The social cost of trading: Measuring the increased damages from sulfur dioxide trading in the United States

The sulfur dioxide (SO₂) cap and trade program established in the 1990 Clean Air Act Amendments is celebrated for reducing abatement costs ($0.7 to $2.1 billion per year) by allowing emissions allowances to be traded. Unfortunately, places with high marginal costs also tend to have high marginal damages. Ton‐for‐ton trading reduces emissions in low damage areas (rural) while increasing emissions in high damage areas (cities). From 2000 to 2007, conservative estimates of the value of mortality risk suggest that trades increased damages from $0.8 to $1.1 billion annually relative to the initial allowance allocation and from $1.5 to $1.9 billion annually relative to a uniform performance standard. With U.S. Environmental Protection Agency (USEPA) values, trades increased damages from $2.4 to $3.2 billion annually compared to the initial allowance allocation and from $4.4 to $5.4 billion compared to a uniform performance standard. It is not clear that the ton‐for‐ton SO₂ cap and trade program is actually more efficient than comparable command and control programs. The trading program needs to be modified so that tons are weighted by their marginal damage. © 2011 by the Association for Public Policy Analysis and Management.     

Intertemporal regulatory tasks and responsibilities for greenhouse gas reductions

Jurisdictions are in the process of establishing regulatory systems to control greenhouse gas emissions. Short‐term and sometimes long‐term emissions reduction goals are established, as California does for 2020 and 2050, but little attention has yet been focused on annual emissions targets for the intervening years. We develop recommendations for how these annual targets—which we collectively term a “compliance pathway”—can be set, as well as what flexibility sources should have to adjust in light of cost uncertainties. Environmental effectiveness, efficiency, equity, adaptability, and encouraging global participation are appropriate criteria by which these intertemporal policy alternatives should be judged. Limited but useful knowledge about costs leads us to recommend a compliance pathway characterized by increasing incremental reductions along it. This can be approximated by discrete linear segments, which may fit better with global negotiations. Although the above conclusion applies to any long‐term GHG regulatory program, many jurisdictions will rely heavily on a cap‐and‐trade system, and the same pathway recommendation applies to its time schedule of allowances. Furthermore, borrowing constraints in cap‐and‐trade systems can impose substantial unnecessary costs. To avoid most of these costs, we recommend that sources be allowed early use of limited percentages of allowances intended for future years. We also find that a three‐year compliance period can have substantial benefit over a one‐year period. © 2010 by the Association for Public Policy Analysis and Management.     

The United States,Japan and the aerospace industry: from capture to competitor? 1

Abstract

For all its success in other high-technology sectors, Japan has largely failed to develop a strong aerospace sector. Its leading firms do not market finished aircraft and, in stark contrast to other sectors, the aerospace industry features a trade deficit with the United States. Japanese firms seem trapped as suppliers of components and sub-assemblies, mainly for the US industry. The general explanation for this state of affairs is that the Japanese industry has been effectively ‘captured’ by the United States; Boeing in particular dominates the sector and has effectively locked the Japanese firms into a relationship where moving up the value chain is difficult. This relationship may be changing. Japan's government has placed renewed emphasis on developing Japan's aerospace sector, while matters are evolving at the corporate level too, with Boeing's relations with Japan revealing a steadily increasing work share for the Japanese industry. The rise of Asia as an important market, and technological change making aerospace more like other manufacturing industries, presents Japanese firms with new incentives and opportunities beyond the US relationship.     

Economic and social determinants of carbon emissions: Evidence from organization of petroleum exporting countries

This research investigates the economic and social determinants of carbon emissions in the Organization of Petroleum Exporting Countries (OPEC) over the period 1995–2016. The study particularly examines the link between CO₂ emissions and four socio‐economic variables (per‐capita GDP, urbanisation, fossil fuel energy consumption and international trade). A long‐run relationship amongst these variables is confirmed by Kao, Pedroni and Johansen panel cointegration tests. Fully modified ordinary least squares outcomes show that the relationship between CO₂ emission and GDP is non‐linear in OPEC countries and follows the inverted U‐shape suggested by the environmental Kuznets curve hypothesis. Also, urbanisation is responsible for a significant proportion of carbon emissions in OPEC countries. As expected, fossil fuel energy consumption is a significant positive driver of carbon emission. International trade significantly contributes to carbon emissions within OPEC member countries.     

Nexus between carbon emission,financial development,and access to electricity: Incorporating the role of natural resources and population growth

This study explores the nexus between financial development, access to electricity, and CO₂ emissions in Pakistan over the period from 1990 to 2015, incorporating the role of natural resources and population growth. We checked the stationarity of the data by using three different unit root tests (ADF, Phillip Pesaran, and DG‐FLS). Long‐ and short‐run elasticities have been determined through auto‐regressive distributive lag (ARDL) method. The empirical results confirmed that financial development and access to electricity increase CO₂ emissions and deteriorate the environmental quality. In addition, the population growth is responsible for growing CO₂ emissions in Pakistan, while natural resources have insignificant relation with CO₂ emissions. Furthermore, bidirectional causality exists between population growth and natural resources, whereas unidirectional causality is detected among financial development and CO₂ emissions, natural resources and population growth, and financial development and population growth. The newly developed findings suggest helpful policy implications to adequately address the issue of CO₂ emissions without compromising economic development.     

