Incentives for energy efficiency in the EU Emissions Trading Scheme

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 (2008–2012) 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 (2005–2007), 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 cost-efficient 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.

Analysis of the impacts of combining carbon taxation and emission trading on different industry sectors

Application of price mechanisms has been the important instrument for carbon reduction, among which the carbon tax has been frequently advocated as a cost-effective economic tool. However, blanket taxes applied to all industries in a country might not always be fair or successful. It should therefore be implemented together with other economic tools, such as emission trading, for CO₂ reduction. This study aims to analyze the impacts of combining a carbon tax and emission trading on different industry sectors. Results indicate that the “grandfathering rule (RCE2000)” is the more feasible approach in allocating the emission permit to each industry sector. Results also find that the accumulated GDP loss of the petrochemical industry by the carbon tax during the period 2011–2020 is 5.7%. However, the accumulated value of GDP will drop by only 4.7% if carbon taxation is implemented together with emission trading. Besides, among petrochemical-related industry sectors, up-stream sectors earn profit from emission trading, while down-stream sectors have to purchase additional emission permits due to failure to achieve their emission targets.     

Greenhouse gas emission trading schemes: a new tool for the environmental regulator's kit

As the European Union greenhouse gas emission trading scheme (ETS) is emerging, it seems interesting to look back on previous experiments and to bring together a few elements of reflection about the pertinence of ETS as a new policy tool to regulate industrial pollution. So far, several regulatory tools have been used to decrease pollution. This article focuses on two of them, command-and-control (CAC) and ETS. There is no simple answer to which one is more efficient. It depends strongly on the context. Given a few elements outlined in this paper, the choice of an ETS to abate industrial emissions of greenhouse gases in the European Union (EU) can be considered pertinent. But, ultimately, what makes a scheme environmentally efficient is not the tool in itself (ETS or CAC) but the ambition of the target. Hence the design of the National Allocation Plans setting the emission caps are of paramount importance. They will make the EU ETS either a useless mess or an effective climate change mitigation policy tool.     

A tripartite equilibrium for carbon emission allowance allocation in the power-supply industry

In the past decades, there has been a worldwide multilateral efforts to reduce carbon emissions. In particular, the “cap-and-trade” mechanism has been regarded as an effective way to control emissions. This is a market-based approach focused on the efficient allocation of initial emissions allowances. Based on the “grandfather” allocation method, this paper develops an alternative method derived from Boltzmann distribution to calculate the allowances. Further, with fully considering the relationship between the regional authority, power plants and grid company, a three-level multi-objective model for carbon emission allowance allocations in the power-supply industry is presented. To achieve tripartite equilibrium, the impacts on electricity output, carbon emissions and carbon intensity of the allocation method, allocation cap, and emission limits are assessed. The results showed that the greatest impact was seen in the emission limits rather than the allocation cap or allocation method. It also indicated that to effectively achieve reduction targets, it is necessary to allocate greater allowances to lower carbon intensity power plants. These results demonstrated the practicality and efficiency of the proposed model in seeking optimal allocation policies.     

Next allocation phase of the EU emissions trading scheme: How tough will the future be?

The development of National Allocation Plans (NAPs) for the first phase 2005–2007 of the EU emissions trading scheme (EU-ETS) was accompanied by the stated concern of the industrial enterprises with installations that fall under the scope of the relevant Directive 2003/87, since the impacts of the allocation in their financial and technical modes of operation were judged to be severe. Thus, the intensity of the negotiations for the next allocation phase (i.e. 2008–2012), is expected to be heated. With a view to assisting enterprises, especially in the energy sector or for which energy use and its management is a crucial part of their activity, to incorporate in their business plans the impacts of the Directive in an informed manner, an attempt is made here to explore the constraints and the available options that will guide the coming EU-ETS potential allocations. In the analysis, the credits derived from the use of CDM are specifically taken into account. The results show that the next allocations would tend to be significantly more stringent than the current ones because of the combined effect of no inter-period transfer of allowances, the amount of CDM credits expected to be available compared to the amount of effort that would be required and the yield of emission reductions from existing or planned policies and measures. It becomes then crucial, if not imperative, for the enterprises involved as well as national governments to examine carefully means to address their obligations under the Directive.     

Does EU ETS lead to emission reductions through trade? The case of the Swedish emissions trading sector participants

The first trading period of the European Emissions Trading Scheme (EU ETS) has recently come to an end. The experiences of the actors in the trading sector will be of great importance in evaluating the aim and direction of this “Grand Policy Experiment”. This paper gives an account of the attitudes and actions of the companies included in the Swedish emissions trading sector after about 15 months of experience with the system. The data are based on a study commissioned by the Swedish Environmental Protection Agency, and is a comprehensive survey that encompasses all companies operating installations included in the Swedish Emission Trading Registry. However, the results point in a somewhat disquieting direction. Although the Swedish companies have shown significant interest in reducing emissions, this survey indicates that this is done without close attention to the pricing mechanism of the market-based instruments. If this praxis is widespread within the European trading sector, it can have a serious negative effect on the efficiency of the system.     

