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EU climate change policy 2013-2020: Using the Clean Development Mechanism more effectively in the non-EU-ETS Sector

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  • Gorecki, Paul K.
  • Lyons, Sean
  • Tol, Richard S.J.

Abstract

Under European Union proposals for CO2 emission reduction between 2013 and 2020, a Member State can transfer to another Member State the right to use its unused Clean Development Mechanism ("CDM") credits. The paper addresses three issues in relation to these CDM Warrants ("CDMW"). First, how should the Member State treat the CDMW in making decisions concerning emission reduction? The price of the property right is an important signal for a Member State in deciding the level of domestic abatement compared to trading in CDMWs. In other words, a shadow price for CDMWs should be used in formulating the emission strategy in order to determine whether or not a Member State is a buyer or seller of CDMWs. Second, what mechanism should be used to facilitate the exchange of CDMWs? The preferred mechanism depends on the market size, over which there appears to be some ambiguity: market intermediaries such as Over-the-Counter trades and exchanges are preferred if market size is small; auctions if the market size is large. Third, who should realise the value of CDMWs--the State, existing polluters, etc.? The value of CDMWs should accrue to the State.

Suggested Citation

  • Gorecki, Paul K. & Lyons, Sean & Tol, Richard S.J., 2010. "EU climate change policy 2013-2020: Using the Clean Development Mechanism more effectively in the non-EU-ETS Sector," Energy Policy, Elsevier, vol. 38(11), pages 7466-7475, November.
  • Handle: RePEc:eee:enepol:v:38:y:2010:i:11:p:7466-7475
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    References listed on IDEAS

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    1. Capros, Pantelis & Mantzos, Leonidas & Parousos, Leonidas & Tasios, Nikolaos & Klaassen, Ger & Van Ierland, Tom, 2011. "Analysis of the EU policy package on climate change and renewables," Energy Policy, Elsevier, vol. 39(3), pages 1476-1485, March.
    2. Richard S. J. Tol & Tim Callan & Thomas Conefrey & John FitzGerald & Seán Lyons & Laura Malaguzzi Valeri & Susan Scott, 2008. "A Carbon Tax for Ireland," Papers WP246, Economic and Social Research Institute (ESRI).
    3. Tol, Richard S.J., 2009. "Intra- and extra-union flexibility in meeting the European Union's emission reduction targets," Energy Policy, Elsevier, vol. 37(11), pages 4329-4336, November.
    4. Michaelowa, Axel & Jotzo, Frank, 2005. "Transaction costs, institutional rigidities and the size of the clean development mechanism," Energy Policy, Elsevier, vol. 33(4), pages 511-523, March.
    5. Karan Capoor & Philippe Ambrosi, "undated". "State and Trends of the Carbon Market 2006," World Bank Other Operational Studies 13409, The World Bank.
    6. Ellis, Jane & Winkler, Harald & Corfee-Morlot, Jan & Gagnon-Lebrun, Frederic, 2007. "CDM: Taking stock and looking forward," Energy Policy, Elsevier, vol. 35(1), pages 15-28, January.
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    Cited by:

    1. Barros, Carlos Pestana & Chen, Zhongfei & Managi, Shunsuke & Antunes, Olinda Sequeira, 2013. "Examining the cost efficiency of Chinese hydroelectric companies using a finite mixture model," Energy Economics, Elsevier, vol. 36(C), pages 511-517.
    2. Harmsen, Robert & Eichhammer, Wolfgang & Wesselink, Bart, 2011. "Imbalance in Europe's Effort Sharing Decision: Scope for strengthening incentives for energy savings in the non-ETS sectors," Energy Policy, Elsevier, vol. 39(10), pages 6636-6649, October.
    3. Pestana Barros, Carlos & Sequeira Antunes, Olinda, 2011. "Performance assessment of Portuguese wind farms: Ownership and managerial efficiency," Energy Policy, Elsevier, vol. 39(6), pages 3055-3063, June.
    4. Chen, Zhongfei & Barros, Carlos Pestana & Borges, Maria Rosa, 2015. "A Bayesian stochastic frontier analysis of Chinese fossil-fuel electricity generation companies," Energy Economics, Elsevier, vol. 48(C), pages 136-144.

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