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.

Changes in energy efficiency in Australia: A decomposition of aggregate energy intensity using logarithmic mean Divisia approach

This paper provides an empirical estimation of energy efficiency and other proximate factors that explain energy intensity in Australia for the period 1978-2009. The analysis is performed by decomposing the changes in energy intensity by means of energy efficiency, fuel mix and structural changes using sectoral and sub-sectoral levels of data. The results show that the driving forces behind the decrease in energy intensity in Australia are efficiency effect and sectoral composition effect, where the former is found to be more prominent than the latter. Moreover, the favourable impact of the composition effect has slowed consistently in recent years. A perfect positive association characterizes the relationship between energy intensity and carbon intensity in Australia. The decomposition results indicate that Australia needs to improve energy efficiency further to reduce energy intensity and carbon emissions. © 2012 Elsevier Ltd.

Global carbon budget 2014

Accurate assessment of anthropogenic carbon dioxide (CO2) emissions and their redistribution among the atmosphere, ocean, and terrestrial biosphere is important to better understand the global carbon cycle, support the development of climate policies, and project future climate change. Here we describe data sets and a methodology to quantify all major components of the global carbon budget, including their uncertainties, based on the combination of a range of data, algorithms, statistics, and model estimates and their interpretation by a broad scientific community. We discuss changes compared to previous estimates, consistency within and among components, alongside methodology and data limitations. CO2 emissions from fossil fuel combustion and cement production (E-FF) are based on energy statistics and cement production data, respectively, while emissions from land-use change (E-LUC), mainly deforestation, are based on combined evidence from land-cover-change data, fire activity associated with deforestation, and models. The global atmospheric CO2 concentration is measured directly and its rate of growth (G(ATM)) is computed from the annual changes in concentration. The mean ocean CO2 sink (S-OCEAN) is based on observations from the 1990s, while the annual anomalies and trends are estimated with ocean models. The variability in S-OCEAN is evaluated with data products based on surveys of ocean CO2 measurements. The global residual terrestrial CO2 sink (S-LAND) is estimated by the difference of the other terms of the global carbon budget and compared to results of independent dynamic global vegetation models forced by observed climate, CO2, and land-cover-change (some including nitrogen-carbon interactions). We compare the mean land and ocean fluxes and their variability to estimates from three atmospheric inverse methods for three broad latitude bands. All uncertainties are reported as +/- 1 sigma, reflecting the current capacity to characterise the annual estimates of each component of the global carbon budget. For the last decade available (2004-2013), E-FF was 8.9 +/- 0.4 GtC yr(-1), E-LUC 0.9 +/- 0.5 GtC yr(-1), G(ATM) 4.3 +/- 0.1 GtC yr(-1), S-OCEAN 2.6 +/- 0.5 GtC yr(-1), and S-LAND 2.9 +/- 0.8 GtC yr(-1). For year 2013 alone, E-FF grew to 9.9 +/- 0.5 GtC yr(-1), 2.3% above 2012, continuing the growth trend in these emissions, E-LUC was 0.9 +/- 0.5 GtC yr(-1), G(ATM) was 5.4 +/- 0.2 GtC yr(-1), S-OCEAN was 2.9 +/- 0.5 GtC yr(-1), and S-LAND was 2.5 +/- 0.9 GtC yr(-1). G(ATM) was high in 2013, reflecting a steady increase in E-FF and smaller and opposite changes between S-OCEAN and S-LAND compared to the past decade (2004-2013). The global atmospheric CO2 concentration reached 395.31 +/- 0.10 ppm averaged over 2013. We estimate that E-FF will increase by 2.5% (1.3-3.5 %) to 10.1 +/- 0.6 GtC in 2014 (37.0 +/- 2.2 GtCO(2) yr(-1)), 65% above emissions in 1990, based on projections of world gross domestic product and recent changes in the carbon intensity of the global economy. From this projection of E-FF and assumed constant E-LUC for 2014, cumulative emissions of CO2 will reach about 545 +/- 55 GtC (2000 +/- 200 GtCO(2)) for 1870-2014, about 75% from E-FF and 25% from E-LUC. This paper documents changes in the methods and data sets used in this new carbon budget compared with previous publications of this living data set (Le Quere et al., 2013, 2014). All observations presented here can be downloaded from the Carbon Dioxide Information Analysis Center (doi:10.3334/CDIAC/GCP_2014).