An evaluation of possible EU air transport emissions trading scheme allocation methods

The European Commission has been requested by member states to study the incorporation of air transport into their existing emissions trading scheme (ETS). Only CO₂ is to be included, at least initially.     

An impact assessment of electricity and emission allowances pricing in optimised expansion planning of power sector portfolios

The present work concerns a systematic investigation of power sector portfolios through discrete scenarios of electricity and CO₂ allowance prices. The analysis is performed for different prices, from regulated to completely deregulated markets, thus representing different electricity market policies. The modelling approach is based on a stochastic programming algorithm without recourse, used for the optimisation of power sector economics under multiple uncertainties. A sequential quadratic programming routine is applied for the entire investigation period whilst the time-dependent objective function is subject to various social and production constraints, usually confronted in power sectors. The analysis indicated the optimal capacity additions that should be annually ordered from each competitive technology in order to substantially improve both the economy and the sustainability of the system. It is confirmed that higher electricity prices lead to higher financial yields of power production, irrespective of the CO₂ allowance price level. Moreover, by following the proposed licensing planning, a medium-term reduction of CO₂ emissions per MW h by 30% might be possible. Interestingly, the combination of electricity prices subsidisation with high CO₂ allowance prices may provide favourable conditions for investors willing to engage on renewable energy markets.     

Economic impact assessment of Turkey's post-Kyoto vision on emission trading

For the post-Kyoto period, Turkey strongly emphasizes the establishment of national emission trading system by 2015 and its integration with the EU ETS along its accession process to the EU. In this paper, we study the mechanisms of adjustment and economic welfare consequences of various ETS regimes that Turkey considers to apply by 2020, i.e. regional ETS and international trading within the EU ETS. We conduct our analysis under the current EU 20–20–20 emission target, 20%, and also under its revised version, 30%. We find that Turkey has economic gains from linking with the EU ETS under the 20% cap, in comparison to the domestic ETSs. Despite the EU's welfare loss under linkage in comparison to the case where Turkey has domestic abatement efforts, it still prefers linking as it increases economic well being compared to the case where Turkey does not abate. Under 30% cutback, Turkey has critical output loss under linkage due to high abatement burden on the EU, while the EU is better off as it passes some of its abatement burden to Turkey. Therefore, emission quotas and their allocation across the ETS and non ETS sectors become highly critical in distributing the overall economic gains from bilateral trading.     

The impact of China's carbon allowance allocation rules on the product prices and emission reduction behaviors of ETS-covered enterprises

It is an important task for China to allocate carbon emission allowance to realize its carbon reduction target and establish carbon trading market. China has designed several allocation rules within seven pilot regions. What influence those rules may cause is closely related with the enthusiasm of emission trading scheme (ETS) covered enterprises' participation in carbon market, and more importantly, with the mechanism design and sustainable development of carbon market. For this purpose, the multi-stage profit model is developed to analyze the ETS-covered enterprises' product prices and emission reduction behaviors under different allocation rules. The results show that, first, under the rules of grandfathering, self-declaration and auctioning, when deciding the optimal product price and optimal carbon emission reduction, those enterprises may focus on maximizing current stage profit; however, under the rule of benchmarking, those enterprises may care more about the impact of current decisions on the profit in next stage. Second, the optimal product price policy is positively correlated with the price of the same kind products, consumers' low-carbon awareness and government subsidy. Finally, along with the increase of carbon price, consumers' low-carbon awareness and government subsidy and the decrease of carbon emission cap, those enterprises tend to reduce carbon emissions.     

CO2 emission trading within the European Union and Annex B countries: the cement industry case

The cement industry is the third largest carbon emitting industrial sector in the EU. This article presents the foreseeable technological evolution of the cement industry under business as usual circumstances, and examines the effects on the sector of carbon trading. For those purposes a global dynamic simulation model of the cement industry (CEMSIM) has been developed. The model is composed of a series of interconnected modules on cement consumption and production, international trade and capacity planning. This study quantifies the benefits achieved from emission trading in different markets (EU15, EU27 and Annex B), derived both from the revenues of emission trading, and from the lower compliance costs. The magnitude of the potential carbon leakage effect is also assessed.     

