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Climate policies for road transport revisited (II): Closing the policy gap with cap-and-trade

Author

Listed:
  • Christian Flachsland
  • Steffen Brunner
  • Ottmar Edenhofer
  • Felix Creutzig

Abstract

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.

Suggested Citation

  • Christian Flachsland & Steffen Brunner & Ottmar Edenhofer & Felix Creutzig, 2010. "Climate policies for road transport revisited (II): Closing the policy gap with cap-and-trade," Working Papers 2, Department of Climate Change Economics, TU Berlin.
  • Handle: RePEc:ecc:wpaper:2
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    References listed on IDEAS

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    Cited by:

    1. Lutsey, Nicholas, 2012. "Regulatory and technology lead-time: The case of US automobile greenhouse gas emission standards," Transport Policy, Elsevier, vol. 21(C), pages 179-190.
    2. AlSabbagh, Maha & Siu, Yim Ling & Guehnemann, Astrid & Barrett, John, 2017. "Integrated approach to the assessment of CO2e-mitigation measures for the road passenger transport sector in Bahrain," Renewable and Sustainable Energy Reviews, Elsevier, vol. 71(C), pages 203-215.
    3. Frédéric Babonneau & Alain Haurie & Marc Vielle, 2016. "Assessment of balanced burden-sharing in the 2050 EU climate/energy roadmap: a metamodeling approach," Climatic Change, Springer, vol. 134(4), pages 505-519, February.
    4. Kesicki, Fabian, 2013. "What are the key drivers of MAC curves? A partial-equilibrium modelling approach for the UK," Energy Policy, Elsevier, vol. 58(C), pages 142-151.
    5. 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.
    6. Font Vivanco, David & Kemp, René & van der Voet, Ester, 2016. "How to deal with the rebound effect? A policy-oriented approach," Energy Policy, Elsevier, vol. 94(C), pages 114-125.
    7. Ruzzenenti, Franco & Basosi, Riccardo, 2017. "Modelling the rebound effect with network theory: An insight into the European freight transport sector," Energy, Elsevier, vol. 118(C), pages 272-283.
    8. repec:spr:nathaz:v:88:y:2017:i:2:d:10.1007_s11069-017-2886-3 is not listed on IDEAS
    9. Heinrichs, Heidi & Jochem, Patrick & Fichtner, Wolf, 2014. "Including road transport in the EU ETS (European Emissions Trading System): A model-based analysis of the German electricity and transport sector," Energy, Elsevier, vol. 69(C), pages 708-720.
    10. repec:eee:transa:v:106:y:2017:i:c:p:22-50 is not listed on IDEAS
    11. Davide Natalini & Giangiacomo Bravo, 2013. "Encouraging Sustainable Transport Choices in American Households: Results from an Empirically Grounded Agent-Based Model," Sustainability, MDPI, Open Access Journal, vol. 6(1), pages 1-20, December.
    12. Hans, Michiels & Carolien, Beckx & Liesbeth, Schrooten & Stijn, Vernaillen & Tobias, Denys, 2012. "Exploring the transition to a clean vehicle fleet: From stakeholder views to transport policy implications," Transport Policy, Elsevier, vol. 22(C), pages 70-79.
    13. Maggi,Elena & Vallino,Elena, 2017. "An Agent-Based Simulation of Urban Passenger Mobility and Related Policies. The Case Study of an Italian Small City," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201708, University of Turin.
    14. Solaymani, Saeed & Kardooni, Roozbeh & Yusoff, Sumiani Binti & Kari, Fatimah, 2015. "The impacts of climate change policies on the transportation sector," Energy, Elsevier, vol. 81(C), pages 719-728.
    15. Paltsev, Sergey & Chen, Y.-H. Henry & Karplus, Valerie & Kishimoto, Paul & Reilly, John & Loeschel, Andreas & von Graevenitz, Kathrine & Koesler, Simon, 2015. "Reducing CO2 from cars in the European Union: Emission standards or emission trading?," CAWM Discussion Papers 84, University of Münster, Center of Applied Economic Research Münster (CAWM).
    16. repec:fes:wpaper:wpaper77 is not listed on IDEAS
    17. Ottmar Edenhofer & Christian Flachsland, 2012. "Die Nutzung globaler Gemeinschaftsgüter: Politökonomische Herausforderungen an die Klimapolitik," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 65(12), pages 29-35, June.
    18. Tomaschek, Jan, 2015. "Marginal abatement cost curves for policy recommendation – A method for energy system analysis," Energy Policy, Elsevier, vol. 85(C), pages 376-385.
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    More about this item

    Keywords

    Climate Policy; Road Transport; Cap-and-trade;

    JEL classification:

    • Z0 - Other Special Topics - - General
    • Z1 - Other Special Topics - - Cultural Economics

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