Climate policies for road transport revisited (II): Closing the policy gap with cap-and-trade
Current policies in the road transport sector fail to deliver consistent and efficient incentives for greenhouse gas abatement (see companion article by Creutzig et al., 2010a). Market-based instruments such as cap-and-trade systems close this policy gap and are complementary to traditional policies which are required where specific market failures arise. Even in presence of strong existing non-market policies, cap-and-trade delivers additional abatement and efficiency by incentivizing demand side abatement options. This paper analyzes generic design options and economic impacts of including the European road transport sector to the EU ETS. The point of regulation in a road transport cap-and-trade system should be upstream in the fuel chain to ensure effectiveness (cover all life-cycle emissions and avoid double-counting), efficiency (incentivize all abatement options) and low transaction costs. Based on year 2020 marginal abatement cost curves from different models and current EU climate policy objectives we show that in contrast to conventional wisdom road transport inclusion would not change the EU ETS allowance price. This puts concerns over industrial carbon leakage as a consequence of adding road transport to the EU ETS into perspective.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Raux, Charles & Marlot, Grégoire, 2005.
"A system of tradable CO2 permits applied to fuel consumption by motorists,"
Elsevier, vol. 12(3), pages 255-265, May.
- Charles Raux & Grégoire Marlot, 2005. "A System of Tradable CO2 Permits Applied to Fuel Consumption by Motorists," Post-Print halshs-00067833, HAL.
- Böhringer, Christoph & Rutherford, Thomas F. & Tol, Richard S. J., 2009. "The EU 20/20/2020 Targets: An Overview of the EMF22 Assessment," Papers WP325, Economic and Social Research Institute (ESRI).
- Stavins, Robert, 2007. "A U.S. Cap-and-Trade System to Address Global Climate Change," Working Paper Series rwp07-052, Harvard University, John F. Kennedy School of Government.
- Stavins, Robert & Jaffe, Adam & Newell, Richard, 2004.
"A Tale of Two Market Failures: Technology and Environmental Policy,"
dp-04-38, Resources For the Future.
- Jaffe, Adam B. & Newell, Richard G. & Stavins, Robert N., 2005. "A tale of two market failures: Technology and environmental policy," Ecological Economics, Elsevier, vol. 54(2-3), pages 164-174, August.
- Hans-Werner Sinn, 2008.
"Public policies against global warming: a supply side approach,"
International Tax and Public Finance,
Springer, vol. 15(4), pages 360-394, August.
- Sinn, Hans-Werner, 2008. "Public policies against global warming: A supply side approach," Munich Reprints in Economics 19638, University of Munich, Department of Economics.
- Jos Sijm & Karsten Neuhoff & Yihsu Chen, 2006.
"CO 2 cost pass-through and windfall profits in the power sector,"
Taylor & Francis Journals, vol. 6(1), pages 49-72, January.
- Sijm, J. & Neuhoff, K. & Chen, Y., 2006. "CO2 cost pass through and windfall profits in the power sector," Cambridge Working Papers in Economics 0639, Faculty of Economics, University of Cambridge.
- Matthias Kalkuhl & Ottmar Edenhofer, 2010. "Prices vs. Quantities and the Intertemporal Dynamics of the Climate Rent," CESifo Working Paper Series 3044, CESifo Group Munich.
- Hepburn, C. & Grubb, M. & Neuhoff, K. & Matthes , F. & Tse, M., 2006.
"Auctioning of EU ETS Phase II allowances: how and why?,"
Cambridge Working Papers in Economics
0644, Faculty of Economics, University of Cambridge.
- Cameron Hepburn & Michael Grubb & Karsten Neuhoff & Felix Matthes & Maximilien Tse, 2006. "Auctioning of EU ETS phase II allowances: how and why?," Climate Policy, Taylor & Francis Journals, vol. 6(1), pages 137-160, January.
- Fischer, Carolyn & Newell, Richard, 2004.
"Environmental and Technology Policies for Climate Mitigation,"
dp-04-05, Resources For the Future.
- Fischer, Carolyn & Newell, Richard G., 2008. "Environmental and technology policies for climate mitigation," Journal of Environmental Economics and Management, Elsevier, vol. 55(2), pages 142-162, March.
- Criqui, Patrick & Mima, Silvana & Viguier, Laurent, 1999. "Marginal abatement costs of CO2 emission reductions, geographical flexibility and concrete ceilings: an assessment using the POLES model," Energy Policy, Elsevier, vol. 27(10), pages 585-601, October.
- Ottmar Edenhofer & Brigitte Knopf & Terry Barker & Lavinia Baumstark & Elie Bellevrat & Bertrand Chateau & Patrick Criqui & Morna Isaac & Alban Kitous & Socrates Kypreos & Marian Leimbach & Kai Lessma, 2010.
"The economics of low stabilization: Model comparison of mitigation strategies and costs,"
- Ottmar Edenhofer , Brigitte Knopf, Terry Barker, Lavinia Baumstark, Elie Bellevrat, Bertrand Chateau, Patrick Criqui, Morna Isaac, Alban Kitous, Socrates Kypreos, Marian Leimbach, Kai Lessmann, Bertra, 2010. "The Economics of Low Stabilization: Model Comparison of Mitigation Strategies and Costs," The Energy Journal, International Association for Energy Economics, vol. 0(Special I).
- repec:dau:papers:123456789/10174 is not listed on IDEAS
- M. L. Weitzman, 1973.
"Prices vs. Quantities,"
106, Massachusetts Institute of Technology (MIT), Department of Economics.
- Kenneth A. Small & Kurt Van Dender, 2006.
"Fuel Efficiency and Motor Vehicle Travel: The Declining Rebound Effect,"
050603, University of California-Irvine, Department of Economics.
- Kenneth A. Small & Kurt Van Dender, 2007. "Fuel Efficiency and Motor Vehicle Travel: The Declining Rebound Effect," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 25-52.
- Anger, Niels, 2008. "Emissions trading beyond Europe: Linking schemes in a post-Kyoto world," Energy Economics, Elsevier, vol. 30(4), pages 2028-2049, July.
- David M Newbery, 1992. "Should Carbon Taxes Be Additional to Other Transport Fuel Taxes?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 49-60.
- Proost, Stef & Delhaye, Eef & Nijs, Wouter & Regemorter, Denise Van, 2009. "Will a radical transport pricing reform jeopardize the ambitious EU climate change objectives?," Energy Policy, Elsevier, vol. 37(10), pages 3863-3871, October.
- Karan Capoor & Philippe Ambrosi, . "State and Trends of the Carbon Market 2009," World Bank Other Operational Studies 13403, The World Bank.
- Loreta Stankeviciute & Alban Kitous & Patrick Criqui, 2008.
"The fundamentals of the future international emissions trading system,"
- 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.
- Sterner, Thomas, 2007. "Fuel taxes: An important instrument for climate policy," Energy Policy, Elsevier, vol. 35(6), pages 3194-3202, June.
- Christa Clapp & Katia Karousakis & Barbara Buchner & Jean Château, 2009. "National and Sectoral GHG Mitigation Potential: A Comparison Across Models," OECD/IEA Climate Change Expert Group Papers 2009/7, OECD Publishing.
When requesting a correction, please mention this item's handle: RePEc:ecc:wpaper:2. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Felix Creutzig)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.