Backloading: A necessary, but not sufficient first step. CEPS Special Report No. 72, 20 November 2012

In July 2012, the European Commission issued an invitation for public consultation to review the ‘auctioning time profile’ for the EU Emissions Trading Scheme” in order to collect views from stakeholders and experts in the field of the EU carbon market on a draft for a future amendment of the Commission Regulation on the timing, administration and other aspects of auctioning of greenhouse gas emission allowances. In this submission, the CEPS Carbon Market Forum addresses the following questions and offers its views on the Commission’s proposed amendments: Is back loading a good idea? Is there a need for following up the back loading with structural measures? What should the number be? If this cannot be addressed, what are the considerations for deciding upon that number? What price expectations are linked to the number? On what basis are they construed?

Mercado de carbono: um estudo comparado entre Brasil, China e Índia

Coordenação de Aperfeiçoamento de Pessoal de Nível Superior (CAPES)

O potencial da agroenergia no Brasil na mitigação do clima: histórico jurídico

Pós-graduação em Agronomia (Energia na Agricultura) - FCA

The human side of social technology for climate change mitigation and human development: the case of "efficient stoves" in Brazil

Carbon management has gradually gained attention within the overall environmental management and corporate social responsibility agendas. The clean development mechanism, from Kyoto Protocol, was envisioned as connecting carbon market and sustainable development objectives in developing countries. Previous research has shown that this potential is rarely being achieved. The paper explores how the incorporation of the human side into carbon management reinforces its contribution to generate human development in local communities and to improve the company's image. A case study of a Brazilian company is presented, with the results of the application of an analytical model that incorporates the human side and human development. The selected project is an "efficient stoves" programme. "Efficient stoves" are recognised in Brazil as social technologies. Results suggest that the fact that social technologies value the human side of the technology plays a key role when it comes to analysing the co-benefits of the project implementation.

EU Policy on Climate Change Mitigation since Copenhagen and the Economic Crisis. CEPS Working Document No. 380, 5 March 2013

The EU has long assumed leadership in advancing domestic and international climate change policy. While pushing its partners in international negotiations, it has led the way in implementing a host of domestic measures, including a unilateral and legally binding target, an ambitious policy on renewable energy and a strategy for low-carbon technology deployment. The centrepiece of EU policy, however, has been the EU Emissions Trading System (ETS), a cap-and-trade programme launched in 2005. The ETS has been seen as a tool to ensure least-cost abatement, drive EU decarbonisation and develop a global carbon market. After an initial review and revision of the ETS, to come into force in 2013, there was a belief that the new ETS was ‘future-proof’, meaning able to cope with the temporary lack of a global agreement on climate change and individual countries’ emission ceilings. This confidence has been shattered by the simultaneous ‘failure’ of Copenhagen to deliver a clear prospect of a global (top-down) agreement and the economic crisis. The lack of prospects for national caps at the international level has led to a situation whereby many member states hesitate to pursue ambitious climate change policies. In the midst of this, the EU is assessing its options anew. A number of promising areas for international cooperation exist, all centred on the need to ‘raise the ambition level’ of GHG emission reductions, notably in aviation and maritime, short-lived climate pollutions, deforestation, industrial competitiveness and green growth. Public policy issues in the field of technology and its transfer will require more work to identify real areas for cooperation.

