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The fundamentals of the future international emissions trading system

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  • Stankeviciute, Loreta
  • Kitous, Alban
  • Criqui, Patrick

Abstract

The study aims to analyze the sectoral marginal abatements cost curves for a number of EU countries as well as to examine the efficiency aspects and the economic impacts for the major sectors of the ETS under different carbon market configurations in 2010 and 2020. To produce a consistent and realistic assessment, we employ sources such as GHG National Inventories, NAPs and POLES world energy model to constitute the sectoral base year and 2010, 2020 emission levels in different countries and regions. We then use the market analysis tool ASPEN, which enables to derive supply and demand from sectoral MACCs produced with the POLES model, and to evaluate the economic impacts on the carbon market participants. The paper shows that, in compliance with the Kyoto targets, the benefits of an enlarged carbon market are significant, since more than 50% of the abatement in the short term have to be achieved in ETS sectors, which may indeed use CDM or JI credits. A second major conclusion is that in 2020 the new flexibility margins provided by the adjustment of investments in new capacities compensate for the increase in pressure towards stronger emission reductions. This reduces the relative importance of the enlarged carbon market.

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  • Stankeviciute, Loreta & Kitous, Alban & Criqui, Patrick, 2008. "The fundamentals of the future international emissions trading system," Energy Policy, Elsevier, vol. 36(11), pages 4272-4286, November.
    • Handle: RePEc:eee:enepol:v:36:y:2008:i:11:p:4272-4286
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    1. Marschinski, Robert & Flachsland, Christian & Jakob, Michael, 2012. "Sectoral linking of carbon markets: A trade-theory analysis," Resource and Energy Economics, Elsevier, vol. 34(4), pages 585-606.
    2. Levihn, F. & Nuur, C. & Laestadius, S., 2014. "Marginal abatement cost curves and abatement strategies: Taking option interdependency and investments unrelated to climate change into account," Energy, Elsevier, vol. 76(C), pages 336-344.
    3. J. Onigkeit & N. Anger & B. Brouns, 2009. "Fairness aspects of linking the European emissions trading scheme under a long-term stabilization scenario for CO 2 concentration," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 14(5), pages 477-494, June.
    4. Gren, Ing-Marie & Carlsson, Mattias & Elofsson, Katarina & Munnich, Miriam, 2012. "Stochastic carbon sinks for combating carbon dioxide emissions in the EU," Energy Economics, Elsevier, vol. 34(5), pages 1523-1531.
    5. Sabzevar, Nikoo & Enns, S.T. & Bergerson, Joule & Kettunen, Janne, 2017. "Modeling competitive firms' performance under price-sensitive demand and cap-and-trade emissions constraints," International Journal of Production Economics, Elsevier, vol. 184(C), pages 193-209.
    6. Lee, Chia-Yen & Zhou, Peng, 2015. "Directional shadow price estimation of CO2, SO2 and NOx in the United States coal power industry 1990–2010," Energy Economics, Elsevier, vol. 51(C), pages 493-502.
    7. Münnich Vass, Miriam & Elofsson, Katarina & Gren, Ing-Marie, 2013. "An equity assessment of introducing uncertain forest carbon sequestration in EU climate policy," Energy Policy, Elsevier, vol. 61(C), pages 1432-1442.
    8. Flachsland, Christian & Brunner, Steffen & Edenhofer, Ottmar & Creutzig, Felix, 2011. "Climate policies for road transport revisited (II): Closing the policy gap with cap-and-trade," Energy Policy, Elsevier, vol. 39(4), pages 2100-2110, April.
    9. Edward B. Barbier, 2013. "Is a global crisis required to prevent climate change? A historical–institutional perspective," Chapters, in: Roger Fouquet (ed.), Handbook on Energy and Climate Change, chapter 28, pages 598-614, Edward Elgar Publishing.
    10. Edward B. Barbier, 2012. "Économie verte et développement durable : enjeux de politique économique," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(4), pages 97-117.
    11. Brkic, Dejan, 2009. "Serbian gas sector in the spotlight of oil and gas agreement with Russia," Energy Policy, Elsevier, vol. 37(5), pages 1925-1938, May.
    12. Gren, Ing-Marie & Carlsson, Mattias, 2013. "Economic value of carbon sequestration in forests under multiple sources of uncertainty," Journal of Forest Economics, Elsevier, vol. 19(2), pages 174-189.
    13. Edward Barbier, 2011. "The policy challenges for green economy and sustainable economic development," Natural Resources Forum, Blackwell Publishing, vol. 35(3), pages 233-245, August.
    14. Gren, Ing-Marie Gren & Elofsson, Katarina, 2013. "Value of land use for carbon sequestration: An application to the EU climate policy," Working Paper Series 2012:4, Swedish University of Agricultural Sciences, Department Economics.
    15. Levihn, Fabian, 2016. "On the problem of optimizing through least cost per unit, when costs are negative: Implications for cost curves and the definition of economic efficiency," Energy, Elsevier, vol. 114(C), pages 1155-1163.

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    Keywords

    Emission trading International carbon market CO2 price;

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