A Technology-Based Climate Regime

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A Technology-Based Climate Regime Powered By Docstoc
					        TAXBEN Final Conference
     CEPS - 27 November 2006, Brussels

        Policy Discussion of
         Work package 5:
Abating global warming, emissions
 trade and the need for European
           coordination

Barbara K. Buchner

Fondazione Eni Enrico Mattei, Italy
                                         1
Overview
Ø Climate Policies and Economic Growth by Alho, K. (ETLA)
Ø Post-2012 Climate Policies: A Simulation Study with
  WorldScan by Boeters, S. (CPB), Verweij, G. (CPB)
Ø Taxes and Tradable Permits in the EU to curb CO2
  Emissions: Efficient and Transitional Climate Policies A
  Combined Analysis Using PACE and WorldScan by
  Böhringer, C. (ZEW), Boeters, S. (CPB), Moslener, U. (ZEW)
Ø Post-Kyoto Climate Policies: From G8 to L20 by Böhringer,
  C. (ZEW), Moslener, U. (ZEW)
Ø Efficiency Losses from Overlapping Economic Instruments
  in European Carbon Emissions Regulation by Böhringer, C.
  (ZEW), Koschel, H. (ZEW), Moslener, U. (ZEW)
Ø The EU-ETS and existing energy taxes by Veenendaal, P.J.J.
  (CPB)

                                                           2
        Climate Policies and Economic Growth
Main question:
Ø What are economic effects of climate policies?
ð Important policy question (US position, Stern…)
Main insights for policy:
Ø Technology matters
Ø Price of tradable permit significant role
Ø Optimal subsidy to R&D activity in clean energy
  technology quite high
Ø But: consider that reallocation of resources from
  energy-intensive sectors to those that use other
  inputs is difficult

Ä CO2 = different
Ä Indeed, leakage not that bad                        3
Post-2012 climate policy - Background

    Broad participation on climate change control
    is hard to achieve because of:
  Ø Public good – free-riding incentives
  Ø Large economic and environmental structural
    asymmetries among world regions
  Ø Absence of supra-national authority

  Ä Difficulty of negotiations
  Ä Low environmental effectiveness of Kyoto
    Protocol
  Ä Look for incentives

                                                    4
                        Post-2012 Climate Policies
 Main question:
 Ø How to extend climate policies?
 ð Important policy question: currently negotiations
 Main insights for policy:
 Ø 3 separate markets: expensive
 Ø Link would enable efficiency gains, but there are
   winners & losers and indirect effects
 Ø CDM can set incentives (FSU?)
 Ø Stand-alone policy of US might benefit EU



Ä essential to identify incentives for each country
  to find common ground for negotiations               5
Efficient and Transitional Climate Policies
  Main question:
  Ø What is trade-off between allocative / overall
    efficiency and distributional considerations /
    political feasibility?
  ð Important policy question: wait & see or act?
    Turning point? Is there a “point of no return”?
  Main insights for policy:
  Ø Political feasible transition scenarios: initially
    lower than efficient abatement levels, with more
    pronounced temperature increase
    F requires sharper emissions decline later on
  Ø Stringent targets infeasible / expensive
  Ø Obstacle for future climate negotiations
  Ä go beyond political feasibility
                                                         6
   From G8 to L20: a smaller negotiation group
 Main question:
 Ø Is negotiation in a smaller group easier/more
   efficient?
 ð Important policy question: are there more
   participation incentives for such an approach?
 Main insights for policy:
 Ø In line with theoretic considerations and political
   reality
 Ø But: Trade-off limited ↔ global coverage
   F may not be easily agreed upon (costs)
 Ø Key role of equity

Ä Difficult but essential to cover all countries:
  policy proposal: regional/subglobal climate blocs
ð involve all, binding / non-binding elements            7
EU Carbon Policy: Overlapping Economic Instruments
  Main question:
  Ø Potential efficiency losses from co-existence of
    emission taxes and emissions trading in EU?
  ð Important policy question: are there distortions?
    implications for EU ETS design / climate policy?
  Main insights for policy:
  Ø Price-based mechanism within quantity-based
    scheme: unlikely to alter environ. effectiveness;
    increases overall EU compliance costs
  Ø Carbon tax for non-trading sectors
  Ø Careful handling of carbon/energy taxes in
    trading sectors

 Ä Portfolio of climate policy instruments: yes
 Ä But: careful design                                  8
               EU ETS and existing energy taxes
Main question:
Ø Interactions between EU ETS & EU energy taxation
Main insights for policy:
Ø Taxes differ strongly between countries and sectors;
  mainly political reasons for energy taxes, almost no
  environmental considerations
Ø Existing energy taxes: distortive F power of
  rearranging existing taxes
Ø EU ETS: given energy taxes, substantial extension
  unlikely to increase efficiency
Ø EU ETS: auctioning can increase economic welfare

Ä CO2 emission reductions often as by-product of
  other (mainly energy-related) concerns
ð Portfolio approach crucial                             9
Summary: The Facts

  FSpeed of climate change: alarming, unexpected
  FIncreasing evidence for potentially large
   impacts of climate change
  FIncreasing evidence for high costs or even
   infeasibility of reaching stringent targets
  FNeed to involve as many countries as possible
  FCO2 = different (indeed, leakage not that bad)
  FCO2 emission reductions often as by-product
   of other (mainly energy-related) concerns
  FExisting energy taxes: distortive
Ä Use insights of papers to set incentives for
                                                    10
  participation
            Summary: Implications for post-2012
  FDifficult but essential to cover all countries:
   regional / subglobal climate blocs
    ðInvolve all, binding / non-binding elements
  FEssential to identify incentives for
   participation and compliance
    ðBetter coordination / institutions
    ðPortfolio approach to climate policy
      But: careful design
  FLinking of ET markets important but
   complicated
    ðfirst step: link CDM to ET markets
Ä Global participation, but differentiated commitments
Ä Improvement of energy system
                                                      11
Ä Go beyond political feasibility!
Summary: Implications for EU climate policy
   FEssential to identify incentives and impacts
    for each country / sector
   FDifficult but essential to cover all sectors
     ðSubstantial extension of EU ETS not
       recommended due to existing energy taxes
     ðBetter coordination
     ðPortfolio approach to EU climate policy
       But: careful design
   FLinking of ET markets important but
    complicated (current evidence from EU ETS)
     ðfirst step: strengthen link to CDM
   FOne more recommendation for auctioning
                Ä Go beyond political feasibility!   12
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web   http://www.feem.it
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posted:6/19/2013
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