Essays on emissions trading markets

This dissertation is a collection of three economics essays on different aspects of carbon emission trading markets. The first essay analyzes the dynamic optimal emission control strategies of two nations. With a potential to become the largest buyer under the Kyoto Protocol, the US is assumed to be a monopsony, whereas with a large number of tradable permits on hand Russia is assumed to be a monopoly. Optimal costs of emission control programs are estimated for both the countries under four different market scenarios: non-cooperative no trade, US monopsony, Russia monopoly, and cooperative trading. The US monopsony scenario is found to be the most Pareto cost efficient. The Pareto efficient outcome, however, would require the US to make side payments to Russia, which will even out the differences in the cost savings from cooperative behavior. The second essay analyzes the price dynamics of the Chicago Climate Exchange (CCX), a voluntary emissions trading market. By examining the volatility in market returns using AR-GARCH and Markov switching models, the study associates the market price fluctuations with two different political regimes of the US government. Further, the study also identifies a high volatility in the returns few months before the market collapse. Three possible regulatory and market-based forces are identified as probable causes of market volatility and its ultimate collapse. Organizers of other voluntary markets in the US and worldwide may closely watch for these regime switching forces in order to overcome emission market crashes. The third essay compares excess skewness and kurtosis in carbon prices between CCX and EU ETS (European Union Emission Trading Scheme) Phase I and II markets, by examining the tail behavior when market expectations exceed the threshold level. Dynamic extreme value theory is used to find out the mean price exceedence of the threshold levels and estimate the risk loss. The calculated risk measures suggest that CCX and EU ETS Phase I are extremely immature markets for a risk investor, whereas EU ETS Phase II is a more stable market that could develop as a mature carbon market in future years.

Séquestration géologique du CO2 par carbonatation minérale dans les résidus miniers

La carbonatation minérale dans les résidus miniers est un moyen sûr et permanent de séquestrer le CO2 atmosphérique. C’est un processus naturel et passif qui ne nécessite aucun traitement particulier et donc avantageux d’un point de vue économique. Bien que la quantité de CO2 qu’il soit possible de séquestrer selon ce processus est faible à l’échelle globale, dans le cadre d’un marché du carbone, les entreprises minières pourraient obtenir des crédits et ainsi revaloriser leurs résidus. À l’heure actuelle, il y a peu d’informations pour quantifier le potentiel de séquestration du CO2 de façon naturelle et passive dans les piles de résidus miniers. Il est donc nécessaire d’étudier le phénomène pour comprendre comment évolue la réaction à travers le temps et estimer la quantité de CO2 qui peut être séquestrée naturellement dans les piles de résidus. Plusieurs travaux de recherche se sont intéressés aux résidus miniers de Thetford Mines (Québec, Canada), avec une approche principalement expérimentale en laboratoire. Ces travaux ont permis d’améliorer la compréhension du processus de carbonatation, mais ils nécessitent une validation à plus grande échelle sous des conditions atmosphériques réelles. L’objectif général de cette étude est de quantifier le processus de carbonatation minérale des résidus miniers sous des conditions naturelles, afin d’estimer la quantité de CO2 pouvant être piégée par ce processus. La méthodologie utilisée repose sur la construction de deux parcelles expérimentales de résidus miniers situées dans l’enceinte de la mine Black Lake (Thetford Mines). Les résidus miniers sont principalement constitués de grains et de fibres de chrysotile et lizardite mal triés, avec de petites quantités d’antigorite, de brucite et de magnétite. Des observations spatiales et temporelles ont été effectuées dans les parcelles concernant la composition et la pression des gaz, la température des résidus, la teneur en eau volumique, la composition minérale des résidus ainsi que la chimie de l’eau des précipitations et des lixiviats provenant des parcelles. Ces travaux ont permis d’observer un appauvrissement notable du CO2 dans les gaz des parcelles (< 50 ppm) ainsi que la précipitation d’hydromagnésite dans les résidus, ce qui suggère que la carbonatation minérale naturelle et passive est un processus potentiellement important dans les résidus miniers. Après 4 ans d’observations, le taux de séquestration du CO2 dans les parcelles expérimentales a été estimé entre 3,5 et 4 kg/m3/an. Ces observations ont permis de développer un modèle conceptuel de la carbonatation minérale naturelle et passive dans les parcelles expérimentales. Dans ce modèle conceptuel, le CO2 atmosphérique (~ 400 ppm) se dissout dans l’eau hygroscopique contenue dans les parcelles, où l’altération des silicates de magnésium forme des carbonates de magnésium. La saturation en eau dans les cellules est relativement stable dans le temps et varie entre 0,4 et 0,65, ce qui est plus élevé que les valeurs de saturation optimales proposées dans la littérature, réduisant ainsi le transport de CO2 dans la zone non saturée. Les concentrations de CO2 en phase gazeuse, ainsi que des mesures de la vitesse d’écoulement du gaz dans les cellules suggèrent que la réaction est plus active près de la surface et que la diffusion du CO2 est le mécanisme de transport dominant dans les résidus. Un modèle numérique a été utilisé pour simuler ces processus couplés et valider le modèle conceptuel avec les observations de terrain. Le modèle de transport réactif multiphase et multicomposant MIN3P a été utilisé pour réaliser des simulations en 1D qui comprennent l’infiltration d’eau à travers le milieu partiellement saturé, la diffusion du gaz, et le transport de masse réactif par advection et dispersion. Même si les écoulements et le contenu du lixivat simulés sont assez proches des observations de terrain, le taux de séquestration simulé est 22 fois plus faible que celui mesuré. Dans les simulations, les carbonates précipitent principalement dans la partie supérieure de la parcelle, près de la surface, alors qu’ils ont été observés dans toute la parcelle. Cette différence importante pourrait être expliquée par un apport insuffisant de CO2 dans la parcelle, qui serait le facteur limitant la carbonatation. En effet, l’advection des gaz n’a pas été considérée dans les simulations et seule la diffusion moléculaire a été simulée. En effet, la mobilité des gaz engendrée par les fluctuations de pression barométrique et l’infiltration de l’eau, ainsi que l’effet du vent doivent jouer un rôle conséquent pour alimenter les parcelles en CO2.