The harmonization of automobile environmental standards between Japan,the United States and Europe: the ‘depoliticizing strategy’ by industry and the dynamics between firms and governments in a transnational context

Abstract

When initial automobile environmental standards were introduced during the 1970s and 1980s there was a large difference in the level and timing of the introduction of these initial emission standards in the United States, Japan and Europe. Trade in automobiles was the target of fierce trade disputes in the 1980s between, for example, the United States and Japan. The governments of Japan, the United States and Europe were involved in trade negotiations as agents of the automobile industry of each country, often focusing on environmental standards as sources of non-tariff barriers. But since the mid-1990s, because of the globalization of the automobile industry, automobile firms have had common interests in collaborating in relation to voluntary harmonized standards. They also have common interests in relation to other sectors such as the petroleum industry in that the burden for emission reductions needs to be shared equitably among sectors. In that sense, it can be said that a ‘depoliticizing strategy’ has been used, which is the strategy used by the automobile industry not to rely on government intervention and trade conflicts at an intergovernmental level to deal with the difference in standards. There is a tendency for high-level convergence concerning environmental emission standards for NO_x etc. in Japan, the United States and Europe and related sulfur content standards for complying with them. In addition, the automobile industry has been consciously seeking international harmonization through the Trans Atlantic Business Dialogue (TABD) and the TrilateralWorking Group. Harmonization has also been attempted at the intergovernmental level to gain legitimacy at the arena of the United Nations Economic Commission for Europe (UNECE) through the signing of the 1995 Agreement (the revision of 1958 Agreement) and the establishment of the 1998 Global Agreement. In the process, governments have been requested by automobile firms to adopt harmonized standards; but governments also have their own incentives to set up an intergovernmental mechanism to establish harmonized standards.     

Policy attribute framing: A comparison between three policy instruments for personal emissions reduction

A comparative experiment in the UK examined people's willingness to change energy consumption behavior under three different policy framings: energy tax, carbon tax, and personal carbon allowances (PCA). PCA is a downstream cap‐and‐trade policy proposed in the UK, in which emission rights are allocated to individuals. We hypothesized that due to economic, pro‐environmental and mental accounting drivers PCA would have greater potential to deliver emissions reduction than taxation. Participants (n = 1,096) received one version of a survey with the same energy‐behavior–related questions and identical incurred costs under one of the following framings: energy tax (where carbon was not mentioned), carbon tax, and PCA. Results suggest that policies that draw people's attention to carbon (PCA and carbon taxation) could have greater impact on their stated willingness to reduce energy consumption, and on the reduction amounts prompted, than would a non‐overt price signal (energy tax). There is mixed evidence, however, as to whether PCA or carbon taxation would produce the largest energy demand reductions. Some indication was found for a spillover toward wider carbon conservation under the PCA framing. © 2011 by the Association for Public Policy Analysis and Management.     

The Contours of “Cap and Trade”: The Evolution of Emissions Trading Systems for Greenhouse Gases

This article documents the evolution of “cap and trade” as a policy response to global climate change. Through an analysis of 33 distinct policy venues, the article describes how the cap and trade policy domain has developed along spatial, temporal, and institutional dimensions. This discussion demonstrates that following initial discussions of cap and trade in the Kyoto Protocol negotiations, the idea quickly spread to other policy venues, creating a complex system of multilevel governance, where many questions about how to govern emissions trading remain contested. The analysis contextualizes recent questioning of emissions trading as an appropriate mechanism for controlling GHG emissions, as well as the ongoing debates about who should govern cap and trade and how it should be carried out. The findings highlight the value added of a domain‐level perspective and suggest the need for future research on the sociopolitical nature of cap and trade policy debates.     

Going out: China's food security from Southeast Asia

Abstract

China's new five-year plan recognised the looming insecurity in its agricultural sector. On the one hand, the country faces a diminishing arable land supply; on the other, a large population with rapidly increasing diets. Although large-scale trade and investment in this sector has been developing since the mid 1990s between China and a variety of African states, it is a relatively new addition to the more established China-Southeast Asian economic relationship. This article seeks to explore the impact that China's agricultural investments are having on two Southeast Asian countries – Indonesia and the Philippines – where there has been a marked increase in activities by Chinese firms in agricultural produce. The findings from these two case studies – and a series of smaller studies of the situation in other regional states – are used as a benchmark to clarify some of the consequences of China's agricultural investment from Southeast Asia for regional food security.     

