Dóra Fazekas Carbon Market Implications for new EU - UniCredit ...

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“If it is feasible to establish a market to implement a policy, no policy maker can afford to do without one” 12 John H. Dales, Professor Emeritus (1968) II. EMISSIONS TRADING IN CLIMATE CHANGE REGULATION 1. Climate Change Regulation 1.1. Environmental Policy Tools for Emissions Reductions 1.2. Tradeable Permits Schemes 2. Practical Experiences and Implementation of Tradeable Permits Schemes 2.1. The Kyoto Protocol 2.2. Flexibility Mechanisms 2.3. Emission Trading Schemes 3. Pilot phase of the EU Emission Trading Scheme 3.1. Emission Trading in the old EU Member States 3.2. Emission Trading in the new EU Member States
1. Climate Change Regulation The field of environmental economics has been developing quickly over the last few decades. This chapter presents tools for environmental policy regulation. Although environmental awareness is increasing day by day, and improvements in environmental policy are taking place, it will take a long time to solve these problems in a satisfying way. The tool kit of environmental protection policies in the field of climate change is diverse. The range of possible environmental policy instruments is as wide as the range of concerns they intend to address, and they are grouped in different ways in the economics and policy literatures. Economists frequently divide environmental policy instruments into two categories: (1) those that provide firms with little flexibility in achieving goals, the so-called command-and- control approaches (C&C), and (2) those that provide firms with greater flexibility and incentives to look for more effective ways of making sustained environmental progress, the so-called market-based or incentive-based instruments. Other scientists use different categorizations but there is a consensus on the divide between the two main streams. A simple and widely used approach (Cassils, 1991) is to consider that environmental policy instruments can be grouped into three broad categories, besides the above two: (3) decentralized policies or voluntary measures (see table below). Direct regulation Command-and- control measures - norms - limits - licensing - liability - fines - bans - standards Indirect regulation Economic / Market-based / Incentive- based instruments - taxes, charges, levies duties, effluent charges - incentives - fiscal and budgetary subsidies (tax credits, exemptions and allowances, direct transfers, low-interest loans and grants, R&D) - tradeable permits Decentralized regulation Negotiated compliance Suasive instruments - unilateral firm statements - voluntary agreements - environmental marketing - ISO, EMAS and other environmental certifications - ecolabelling - ecoaudit - BAT, BATNEC 2 - enforcement incentives - environmental liability insurance - information-based measures Table 4. Environmental policy instruments Source: Kerekes – Szlávik, 2001 1.1. Environmental Policy Tools for Emissions Reductions Before focusing on tradeable permit schemes let us review the three major types of environmental policy instruments in more detail. 2 BAT: Best Available Technology, BATNEC: Best Available Technology Not Entailing Excessive Cost 13
Page 1 and 2: PhD Program in Management and Busin
Page 3 and 4: List of figures Figure 1. Optimal l
Page 5 and 6: „If you want to understand today,
Page 7 and 8: Neither the theory nor the empirica
Page 9 and 10: Table 1. Installations receiving th
Page 11: oth on national and corporate level
Page 15 and 16: approaches, activities that are not
Page 17 and 18: In Europe the United Kingdom and De
Page 19 and 20: (2) Allocating emission rights is d
Page 21 and 22: Figure 2. The cap determines the ma
Page 23 and 24: Table 5. Tradeable certificates (ba
Page 25 and 26: value, sectoral and spatial coverag
Page 27 and 28: with their quantified reduction tar
Page 29 and 30: * * * Several authors (Hahn and Sta
Page 31 and 32: EU ETS Within the context of the UN
Page 33 and 34: establishing an international marke
Page 35 and 36: (c) Allowances can also be distribu
Page 37 and 38: • ETS in New Zealand; • Volunta
Page 39 and 40: emissions trading schemes, making i
Page 41 and 42: end of the pilot phase. Since Augus
Page 43 and 44: Figure 10. Distance to burden-shari
Page 45 and 46: Early attitude of companies towards
Page 47 and 48: high quality, differentiated produc
Page 49 and 50: investments needed in the industry.
Page 51 and 52: 3.2. Emission Trading in the new EU
Page 53 and 54: environmental benefits at a relativ
Page 55 and 56: well below their Kyoto target (EEA,
Page 57 and 58: lawsuits against the Commission for
Page 59 and 60: The most active countries to host J
Page 61 and 62: Figure 14. Hot air as supply for AA
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There have been three proposals on
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transparency of AAU transfers; redu
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Figure 18. Tradeable Hungarian AAU
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“Think Globally, Act Locally” I
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At the same time, this relatively f
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processes on the whole act a sink,
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directly from CO2 emissions are ess
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1.2. A Review of the Hungarian Lite
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2. Introducing the EU ETS in Hungar
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databases containing common data el
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instances where inconsistent decisi
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emissions each calendar year Non-tr
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is found to be in order, they may s
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economy to a market economy, as is
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the EU ETS. Many observers believe
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Emissions allowances to be allocate
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2005 2006 2007 Installation Alloc.
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Finance is putting much of the reve
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conclusion. It is safe to conclude
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allowance surplus, and then increas
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agent. 23 Denmark sold 2,762 thousa
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and Water prepared its proposal on
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What was the reason for this anomal
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considered a “transfer.” Apart
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When allowances are recognized as g
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provision is to be formed against t
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the model shall be supplemented wit
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Participants of the Hungarian EU ET
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program, full sets of emissions dat
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Figure 27. The Concentration of the
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Figure 30. The Hungarian EU ETS mar
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Figure 32. Positions of Hungarian E
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Figure 40 below shows the allocatio
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3.2. The Impact of the EU ETS on Hu
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interviews, that companies looked u
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neither emissions-reduction targets
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was considered, since they all obta
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spillover effect; this, however, co
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During the pilot period, Hungarian
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to comply shall have their names pu
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eact efficiently to regulations. Th
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ensuring great enough profit, it sw
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combined with an internal price tha
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Were Emissions Actually Reduced? Co
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column) and the verified emissions
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Figure 38. Hungarian reference peri
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* * * The effects of the EU ETS on
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(2) Transfer account of allowances,
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In an EU-context, Hungary held its
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installations the author spoke to w
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Companies, which were certain of th
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Figure 42. Hungarian transactions d
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phase. CITL Data The transaction da
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International Transfers The author
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Based on these numbers, it may be c
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The two right-hand side columns in
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sales, and how much was accounted f
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the CITL only contains data on wher
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approximately two-fifths of the vol
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(3) Installations that had shut dow
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production, one-fifth represented t
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IV. EXPERIENCES OF THE EU ETS PILOT
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starting in 2012, the European Unio
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originally allocated. Based on thes
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economic development rather than as
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Hungary has still to learn to opera
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Appendix I. - Questionnaire 3.c. Cl
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Had surplus but did not sell EUAs ,
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Appendix III. - Accounting Aspects
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Appendix V. - Overview and main fea
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Appendix VII. - Foreign emission al
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Hungária Cementipari Rt. 2006 HU 5
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Reductions Clean Development Mechan
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Linking Directive from project acti
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VII. REFERENCES Ahman, M. - Burtraw
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Burtraw, D. - Palmer, K. - Bharvirk
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EEA (2006): Greenhouse gas emission
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Hahn, R. - Stavins, R. (1999): What
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Kaderják, P. (1997): Economics for
Page 221 and 222:
Montero, J. P. (1997): Marketable P
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Philibert, C. (2006): Certainty ver
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Tietenberg, T. (1992): Relevant Exp
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Woerdmann, E. (2003): Developing ca
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Hungarian law - Hungarian governmen
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Oxford University Press, USA http:/
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