Gestão florestal e propriedade: A floresta, a (sua) propriedade e o alcance das políticas públicas

O trabalho pretende questionar se as necessidades da gestão da floresta e as interacções com o ambiente, justificam o repensar do conceito de propriedade privada, na definição de políticas florestais concretizadoras duma «mundividência ambiental». Estrutura-se em quatro partes: primeiro, procura-se dar uma perspectiva do direito de propriedade privada, a sua perenidade na nossa cultura, sobretudo na cultura jurídica; segundo, analisa-se a dinâmica da propriedade privada da floresta nos últimos séculos, e as soluções de políticas florestais- destacando-se a criação das zonas de intervenção florestal (ZIF); terceiro, estuda-se em concreto o regime de certificação florestal, como forma específica de gestão florestal; quarto, sublinham-se novos desafios ambientais à gestão das florestas, designadamente a identificação dos problemas que emergem em resultado das alterações climáticas, destacando-se o sequestro de carbono e a criação do mercado de carbono. Este estudo não é estanque, faz parte de um mesmo questionamento: é o ambiente um valor para a humanidade ou é um valor em si mesmo? ABSTRACT: The work intends to question if the private property of the forest, toward the necessities of management and interactions with the environment, justifies the rethink of the concept, in forest politics definition, producer of an interactive view of the environment. lt is structured in four parts: first, it intends to give a perspective of the right of private property, its longevity in our culture, the importance of legal quarrel; second, the dynamics of the private property of the forest, in the latest centuries, and the solutions of the implemented forest politics - being distinguished the creation of zones of forest intervention, the ZIF; third, the forest management ­ forest certification; fourth, the environmental source, the identification of problems that emerge in result of climatic alterations, being distinguished the kidnap of carbon and the creation of the carbon market. This study is not tight; it is part of the same reflection: of being the environment a value for the humanity or a value in itself exactly.

