between the Kyoto emissions market and the EU ETS. We find that Russia may have incentives to join the EU ETS as long as the latter remains separated from the Kyoto international emissions market. In this case, Russia can exert monopolistic price discrimination between two separated markets thereby maximizing revenues from hot air sales. The EU will be able to substantially reduce compliance costs when it does not restrain itself to EU-internal emission regulation schemes. However, part of the gains from extra-EU emissions trading will come at the expense of environmental effectiveness as (more) hot air will be drawn in.
Energy markets and energy-intensive industries in all EU member states – especially in Germany – are subject to a diverse set of policies related to climate change. We analyse the potential efficiency losses from simultaneous application of emission taxes and emissions trading in qualitative and quantitative terms within a partial equilibrium framework for the EU. It turns out that those firms within the EU Emissions Trading Scheme (EU ETS) which at the same time are subject to domestic energy or carbon taxes will abate inefficiently much while other firms within the EU ETS will benefit from lower international emission permit prices. The same logic disproves the argument that additional national emission taxes will reduce inefficiencies in abatement supposed to be resulting from allowance (over-) allocation. In essence, unilateral emission taxes within the EU ETS are ecologically ineffective and subsidise net permit buyers. Thus, all firms that are subject to emissions trading and any CO2 emission taxes at the same time should be exempt from the latter. The foregone tax revenue could be generated by auctioning a small fraction of the permits instead. This would be cheaper for the emissions trading sectors as a whole and could be compatible even with the tight auctioning restrictions of the EU directive.
This paper analyzes barriers for energy efficiency investments for small-and medium-sized enterprises (SMEs) in China. Based on a survey of 480 SMEs in Zhejiang Province, this study assesses financial, informational, and organizational barriers for energy efficiency investments in the SME sector. The conventional view has been that the lack of appropriate financing mechanisms particularly hinders SMEs to adopt cost-effective energy efficiency measures. As such, closing the financing gap for SMEs is seen as a prerequisite in order to promote energy efficiency in the sector. The econometric estimates of this study, however, suggest that access to information is an important determinant of investment outcomes, while this is less clear with respect to financial and organizational factors. More than 40 percent of enterprises in the sample declared that that they are not aware of energy saving equipments or practices in their respective business area, indicating that there are high transaction costs for SMEs to gather, assess, and apply information about energy saving potentials and relevant technologies. One implication is that the Chinese government may assume an active role in fostering the dissemination of energy-efficiency related information in the SME sector.
Am 15. Dezember 2007 endete die UN-Klimakonferenz in Bali mit einer so genannten Roadmap, die den Fahrplan der Klimaverhandlungen bis zur nächsten Klimakonferenz 2009 in Kopenhagen vorgibt. In welchen Politikbereichen lassen sich innerhalb dieses Fahrplans Synergien nutzen? Welche Verhandlungsstrategien führen zu den besten Ergebnissen für die globale Klimapolitik?
In its fight against climate change the EU is committed to reducing its overall greenhouse gas emissions to at least 20% below 1990 levels by 2020. To meet this commitment, the EU builds on segmented market regulation with an EU-wide cap-and-trade system for emissions from energy-intensive installations (ETS sectors) and additional measures by each EU Member State covering emission sources outside the cap-and-trade system (the non-ETS sector). Furthermore, the EU has launched additional policy measures such as renewable energy subsidies in order to promote compliance with the climate policy target. Basic economic reasoning suggests that emission market segmentation and overlapping regulation can create substantial excess costs if we focus only on the climate policy target. In this paper, we evaluate the economic impacts of EU climate policy based on numerical simulations with a computable general equilibrium model of international trade and energy use. Our results highlight the importance of initial market distortions and imperfections as well as alternative baseline projections for the appropriate assessment of EU compliance cost.
Climate change will alter the conditions that underlie economies. Slow onset changes such as shifting rainfall patterns, increasing temperatures, and coastal intrusion will affect both global as well as national and subnational markets, while rapid onset events such as high intensity storms and flooding will increase disruption and drive economic loss. These impacts are changing the conditions under which economies deliver goods and services. The resulting structural shift in the economy has already started to drive investment in new business models, technologies, and infrastructure, as well as the upgrading/climate proofing and relocation of existing infrastructure. These investments are taking place against a background of unprecedented uncertainty accompanying climate change and its immediate physical impacts, as well as the more indirect consequences that might ensue. This uncertainty and lack of historical precedent, coupled with other market imperfections, inhibit private financial flows for adaptation from reaching the required volumes. Much of the discussion on adaptation finance to date has focused on public spending. However, it is clear that a large share of the required adaptation measures, as well as the corresponding financing needs, will need to be provided by private sector actors. This report finds that substantial investment in adaptation and resilience is already occurring in the private sector, financed by private capital. This investment is being undertaken within private enterprises of varying scales in response to the shifting market conditions driven by climate change. Understanding how this investment occurs, what drives it and how it is financed, is a low-cost entrance for governments and policy makers seeking to increase levels of adaptation. The ultimate aim of this report is to analyse the role of public actors in order to inform the way in which public finance and policy can be used to catalyse private investments in adaptation. The report focuses on the barriers inhibiting private ...
Implementation of an EU-wide emissions trading system by means of National Allocation Plans is at the core of European environmental policy agenda. Member States are faced with the problem of allocating their national emission budgets under the EU Burden Sharing Agreement between energy-intensive sectors that are eligible for international emissions trading and the remaining segments of their economies that will be subject to complementary domestic emission regulation. The country-specific segmentation of national emission budgets between trading sectors and non-trading sectors will determine the cost efficiency of the EU emissions trading system and the gains for each Member State vis-?-vis domestic abatement policies. We present an interactive simulation model where users can specify the design of National Allocation Plans for each EU Member State and then evaluate the induced economic effects. Our numerical framework is based on marginal abatement cost curves for (emissions) trading and non-trading sectors of the EU-15 economies. Illustrative simulations highlight the importance of a coordinated design of National Allocation Plans in order to avoid substantial excess costs of regulation and drastic burden shifting between nontrading and trading sectors.
The ambitious long-term target of the Paris Agreement (PA) can only be achieved if private sector action on climate change is scaled up and global finance flows are reoriented towards low-carbon development and climate resilience. Governments will need to trigger climate-compatible investments through targeted national policy instruments. International market mechanisms introduced by the PA in Article 6 are expected to play a critical role in creating the right incentives for mitigation activities financed and managed by the private sector. The upcoming Conference of the Parties (COP) in Chile is to deliver a final rulebook for Article 6, which will define the framework within which the private sector can operate and will define how generated mitigation results can be brought to market. While the price level achieved for internationally transferred mitigation outcomes (ITMO) or Article 6.4 Emission Reductions (A6.4ERs) will be the key driver for private sector engagement in market mechanisms, several other parameters will be relevant: the level of transaction costs, the degree of government interference, the scope of eligible activities, and the stringency of additionality determination and baseline setting. Balancing the delicate trade-off between private sector costs and assurance of environmental integrity is vital if new market mechanisms are to trigger private sector participation in climate change mitigation and adaptation activities at scale. This study seeks to answer the overarching question: How can Article 6 market mechanisms be designed to incentivize mobilization of private financing and contribute to support Article 2.1c in the Paris Agreement? While a wide definition of climate finance would cover finance triggered by market mechanisms; a narrow definition consistent with Article 9 PA would not cover market mechanism financing that aims to generate market mechanism units (ITMOs/A6.4ERs) for compliance with NDC targets. It should however be noted that no consensus on definitions has been achieved ...