Global Carbon Budget 2015

Accurate assessment of anthropogenic carbon dioxide (CO2) emissions and their redistribution among the atmosphere, ocean, and terrestrial biosphere is important to better understand the global carbon cycle, support the development of climate policies, and project future climate change. Here we describe data sets and a methodology to quantify all major components of the global carbon budget, including their uncertainties, based on the combination of a range of data, algorithms, statistics, and model estimates and their interpretation by a broad scientific community. We discuss changes compared to previous estimates as well as consistency within and among components, alongside methodology and data limitations. CO2 emissions from fossil fuels and industry (EFF) are based on energy statistics and cement production data, while emissions from land-use change (ELUC), mainly deforestation, are based on combined evidence from land-cover-change data, fire activity associated with deforestation, and models. The global atmospheric CO2 concentration is measured directly and its rate of growth (GATM) is computed from the annual changes in concentration. The mean ocean CO2 sink (SOCEAN) is based on observations from the 1990s, while the annual anomalies and trends are estimated with ocean models. The variability in SOCEAN is evaluated with data products based on surveys of ocean CO2 measurements. The global residual terrestrial CO2 sink (SLAND) is estimated by the difference of the other terms of the global carbon budget and compared to results of independent dynamic global vegetation models forced by observed climate, CO2, and land-cover change (some including nitrogen–carbon interactions). We compare the mean land and ocean fluxes and their variability to estimates from three atmospheric inverse methods for three broad latitude bands. All uncertainties are reported as ±1σ, reflecting the current capacity to characterise the annual estimates of each component of the global carbon budget. For the last decade available (2005–2014), EFF was 9.0 ± 0.5 GtC yr−1, ELUC was 0.9 ± 0.5 GtC yr−1, GATM was 4.4 ± 0.1 GtC yr−1, SOCEAN was 2.6 ± 0.5 GtC yr−1, and SLAND was 3.0 ± 0.8 GtC yr−1. For the year 2014 alone, EFF grew to 9.8 ± 0.5 GtC yr−1, 0.6 % above 2013, continuing the growth trend in these emissions, albeit at a slower rate compared to the average growth of 2.2 % yr−1 that took place during 2005–2014. Also, for 2014, ELUC was 1.1 ± 0.5 GtC yr−1, GATM was 3.9 ± 0.2 GtC yr−1, SOCEAN was 2.9 ± 0.5 GtC yr−1, and SLAND was 4.1 ± 0.9 GtC yr−1. GATM was lower in 2014 compared to the past decade (2005–2014), reflecting a larger SLAND for that year. The global atmospheric CO2 concentration reached 397.15 ± 0.10 ppm averaged over 2014. For 2015, preliminary data indicate that the growth in EFF will be near or slightly below zero, with a projection of −0.6 [range of −1.6 to +0.5] %, based on national emissions projections for China and the USA, and projections of gross domestic product corrected for recent changes in the carbon intensity of the global economy for the rest of the world. From this projection of EFF and assumed constant ELUC for 2015, cumulative emissions of CO2 will reach about 555 ± 55 GtC (2035 ± 205 GtCO2) for 1870–2015, about 75 % from EFF and 25 % from ELUC. This living data update documents changes in the methods and data sets used in this new carbon budget compared with previous publications of this data set (Le Quéré et al., 2015, 2014, 2013). All observations presented here can be downloaded from the Carbon Dioxide Information Analysis Center (doi:10.3334/CDIAC/GCP_2015).

An investigation of the impact of time of generation on carbon savings from PV systems in Great Britain

PV only generates electricity during daylight hours and primarily generates over summer. In the UK, the carbon intensity of grid electricity is higher during the daytime and over winter. This work investigates whether the grid electricity displaced by PV is high or low carbon compared to the annual mean carbon intensity using carbon factors at higher temporal resolutions (half-hourly and daily). UK policy for carbon reporting requires savings to be calculated using the annual mean carbon intensity of grid electricity. This work offers an insight into whether this technique is appropriate. Using half hourly data on the generating plant supplying the grid from November 2008 to May 2010, carbon factors for grid electricity at half-hourly and daily resolution have been derived using technology specific generation emission factors. Applying these factors to generation data from PV systems installed on schools, it is possible to assess the variation in the carbon savings from displacing grid electricity with PV generation using carbon factors with different time resolutions. The data has been analyzed for a period of 363 to 370 days and so cannot account for inter-year variations in the relationship between PV generation and carbon intensity of the electricity grid. This analysis suggests that PV displaces more carbon intensive electricity using half-hourly carbon factors than using daily factors but less compared with annual ones. A similar methodology could provide useful insights on other variable renewable and demand-side technologies and in other countries where PV performance and grid behavior are different.