Essays on Emissions Trading Markets

This dissertation is a collection of three economics essays on different aspects of carbon emission trading markets. The first essay analyzes the dynamic optimal emission control strategies of two nations. With a potential to become the largest buyer under the Kyoto Protocol, the US is assumed to be a monopsony, whereas with a large number of tradable permits on hand Russia is assumed to be a monopoly. Optimal costs of emission control programs are estimated for both the countries under four different market scenarios: non-cooperative no trade, US monopsony, Russia monopoly, and cooperative trading. The US monopsony scenario is found to be the most Pareto cost efficient. The Pareto efficient outcome, however, would require the US to make side payments to Russia, which will even out the differences in the cost savings from cooperative behavior. The second essay analyzes the price dynamics of the Chicago Climate Exchange (CCX), a voluntary emissions trading market. By examining the volatility in market returns using AR-GARCH and Markov switching models, the study associates the market price fluctuations with two different political regimes of the US government. Further, the study also identifies a high volatility in the returns few months before the market collapse. Three possible regulatory and market-based forces are identified as probable causes of market volatility and its ultimate collapse. Organizers of other voluntary markets in the US and worldwide may closely watch for these regime switching forces in order to overcome emission market crashes. The third essay compares excess skewness and kurtosis in carbon prices between CCX and EU ETS (European Union Emission Trading Scheme) Phase I and II markets, by examining the tail behavior when market expectations exceed the threshold level. Dynamic extreme value theory is used to find out the mean price exceedence of the threshold levels and estimate the risk loss. The calculated risk measures suggest that CCX and EU ETS Phase I are extremely immature markets for a risk investor, whereas EU ETS Phase II is a more stable market that could develop as a mature carbon market in future years.

The cost of carbon : capital market effects of the proposed emission trading scheme (ETS)

In March 2008, the Australian Government announced its intention to introduce a national Emissions Trading Scheme (ETS), now expected to start in 2015. This impending development provides an ideal setting to investigate the impact an ETS in Australia will have on the market valuation of Australian Securities Exchange (ASX) firms. This is the first empirical study into the pricing effects of the ETS in Australia. Primarily, we hypothesize that firm value will be negatively related to a firm's carbon intensity profile. That is, there will be a greater impact on firm value for high carbon emitters in the period prior (2007) to the introduction of the ETS, whether for reasons relating to the existence of unbooked liabilities associated with future compliance and/or abatement costs, or for reasons relating to reduced future earnings. Using a sample of 58 Australian listed firms (constrained by the current availability of emissions data) which comprise larger, more profitable and less risky listed Australian firms, we first undertake an event study focusing on five distinct information events argued to impact the probability of the proposed ETS being enacted. Here, we find direct evidence that the capital market is indeed pricing the proposed ETS. Second, using a modified version of the Ohlson (1995) valuation model, we undertake a valuation analysis designed not only to complement the event study results, but more importantly to provide insights into the capital market's assessment of the magnitude of the economic impact of the proposed ETS as reflected in market capitalization. Here, our results show that the market assesses the most carbon intensive sample firms a market value decrement relative to other sample firms of between 7% and 10% of market capitalization. Further, based on the carbon emission profile of the sample firms we imply a ‘future carbon permit price’ of between AUD$17 per tonne and AUD$26 per tonne of carbon dioxide emitted. This study is more precise than industry reports, which set a carbon price of between AUD$15 to AUD$74 per tonne.

Impact of offshore wind power forecast error in a carbon constraint electricity market

This paper investigates the impacts of offshore wind power forecast error on the operation and management of a pool-based electricity market in 2050. The impact from offshore wind power forecast errors of up to 2000 MW on system generation costs, emission costs, dispatch-down of wind, number of start-ups and system marginal price are analysed. The main findings of this research are an increase in system marginal prices of approximately 1% for every percentage point rise in the offshore wind power forecast error regardless of the average forecast error sign. If offshore wind power generates less than forecasted (−13%) generation costs and system marginal prices increases by 10%. However, if offshore wind power generates more than forecasted (4%) the generation costs decrease yet the system marginal prices increase by 3%. The dispatch down of large quantities of wind power highlights the need for flexible interconnector capacity. From a system operator's perspective it is more beneficial when scheduling wind ahead of the trading period to forecast less wind than will be generated.