Exploring the ancillary benefits of the Kyoto Protocol for air pollution in Europe

An integrated approach to climate change and regional air pollution can harvest considerable ancillary benefits in terms of environmental impacts and costs. This is because both problems are caused to a large extent by the same activity (fossil fuel combustion). Substantial ancillary benefits were found for regional air pollution (SO₂, NO_x, VOC and particulate matter) of implementing the Kyoto Protocol (intended to control greenhouse gas emissions) in Europe. For instance, while three different scenarios on Kyoto implementation were found to reduce European CO₂ emissions by 4–7%, they also reduced European emissions of SO₂ by 5–14% compared with a no Kyoto policies case. The magnitude of ancillary benefits depends on how flexible mechanisms and surplus emission allowances are used in meeting the Kyoto targets. The total cost savings for implementing current policies for regional air pollution of the Kyoto Protocol are of an order of 2.5–7 billion Euro. In all cases, this is in the order of half the costs of the climate policy (4–12 billion Euro). Using flexible mechanisms reduces emissions of air pollutants for Europe as a whole even further than domestic implementation (e.g. 10–14% versus 5% for SO₂ emissions), but the reductions are shifted from Western Europe to Central and Eastern Europe and Russia. The use of surplus emission allowances to achieve the Kyoto targets decreases the ancillary benefits, in particular for the latter group of countries (e.g. unprotected area against acidification increases from 1.3 to 1.7 million ha).     

The European Union Emission Trading System and technological change: The case of the Italian pulp and paper industry

We evaluate the contribution of technological change in reducing CO₂ emissions in the Italian pulp and paper industry during the first and second phases of application of the European Union Emission Trading System (EU-ETS). We decompose the variation in emission and emission intensity into three different types of effects: a composition effect, a technique effect and a scale effect. The composition effect measures the change in emissions and emissions intensity due to a shift in production towards products that cause less emissions. The technique effect measures the change per each type of product, thereby accounting for technology improvements in the production of each type of good produced. The scale effect singles out the reduction in total emission due to an overall reduction in output. We show that the first phase of the application of EU-ETS has led to a reduction in both emissions and emission intensity due to the composition effect. The technological change has had a limited negative impact on emissions in the first phase, while in the second phase there has been limited technology improvement in the industry. However, the figures of the scale effect show that the larger reduction in emission is due to the overall decrease in output.     

A numerical study on combustion and emission characteristics of premixed hydrogen air flames

Main challenges for micro power generators that utilize combustion process for energy production are inadequate residence time, destructive radical wall interactions and intensified heat loss which are mainly rooted from size limitation of such devices. To achieve high and uniform energy output, and bring in a solution to these challenges in an environment friendly manner without any kind of fundamental modification, effect of equivalence ratio on combustion and emission behavior of premixed hydrogen/air flames is numerically investigated in this study. For this purpose, an experimentally tested micro cylindrical combustor model is constructed and premixed hydrogen/air combustion in this model is simulated by varying equivalence ratio between 0.5 and 1.2 to find an optimal equivalence ratio with respect to drawbacks of micro power generators. Combustion and turbulence models implemented in this study are Eddy Dissipation Concept and Standard k-ε models, respectively. A detailed hydrogen/air reaction mechanism which consists of 9 species and 19 steps is employed to accurately gain insight into combustion process. Simulation results show that as the equivalence ratio decreases; centerline temperature distribution gets a lower value and the place where chemical reactions take place moves downstream. The most uniform temperature distribution is achieved between 0.8 and 1.0 equivalence ratios. The highest NO_x formation is at 0.9 equivalence ratio and its mass fraction decreases sharply when the equivalence ratio reduces from 0.9 to 0.5.     

The impact of Chinese carbon emission trading scheme (ETS) on low carbon energy (LCE) investment

China is planning to introduce emission trading scheme (ETS) to decrease CO₂ emission. As low carbon energy (LCE) will play a pivotal role in reducing CO₂ emissions, our paper is to assess the extent and the conditions under which a carbon ETS can deliver LCE investment in China. We chose wind technology as a case study and a real-option based model was built to explore the impact of a number of variables and design features on investment decisions, e.g. carbon and electricity price, carbon market risk, carbon price floor and ceiling and on-grid ratio. We compute critical values of these variables and features and explore trade-offs among them. According to our work, a carbon ETS has a significant effect on wind power plant investment although it cannot support investment in wind power on its own. Carbon price stabilization mechanisms such as carbon price floor can significantly improve the effect of carbon ETS but the critical floor to support investment is still much higher than the carbon price in China pilot ETSs. Our results show that other policy measures will be needed to promote low-carbon energy development in China.     