The global carbon budget 1959–2011

Accurate assessments of anthropogenic carbon dioxide (CO2) emissions and their redistribution among the atmosphere, ocean, and terrestrial biosphere is important to better understand the global carbon cycle, support the climate policy process, and project future climate change. Present-day analysis requires the combination of a range of data, algorithms, statistics and model estimates and their interpretation by a broad scientific community. Here we describe datasets and a methodology developed by the global carbon cycle science community to quantify all major components of the global carbon budget, including their uncertainties. We discuss changes compared to previous estimates, consistency within and among components, and methodology and data limitations. CO2 emissions from fossil fuel combustion and cement production (EFF) are based on energy statistics, while emissions from Land-Use Change (ELUC), including deforestation, are based on combined evidence from land cover change data, fire activity in regions undergoing deforestation, and models. The global atmospheric CO2 concentration is measured directly and its rate of growth (GATM) is computed from the concentration. The mean ocean CO2 sink (SOCEAN) is based on observations from the 1990s, while the annual anomalies and trends are estimated with ocean models. Finally, the global residual terrestrial CO2 sink (SLAND) is estimated by the difference of the other terms. For the last decade available (2002–2011), EFF was 8.3 ± 0.4 PgC yr−1, ELUC 1.0 ± 0.5 PgC yr−1, GATM 4.3 ± 0.1 PgC yr−1, SOCEAN 2.5 ± 0.5 PgC yr−1, and SLAND 2.6 ± 0.8 PgC yr−1. For year 2011 alone, EFF was 9.5 ± 0.5 PgC yr−1, 3.0 percent above 2010, reflecting a continued trend in these emissions; ELUC was 0.9 ± 0.5 PgC yr−1, approximately constant throughout the decade; GATM was 3.6 ± 0.2 PgC yr−1, SOCEAN was 2.7 ± 0.5 PgC yr−1, and SLAND was 4.1 ± 0.9 PgC yr−1. GATM was low in 2011 compared to the 2002–2011 average because of a high uptake by the land probably in response to natural climate variability associated to La Niña conditions in the Pacific Ocean. The global atmospheric CO2 concentration reached 391.31 ± 0.13 ppm at the end of year 2011. We estimate that EFF will have increased by 2.6% (1.9–3.5%) in 2012 based on projections of gross world product and recent changes in the carbon intensity of the economy. All uncertainties are reported as ±1 sigma (68% confidence assuming Gaussian error distributions that the real value lies within the given interval), reflecting the current capacity to characterise the annual estimates of each component of the global carbon budget. This paper is intended to provide a baseline to keep track of annual carbon budgets in the future.

The global carbon budget 1959–2011

Accurate assessment of anthropogenic carbon dioxide (CO2) emissions and their redistribution among the atmosphere, ocean, and terrestrial biosphere is important to better understand the global carbon cycle, support the climate policy process, and project future climate change. Present-day analysis requires the combination of a range of data, algorithms, statistics and model estimates and their interpretation by a broad scientific community. Here we describe datasets and a methodology developed by the global carbon cycle science community to quantify all major components of the global carbon budget, including their uncertainties. We discuss changes compared to previous estimates, consistency within and among components, and methodology and data limitations. Based on energy statistics, we estimate that the global emissions of CO2 from fossil fuel combustion and cement production were 9.5 ± 0.5 PgC yr−1 in 2011, 3.0 percent above 2010 levels. We project these emissions will increase by 2.6% (1.9–3.5%) in 2012 based on projections of Gross World Product and recent changes in the carbon intensity of the economy. Global net CO2 emissions from Land-Use Change, including deforestation, are more difficult to update annually because of data availability, but combined evidence from land cover change data, fire activity in regions undergoing deforestation and models suggests those net emissions were 0.9 ± 0.5 PgC yr−1 in 2011. The global atmospheric CO2 concentration is measured directly and reached 391.38 ± 0.13 ppm at the end of year 2011, increasing 1.70 ± 0.09 ppm yr−1 or 3.6 ± 0.2 PgC yr−1 in 2011. Estimates from four ocean models suggest that the ocean CO2 sink was 2.6 ± 0.5 PgC yr−1 in 2011, implying a global residual terrestrial CO2 sink of 4.1 ± 0.9 PgC yr−1. All uncertainties are reported as ±1 sigma (68% confidence assuming Gaussian error distributions that the real value lies within the given interval), reflecting the current capacity to characterise the annual estimates of each component of the global carbon budget. This paper is intended to provide a baseline to keep track of annual carbon budgets in the future.

