Commitments through financial options: an alternative for delivering climate change obligations

Ismer, Roland; Neuhoff, Karsten

doi:10.3763/cpol.2008.0358

Cited by 17 publications

(13 citation statements)

References 11 publications

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“…These gateways are subject to regular reviews. As an alternative, Ismer and Neuhoff (2006) propose that governments issue put options on the price of allowances. Such options would give investors in energy efficiency the right, but not the obligation, to sell allowances to the government at a predetermined (strike) price.…”

Section: Macrolevelmentioning

confidence: 99%

Incentives for energy efficiency in the EU Emissions Trading Scheme

2008

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This paper explores the incentives for energy efficiency induced by the European Union Emissions Trading Scheme (EU ETS) for installations in the energy and industry sectors. Our analysis of the National Allocation Plans for 27 EU Member States for phase 2 of the EU ETS (2008)(2009)(2010)(2011)(2012) suggests that the price and cost effects for improvements in carbon and energy efficiency in the energy and industry sectors will be stronger than in phase 1 (2005)(2006)(2007), but only because the European Commission has substantially reduced the number of allowances to be allocated by the Member States. To the extent that companies from these sectors (notably power producers) pass through the extra costs for carbon, higher prices for allowances translate into stronger incentives for the demand-side energy efficiency. With the cuts in allocation to energy and industry sectors, these will be forced to greater reductions; thus, the non-ET sectors like household, tertiary, and transport will have to reduce less, which is more in line with the costefficient share of emission reductions. The findings also imply that domestic efficiency improvements in the energy and industry sectors may remain limited since companies can make substantial use of credits from the Kyoto Mechanisms. The analysis of the rules for existing installations, new projects, and closures suggests that incentives for energy efficiency are higher in phase 2 than in phase 1 because of the increased application of benchmarking to new and existing installations and because a lower share of allowances will be allocated for free. Nevertheless, there is still ample scope to further improve the EU ETS so that the full potential for energy efficiency can be realized.

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Section: Macrolevelmentioning

confidence: 99%

Incentives for energy efficiency in the EU Emissions Trading Scheme

2008

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“…As better information about EU GHG supply and demand, and about the costs and benefits of reducing GHG emissions, arrives, so the intervention price can be modified, although there are probably good arguments for issuing long-term contracts for differences on the prevailing price to provide greater certainty for low-carbon investments. There are possibly stronger arguments for governments issuing put options on carbon to create credibility (Ismer and Neuhoff 2006).…”

Section: Discussionmentioning

confidence: 99%

Climate Change Policy and Its Effect on Market Power in the Gas Market

Newbery

2008

Journal of the European Economic Association

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The European Emissions Trading Scheme (ETS) limits CO2 emissions from covered sectors, especially electricity (accounting for about 56%). At $44 billion per annum. the ETS is the largest emissions trading system ever, 40 times larger than US programmes. The article demonstrates that fixing the quantity rather than the price of carbon reduces the price elasticity of demand for gas appreciably, amplifying the market power of gas suppliers, and amplifying the impact of gas price increases on the electricity price. A rough estimate using British data suggests that this could increase the Lerner Index by 50%. (JEL: Q54, Q58, L94)

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“…in emissionshandelssystemen etwa können Mindestpreise durch die Ausgabe von Put-Optionen verankert werden (Ismer und Neuhoff 2009): Diese eigentumstitel würden von der regierung ausgegeben und garantieren ihrem Besitzer, zu einem bestimmten Zeitpunkt in der Zukunft -zum Beispiel im Jahr 2030 -Emissionszertifikate zu einem festgeschriebenen Preis an die regierung verkaufen zu können. Damit erhöht sich der Anreiz zukünftiger regierungen, den Preis im Handelssystem durch Verknappung über diesem Mindestwert zu halten, um den kostspieligen Aufkauf von Zertifikaten zu vermeiden.…”

Section: Glaubwürdige Klimapolitik Auf Nationalstaatlicher Ebeneunclassified

Wer besitzt die Atmosphäre?

2011

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Zusammenfassung: klimapolitik verteilt das Weltvermögen um: Wenn die internationale Staatengemeinschaft ein ambitioniertes klimaschutzziel erreichen will, muss sie die Nutzung der Atmosphäre begrenzen und die rechte an diesem Deponieraum verteilen. Dies hätte zur Folge, dass die Besitzer fossiler ressourcen einen Großteil ihrer ressourcenrente verlieren. Darüber hinaus befindet sich die internationale Klimapolitik in einem sozialen Dilemma. Obwohl Klimapolitik für alle Staaten vorteilhaft wäre, haben sie einen Anreiz, sich einem globalen Abkommen zu entziehen. Dennoch gibt es Ansätze, mit denen das kooperationsproblem möglicherweise über-wunden werden könnte. Wirksame klimapolitik erfordert außerdem glaubhafte institutionelle Selbstverpflichtungen durch Regierungen.Schlüsselwörter: klimapolitik · ressourcenrente · klimarente · emissionshandel · Spieltheorie Abstract: Climate policy redistributes global economic wealth. in order to achieve an ambitious climate stabilization goal, the international community needs to agree on a long-term emission budget and its distribution. this would reduce the resource rent of the owners of fossil resources. The international community also faces a social dilemma. While climate policy is beneficial for all countries, each has an incentive to defect from a global agreement. However, there are some approaches that might enable the international community to overcome the cooperation problem. effective climate policy also requires credible institutional commitment by governments.

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Commitments through financial options: an alternative for delivering climate change obligations

Cited by 17 publications

References 11 publications

Incentives for energy efficiency in the EU Emissions Trading Scheme

Incentives for energy efficiency in the EU Emissions Trading Scheme

Climate Change Policy and Its Effect on Market Power in the Gas Market

Wer besitzt die Atmosphäre?

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