A CGE analysis to study the impacts of energy investment on economic growth and carbon dioxide emission: A case of Shaanxi Province in western China

A two-region ten-sector computable general equilibrium (CGE) model was built to analyze the effects of investment growth in the energy sectors of western areas of China on the local economy and emission of carbon dioxide (CO₂). There are three different scenarios in the quantitative analysis for the investment increase in energy sectors of the western areas. The investment to energy sectors is increased at the rate of 20%, 40%, and 60%. Based on Shaanxi Province's 2002 input–output table, the change of some macro-economic variables is simulated under these scenarios. The results show that the GDP growth is at 0–8.92%, households disposable income growth is at 0–8.94%, and emission of carbon dioxide growth is at 0–11.10% when the investment growth is at 0–60%. The oil and gas sector is the most effective sector with a growth rate of 0–19.47%.     

Contributing to local policy making on GHG emission reduction through inventorying and attribution: A case study of Shenyang,China

Cities consumed 84% of commercial energy in China, which indicates cities should be the main areas for GHG emissions reduction. Our case study of Shenyang in this paper shows how a clear inventory analysis on GHG emissions at city level can help to identify the major industries and societal sectors for reduction efforts so as to facilitate low-carbon policy-making. The results showed total carbon emission in 2007 was 57 Mt CO₂ equivalents (CO₂e), of which 41 Mt CO₂e was in-boundary emissions and 16 Mt CO₂e was out-of-boundary emissions. The energy sector was dominant in the emission inventory, accounting for 93.1% of total emissions. Within energy sector, emissions from energy production industry, manufacturing and construction industry accounted for 88.4% of this sector. Our analysis showed that comparing with geographical boundary, setting system boundary based on single process standard could provide better information to decision makers for carbon emission reduction. After attributing electricity and heating consumption to final users, the resident and commercial sector became the largest emitter, accounting for 28.5% of total emissions. Spatial analysis of emissions showed that industrial districts such as Shenbei and Tiexi had the large potential to reduce their carbon emissions. Implications of results are finally discussed.     

Energy saving and emission reduction: A project of coal-resource integration in Shanxi Province,China

The small or middle coal mines with illegal operations in developing countries or regions can cause bad energy waste and environmental disruption. The project of coal-resource integration in Shanxi Province of China gives a new idea or an approach to energy saving and emission reduction. It is a social- and economic-ecological project. The paper shows the targets of energy saving and emission reduction in Shanxi Province, and analyses the aims, significance, design process and implementation of the integration project. Based on that, the paper discusses the challenges and opportunities the project brings. The analysis shows that the project of coal-resource integration in developing countries or regions can effectively improve mining technologies, collect capital and impel international cooperation and exchange. Finally, the paper analyses the concerns about the future, including the possible problems of implementation period, industrial updating, environmental impact and re-employment. However, the successful integration of coal resources can mitigate energy crisis and climate crisis and promote cleaner production effectively.     

Effects of oxyhydrogen on the CI engine fueled with the biodiesel blends: A performance,combustion and emission characteristics study

The main purpose of this study is to analyse the effects of oxy hydrogen (HHO) along with the Moringa oleifera biodiesel blend on engine performance, combustion and emission characteristics. HHO gases were generated using the typical electrolysis process using the potassium hydroxide solution. The experiments were performed under various engine loads of 25%, 50%, 75%, and 100% in a constant speed engine. Biodiesel from the M. oleifera was prepared by the transesterification process. Further, the procured biodiesel blends mixed with neat diesel at the concentration of 20% (B20) and 40% (B40). In addition to above, the HHO gas flow rate to the engine chamber maintained at the flow rate of 0.5 L^-1. The use of the 20% and 40% blends with HHO reported less BTE compared to the neat diesel. However, B20 reported marginal rise in the BTE due to the addition of the HHO gas. On the other hand, addition of HHO gas to the blends significantly dropped the brake specific fuel consumption. With regard to the emissions, addition of the biodiesel blends reduced the concentration of the CO, HC, and CO₂. Nevertheless, no reduction reported in the formation of the NO. However, adding the HHO to the biodiesel reduced the average NOx by 6%, which is a substantial effect. Overall, HHO enriching biodiesel blends are the potential replacement for the existing fossil fuels for its superior fuel properties compared to the conventional diesel.     

A review of the effects of catalyst and additive on biodiesel production, performance, combustion and emission characteristics

This article is a literature review of the effect of different catalysts and additives on biodiesel production, performance, combustion and emission characteristics. This study is based on the reports of about 60 scientists who published their findings between 1998 and 2010. It was reported that base catalyst produced more biodiesel compared to acid type catalysts. There was not much variation in engine performance with the use of catalyst. Combustion characteristics were improved with the use of additives. It was found that ignition delay was reduced and premixed combustion duration was increased with the addition of catalyst. HC emission and PM emission were reduced with the use of catalysts.