Global carbon budget 2013

Accurate assessment of anthropogenic carbon dioxide (CO2) emissions and their redistribution among the atmosphere, ocean, and terrestrial biosphere is important to better understand the global carbon cycle, support the development of climate policies, and project future climate change. Here we describe data sets and a methodology to quantify all major components of the global carbon budget, including their uncertainties, based on the combination of a range of data, algorithms, statistics and model estimates and their interpretation by a broad scientific community. We discuss changes compared to previous estimates, consistency within and among components, alongside methodology and data limitations. CO2 emissions from fossil-fuel combustion and cement production (EFF) are based on energy statistics, while emissions from land-use change (ELUC), mainly deforestation, are based on combined evidence from land-cover change data, fire activity associated with deforestation, and models. The global atmospheric CO2 concentration is measured directly and its rate of growth (GATM) is computed from the annual changes in concentration. The mean ocean CO2 sink (SOCEAN) is based on observations from the 1990s, while the annual anomalies and trends are estimated with ocean models. The variability in SOCEAN is evaluated for the first time in this budget with data products based on surveys of ocean CO2 measurements. The global residual terrestrial CO2 sink (SLAND) is estimated by the difference of the other terms of the global carbon budget and compared to results of independent dynamic global vegetation models forced by observed climate, CO2 and land cover change (some including nitrogen–carbon interactions). All uncertainties are reported as ± 1 σ, reflecting the current capacity to characterise the annual estimates of each component of the global carbon budget. For the last decade available (2003–2012), EFF was 8.6 ± 0.4 GtC yr − 1, ELUC 0.9 ± 0.5 GtC yr − 1, GATM 4.3 ± 0.1 GtC yr − 1, S OCEAN 2.5 ± 0.5 GtC yr − 1, and S LAND 2.8 ± 0.8 GtC yr − 1. For year 2012 alone, EFF grew to 9.7 ± 0.5 GtC yr − 1, 2.2 % above 2011, reflecting a continued growing trend in these emissions, GATM was 5.1 ± 0.2 GtC yr − 1, SOCEANwas 2.9 ± 0.5 GtC yr −1, and assuming an ELU Cof 1.0 ± 0.5 GtC yr − 1 (based on the 2001–2010 average), SLAND was 2.7 ± 0.9 GtC yr − 1. GATM was high in 2012 compared to the 2003–2012 average, almost entirely reflecting the high EFF. The global atmospheric CO2 con- centration reached 392.52 ± 0.10 ppm averaged over 2012. We estimate that EFF will increase by 2.1 % (1.1–3.1 %) to 9.9 ± 0.5 GtC in 2013, 61 % above emissions in 1990, based on projections of world gross domestic product and recent changes in the carbon intensity of the economy. With this projection, cumulative emissions of CO2 will reach about 535 ± 55 GtC for 1870–2013, about 70 % from EFF (390 ± 20 GtC) and 30 % from ELUC (145 ± 50 GtC). This paper also documents any changes in the methods and data sets used in this new carbon budget from previous budgets (Le Quéré et al., 2013). All observations presented here can be downloaded from the Carbon Dioxide Information Analysis Center.

How does firm heterogeneity information impact the estimation of embodied carbon emissions in Chinese exports?

Using an augmented Chinese input–output table in which information about firm ownership and type of traded goods are explicitly reported, we show that ignoring firm heterogeneity causes embodied CO2 emissions in Chinese exports to be overestimated by 20% at the national level, with huge differences at the sector level, for 2007. This is because different types of firm that are allocated to the same sector of the conventional Chinese input–output table vary greatly in terms of market share, production technology and carbon intensity. This overestimation of export-related carbon emissions would be even higher if it were not for the fact that 80% of CO2 emissions embodied in exports of foreign-owned firms are, in fact, emitted by Chinese-owned firms upstream of the supply chain. The main reason is that the largest CO2 emitter, the electricity sector located upstream in Chinese domestic supply chains, is strongly dominated by Chinese-owned firms with very high carbon intensity.

The Social and Economic Impacts of a Washington State Carbon Tax

Thesis (Master's)--University of Washington, 2016-06

New climate scenario framework implementation in the GCAM integrated assessment model

48 p.

