The European emissions trading scheme (EU ETS) is the centrepiece of Europe's climate policy. The system has been undermined variously by the weakness of its regulation, an undesirable overlap with other public policies and the far-reaching economic and financial crisis that caused the market price of allowances to plunge. This article attempts to identify the conditions for making the coming years of the EU ETS a success. It draws historical lessons from the eight years the scheme has been in operation, and then analyzes, using the ZEPHYR-Flex model, the various interventions by the public authorities currently under discussion in order to revive the market. These simulations reveal the risk of carrying forward problems to the future, with further clouding of the visibility needed by ETS actors in the long term. Finally, the article proposes to draw lessons from monetary policy by outlining what might be the mandate of an Independent Carbon Market Authority, with responsibility for the dynamic management of the supply of allowances, and whose main mission would be to ensure the optimal linkage between the different temporal horizons of the climate strategy.
China is now the world's biggest emitter of greenhouse gases with 7467 million tons (Mt) carbon dioxide equivalent (CO 2 e) in 2005, with agriculture accounting for 11% of this total. As elsewhere, agricultural emissions mitigation policy in China faces a range of challenges due to the biophysical complexity, the heterogeneity of farming systems, and social-economic barriers. Existing research has contributed to improving our understanding of the technical potential of mitigation measures in this sector (i.e. what works). But for policy purposes it is important to convert these measures into a feasible economic potential, which provides a perspective on whether agricultural emissions reduction measures are low cost relative to mitigation measures and overall potential offered by other sectors of the economy. We develop a bottom-up marginal abatement cost curve (MACC) representing the cost of mitigation measures applicable in addition to business-as-usual agricultural practices. The MACC demonstrates that while the sector can offer a maximum technical mitigation potential of 402 MtCO2e in 2020, of which a reduction of 135 MtCO2e is potentially available at zero or negative cost (i.e. a cost saving), and 176 MtCO2e (approximately 44% of the total) can be abated at a cost below a threshold carbon price of ¥ 100 (approximately €12) per tCO2e. Our findings highlight cost-effectiveness of nitrogen fertilizer and manure best management practices, and animal breeding practices. We outline the assumptions underlying MACC construction and discuss some scientific, socioeconomic and institutional barriers to realizing the indicated levels of mitigation.
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The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.
Through its Emissions Trading Scheme (EU ETS), the European Union is leading the world's first effort to mobilize market forces to tackle global climate change. This article, examines how the EU ETS has performed thus far, at the conclusion of the scheme's first trading phase (2005–2007). Insights drawn from this analysis may inform not only the scheme's future operation, but also the establishment of greenhouse gas trading programs outside Europe. This interim analysis finds that Phase I of the EU ETS (2005–2007) has successfully established a carbon price for significant segments of economic activity in Europe, as well as the necessary trading infrastructure and experience; that the price on carbon has so far had limited impact on the industrial competitiveness of European industry; that it has provided an important stimulus to greenhouse gas emission reductions outside of Europe, primarily through the Clean Development Mechanism; and that the EU ETS provides useful lessons for other countries seeking to limit GHG emissions and for future global climate negotiations.
International audienceChina faces significant challenges in reconciling food security goals with the objective of becoming a low-carbon economy. Agriculture accounts for approximately 11 % of China’s national greenhouse gas (GHG) emissions with cereal production representing a large proportion (about 32 %) of agricultural emissions. Minimizing emissions per unit of product is a policy objective and we estimated the GHG intensities (GHGI) of rice, wheat and maize production in China from 1985 to 2010. Results show significant variations of GHGIs among Chinese provinces and regions. Relative to wheat and maize, GHGI of rice production is much higher owing to CH4 emissions, and is more closely related to yield levels. In general, the south and central has been the most carbon intensive region in rice production while the GHGI of wheat production is highest in north and northwest provinces. The southwest has been characterized by the highest maize GHGI but the lowest rice GHGI. Compared to the baseline scenario, a 2 % annual reduction in N inputs, combined with improved water management in rice paddies, would mitigate 17 % of total GHG emissions from cereal production in 2020 while sustaining the required yield increase to ensure food security. Better management practices will entail additional gains in soil organic carbon further decreasing GHGI. To realize the full mitigation potential while maximizing agriculture development, the design of appropriate policies should accommodate local conditions
Linkages between Emissions Trading Systems are deemed an important element of the future climate policy landscape. They are, however, difficult to agree and remain few and far between. Temporary restrictions on permit trading have potential to facilitate and gradually approach unrestricted, full linkage. We compare the relative merits of several link restrictions in this respect, namely quantitative transfer limits, border taxes on transfers, exchange and discount rates, and unilateral linkage. To this end, we develop a simple model to have a unifying framework which, in conjunction with lessons we draw from realworld experiences, serves as a basis for a broader, policy-oriented discussion. While quantitative restrictions seem to be the natural route to full linkage, they can lead to uncertain distributional effects and weaken price signals. These aspects are mitigated under a border permit tax, but this policy seems harder to implement. Exchange rates have potential to adjust for programmes' stringencies and raise ambition over time, but can be challenging to select. As experience corroborates, unilateral linkage can be a convenient approach.
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