The carbon disclosure project, an evolution in international environmental corporate governance : motivations and determinants of market response to voluntary disclosures

This paper examines the factors associated with Canadian firms voluntarily disclosing climate change information through the Carbon Disclosure Project. Five hypotheses are presented to explain the factors influencing management's decision to disclose this information. These hypotheses include a response to shareholder activism, domestic institutional investor shareholder activism, signalling, litigation risk, and low cost publicity. Both binary logistic regressions as well as a cross-sectional analysis of the equity market's response to the environmental disclosures being made were used to test these hypotheses. Support was found for shareholder activism, low cost publicity, and litigation risk. However, the equity market's response was not found to be statistically significant.

Reforming the Market Design of EU Electricity Markets: Addressing the Challenges of a Low-Carbon Power Sector. CEPS Task Force Report, 27 July 2015

This CEPS Task Force Report focuses on whether there is a need to adapt the EU’s electricity market design and if so, the options for doing so. In a first step, it analyses the current market trends by distinguishing between their causes and their consequences. Then, the current blueprint of EU power market design – the target model – is briefly introduced, followed by a discussion of the shortcomings of the current approach and the challenges in finding suitable solutions. The final chapter offers an inventory of solutions differentiating between recommendations shared among Task Force members and non-consensual options.

The role of law in responding to climate change : emerging regulatory, liability and market approaches

Climate change presents as the archetypal environmental problem with short-term economic self-interest operating to the detriment of the long-term sustainability of our society. The scientific reports of the Intergovernmental Panel on Climate Change strongly assert that the stabilisation of emissions in the atmosphere, to avoid the adverse impacts of climate change, requires significant and rapid reductions in ‘business as usual’ global greenhouse gas emissions. The sheer magnitude of emissions reductions required, within this urgent timeframe, will necessitate an unprecedented level of international, multi-national and intra-national cooperation and will challenge conventional approaches to the creation and implementation of international and domestic legal regimes. To meet this challenge, existing international, national and local legal systems must harmoniously implement a strong international climate change regime through a portfolio of traditional and innovative legal mechanisms that swiftly transform current behavioural practices in emitting greenhouse gases. These include the imposition of strict duties to reduce emissions through the establishment of strong command and control regulation (the regulatory approach); mechanisms for the creation and distribution of liabilities for greenhouse gas emissions and climaterelated harm (the liability approach) and the use of innovative regulatory tools in the form of the carbon trading scheme (the market approach). The legal relations between these various regulatory, liability and market approaches must be managed to achieve a consistent, compatible and optimally effective legal regime to respond to the threat of climate change. The purpose of this thesis is to analyse and evaluate the emerging legal rules and frameworks, both international and Australian, required for the effective regulation of greenhouse gas emissions to address climate change in the context of the urgent and deep emissions reductions required to minimise the adverse impacts of climate change. In doing so, this thesis will examine critically the existing and potential role of law in effectively responding to climate change and will provide recommendations on the necessary reforms to achieve a more effective legal response to this global phenomenon in the future.

Risks of Carbon Fraud

Carbon credit markets are in the early stages of development and media headlines such as these illustrate emerging levels of concern and foreboding over the potential for fraudulent crime within these markets. Australian companies are continuing to venture into the largely unregulated voluntary carbon credit market to offset their emissions and / or give their customers the opportunity to be ‘carbon neutral’. Accordingly, the voluntary market has seen a proliferation of carbon brokers that offer tailored offset carbon products according to need and taste. With the instigation of the Australian compliance market and with pressure increasing for political responses to combat climate change, we would expect Australian companies to experience greater exposure to carbon products in both compliance and voluntary markets. This paper examines the risks of carbon fraud in these markets by reviewing cases of actual fraud and analysing and identifying contexts where risks of carbon fraud are most likely.