Poliy Instruments for Climate Change Mitigation Flashcards
Policy Instruments
- Carbon Accounting, e.g. production based accounting, consumption based carbon footprint
- Command and Control/ Regulation, e.g. resticting consumption
- Subsidies and Incentives for Climate Mitigation, e.g. subsidies for new techn; green public procurement
- Carbon Pricing, e.g. carbon tac, cap and trade
Carbon Accounting
- Production based accounting is used today in all national accounting schemes (Kyoto and Paris)
- Current implementations is beneficial for all countries that import products with higher embedded carbon emissions than exported embedded emissions
- Consumption based accounting is mostly used and discussed in science
Carbon Accounting: Production Based Accounting - Benefits and Challenges
Benefits:
* Data availability
* Capacity
* Incentives to control and improve national industry
* Method in line with IPCC guideline
Challenges
- Possible carbon leakage (Verlagerung) due to outsourcing (lowers territorial emissions)
Carbon Accounting: Consumption Based Accounting - Benefits and Challenges
Benefits:
* Makes trans boundary emission flows visible and enables shared responsibility between producers
and consumers
Challenges:
* Political acceptability (requires countries to take responsibilities of emissions that originate outside
their borders)
* Methodological issues (data availability, missing standards)
* No incentive to produce goods that are exported with low emission technologies
Command and Control
- Command and control policy refers to environmental policy that relies on regulation
- Non market based instruments
- Impose direct regulatory intervention: setting standards for pollution output or technology requirements
- Combined with legal enforcement#
- Policy measures that directly address a high carbon technology they could: e.g. restict consumption, set perfomarnce standard
Command and Control: Benefits and Challenges
Benefits:
- Environmental effectiveness is quite certain
Challenges:
* Can conflict with economic growth
* Might contain a higher economic burden than necessary (which is optimized in cap and trade)
* Low public acceptance
* Intelligent policy design is needed to avoid rebound effects
Subsidies and Incentives for Climate Mitigation
- Subsidies for renewable energy, electro mobility, energy
refurbishment - Green public procurement
- Research and Development financed by public money to foster technological innovation
- Setting up green labels and standards that are managed by the government
- Providing infrastructure for new technologies (charging networks for e mobility, hydrogen infrastructure for fuel cell or steel making decarbonization )
Subsidies and Incentives for Climate Mitigation: Benefits and Challenges
Benefits:
* No or very limited conflict with economic growth
* High public acceptance
Challenges:
* No certain quantifiable emission reduction
* Requires additional expenditure by public sector
* Rebound effects (increase of overall consumption possible)
* Might subsidize an inefficient technology too much
Carbon Markets: Cap and Trade
- Cap and Trade: Industries have to purchase
tradable permits for their emissions, only a limited amount of permits is available; it doesn’t
matter who emits, but that a certain emission threshold is not exceeded. - Cap and Trade + Offsetting
Same as above, but surplus tradable permits can be created by climate protection projects. These projects have to be additional (e.g. not economic or very innovative) and deliver quantifiable emission reductions.
Carbon Markets
Compliance market: UNFCCC, Kyoto Protocol –> EUTS -> CDM
Voluntary Marekt: atmosfair, myclimate…
Cap and Trade with Offsets: Benefits and Challenges
Benefits:
* In theory they deliver the most financially attractive solutions
* Provides cheaper emission reductions than cap and trade without offsets
* Should enhance technology transfer
* Potentially create jobs and do not interfere with economic growth
* High acceptance in industry
Challenges:
* Difficult to determine baseline emissions to reduce amount of permits accordingly
* The accreditation of the certifier
* Additionality requirement is hard to verify
* If offsets are not high quality they are running the risks to increase emissions
* Are mainly not addressing the reduction of the use of fossil fuels
* Have a varying price signal (high price fluctuations, because of speculation)
* Sectors that are difficult to decarbonize, decarbonize last (carbon lock in)
Carbon Tax: Benefits and Challenges
Benefits:
* Full coverage (theoretically)
* Constant price signal (good economic planning)
* Doesn’t favor a certain technology and should thus foster further innovation
* If combined with border carbon adjustment /tax carbon leakage can be avoided
Challenges:
* Difficult to determine the right price
* Disadvantage for domestic industry (because of additional production costs compared to imports)
* Risk of carbon leakage
* Might affect poorest people most
* Some industries might obtain exceptions due to lobbying
* If sectors are excluded possible carbon lock in
What is a Carbon Lock in?
- Especially the car and energy industry have fossil based infrastructure
- Electricity and individual mobility infrastructure have long investment cycles
- If these sectors are excluded from carbon pricing, the lock in might make climate goals unreachable if no early action is taken
Border Carbon Adjustment
- Carbon pricing is mostly limited to a certain jurisdiction
- Therefore domestic emission intensive industry has a disadvantage in relation to imported products
- Is a tax that will be imposed on imported goods, that do not fulfill certain environmental standards (e.g. climate protection)
- Is currently not implemented anywhere, because of possible conflict with free trade (could interfere with WTO rules)
- Von der Leyen (President of the European Commission) discussed border carbon tax in August 2019 and a commenting section was opened
- Might have negative side effects for all countries that export CO2 intensive products to the EU
Border Carbon Adjustment: Benefits and Challenges
Benefits:
* Domestic production is protected from products that are cheaper because they have less environmental requirements
Challenges:
* Might not be compliant with WTO rules
* Could hamper economic growth of countries in the global south
* Difficult to determine carbon emissions of a product at the customs
* Goods would have to be tracked to avoid the occurrence of transit state with high environmental standards