Time valued life cycle greenhouse gas emissions from buildings

The UK has adopted legally binding carbon reduction targets of 34% by 2020 and 80% by 2050 (measured against the 1990 baseline). Buildings are estimated to be responsible for more than 50% of greenhouse gas (GHG) emissions in the UK. These consist of both operational, produced during use, and embodied, produced during manufacture of materials and components, and during construction, refurbishments and demolition. A brief assessment suggests that it is unlikely that UK emission reduction targets can be met without substantial reductions in both Oc and Ec. Oc occurs over the lifetime of a building whereas the bulk of Ec occurs at the start of a building’s life. A time value for emissions could influence the decision making process when it comes to comparing mitigation measures which have benefits that occur at different times. An example might be the choice between building construction using low Ec construction materials versus building construction using high Ec construction materials but with lower Oc, although the use of high Ec materials does not necessarily imply a lower Oc. Particular time related issues examined here are: the urgency of the need to achieve large emissions reductions during the next 10 to 20 years; the earlier effective action is taken, the less costly it will be; future reduction in carbon intensity of energy supply; the carbon cycle and relationship between the release of GHG’s and their subsequent concentrations in the atmosphere. An equation is proposed, which weights emissions according to when they occur during the building life cycle, and which effectively increases Ec as a proportion of the total, suggesting that reducing Ec is likely to be more beneficial, in terms of climate change, for most new buildings. Thus, giving higher priority to Ec reductions is likely to result in a bigger positive impact on climate change and mitigation costs.

A comparison of greenhouse gas emissions in the residential sector of major Canadian cities

One of the most significant sources of greenhouse gas (GHG) emissions in Canada is the buildings sector, with over 30% of national energy end-use occurring in buildings. Energy use must be addressed to reduce emissions from the buildings sector, as nearly 70% of all Canada’s energy used in the residential sector comes from fossil sources. An analysis of GHG emissions from the existing residential building stock for the year 2010 has been conducted for six Canadian cities with different climates and development histories: Vancouver, Edmonton, Winnipeg, Toronto, Montreal, and Halifax. Variation across these cities is seen in their 2010 GHG emissions, due to climate, characteristics of the building stock, and energy conversion technologies, with Halifax having the highest per capita emissions at 5.55 tCO2e/capita and Montreal having the lowest at 0.32 tCO2e/capita. The importance of the provincial electricity grid’s carbon intensity is emphasized, along with era of construction, occupancy, floor area, and climate. Approaches to achieving deep emissions reductions include innovative retrofit financing and city level residential energy conservation by-laws; each region should seek location-appropriate measures to reduce energy demand within its residential housing stock, as well as associated GHG emissions.

The ""decarbonization"" of the world`s energy matrix

Decarbonizing the world`s energy matrix is the strategy being implemented by most countries to reduce CO(2) emissions and thus contribute to achieve the ultimate objectives of the Climate Convention. The evolution of the carbon intensity (I(c)=CO(2)/GDP) in the period 1990-2007 was encouraging but not sufficient to reduce the growth of carbon emission. As a result of COP-15 in Copenhagen these countries (and regions) made pledges that could lead to more reduction: for the United States a 17% reduction in CO(2) emissions by 2020 below the level of 2005: for the European Union a 20% reduction in CO(2) emissions by 2020 below the 1990 level: for China a 40-45% reduction in the carbon intensity and for India a 20-25% reduction in carbon intensity by 2020. We analyzed the consequences of such pledges and concluded that the expected yearly rate of decrease of the carbon intensity follows basically the ""business as usual"" trend in the period 1990-2007 and will, in all likelihood, be insufficient to reduce carbon emissions up to 2020. (C) 2010 Elsevier Ltd. All rights reserved.

Special Tax Treatment as Trade Policy: A Database on Export Processing and Special Economic Zones

Many countries treat income generated via exports favourably, especially when production takes places in special zones known as export processing zones (EPZs). EPZs can be defined as specific, geographically defined zones or areas that are subject to special administration and that generally offer tax incentives, such as duty‐free imports when producing for export, exemption from other regulatory constraints linked to import for the domestic market, sometimes favourable treatment in terms of industrial regulation, and the streamlining of border clearing procedures. We describe a database of WTO Members that employ special economic zones as part of their industrial policy mix. This is based on WTO notification and monitoring through the WTO’s trade policy review mechanism (TPRM), supplemented with information from the ILO, World Bank, and primary sources. We also provide some rough analysis of the relationship between use of EPZs and the carbon intensity of exports, and relative levels of investment across countries with and without special zones.