The determinants and interrelationship of carbon emissions and economic growth in African economies: Fresh insights from static and dynamic models

This study explores the interrelationship between CO₂ emissions and economic growth in selected Africa economies from 1990 to 2014 providing evidence from both static and dynamic models. Results show that increases in energy use have a significant and positive effect on economic growth; which goes to show that growth in Africa is actually energy dependent. Further findings suggest that CO₂ emissions have no significant contemporaneous effect, however, a significant and negative effect at a one‐period lag on economic growth. The significance of the impacts is consistently confirmed by both the static and dynamic estimations. Also, trade adds to economic growth and also contributes to environmental deterioration in Africa. There is a dire need for Africa to adjust its energy portfolio by shifting to clean energy sources which will enhance sustainable economic growth without deteriorating the environment.     

EU Legislation to Reduce Carbon Emissions from Cars: Intergovernmental or Supranational Policy Making?

This article examines the making and implementation of the 2009 European Union (EU) regulation on cars and CO₂ emissions (Regulation [EC] No 443/2009). As the first legally binding measure to target the CO₂ emissions of passenger cars, this regulation represents a milestone in EU efforts to reduce the climate impacts of road transport. The analysis draws on two central theoretical perspectives on EU policy making: liberal intergovernmentalism and supranationalism. Both offer important insights, but their explanatory power varies with the policy‐making phase in focus. The analysis shows that the Commission and the car industry were instrumental in shaping what eventually became an industry‐friendly regulation applicable in all EU countries. However, far from being a case of closed negotiations between the industry and the Commission, Germany and other EU countries defending the interest of manufacturers of high‐emission vehicles made use of their powers during the decision‐making phase and succeeded in watering down the Commission's proposal.     

The Effect of the Kyoto Protocol on Carbon Emissions

Since 1997, CO₂ emissions have continued to rise in many countries despite their emission caps under the Kyoto Protocol (Kyoto). Failure to meet promised targets, however, does not imply that Kyoto has been pointless. Whether Kyoto has made a difference relative to the counterfactual of “No Kyoto” is an empirical question that requires an instrumental variables strategy. We argue that countries’ ratification of the statutes governing the International Criminal Court is a valid instrument for ratification of Kyoto commitments. In our panel fixed effects estimations, the instrument easily passes weak identification and overidentification tests. It can be plausibly excluded from our second‐stage equations and does not cause CO₂ emissions. Our estimates suggest that Kyoto ratification has a quantitatively large (about 10 percent) and robust, though only moderately statistically significant, negative effect on CO₂ emissions. We also show that higher fuel prices and a different energy mix in Kyoto countries support this result.     

Policy actions for developing the infrastructure sector: Learnings from the Indian experience

The infrastructure sector is one of the major pillars for economic growth and development of a country. The responsibility to develop this crucial sector is shifting away from the public to the private sector. After the economic liberalization in 1991, India opened the infrastructure sector, among many others, to private domestic and foreign investment. The shortage of electricity, the poor state of roads, and limited telecom access necessitated a stream of persistent reforms, which were expected to play a significant role in the infrastructure sector's growth. Although some subsectors witnessed success, others continued to face hurdles. The paper highlights the role of infrastructure in socio-economic development through global literature. It also presents a story of infrastructure development in India since the inception of economic liberalization. It highlights various challenges that discourage private sector investments, thus providing a rationale for policy initiatives by the government. The paper also presents critical issues highlighted by multiple government committees over nearly three decades and identifies residual issues that merit attention. The outcomes of the paper are relevant in the context of developing and emerging economies.     

Climate change,markets and standards: the case of financial accounting

Abstract

The paper examines unresolved attempts since 2005 to develop financial accounting standards for greenhouse gas emission allowances. It is a detailed empirical case study into how the large-scale experiment of carbon markets has manifested in a particular area of professional expertise – financial accounting. Theories about the role of standards usefully draw attention to the hidden work of standards in society and help explain why some things are difficult to standardise. However, there are notable gaps in conceptualising how standards are integral to wider processes of policy and technology change. Ideas from governmentality and hybrid markets (agencements) are therefore used to explore further the role of standards within markets, and provide a welcome avenue for thinking afresh about the relationship between climate change and standards.     

Supply Chain Linkages and the Extended Carbon Coalition

Which firms oppose action to fight climate change? Networks of input sourcing and sales to downstream customers ought to propagate and reinforce opposition to decarbonization beyond direct emitters of CO₂. To test this claim, we build the largest data set of public political activity for and against climate action in the United States, revealing that the majority of corporate opposition to climate action comes from outside the highest‐emitting industries. We construct new measures of the carbon intensity of firms and show that policy exposure via carbon‐intensive inputs and sales to downstream emitters explains this large volume of opposition from non‐emitting industries. Sixty‐six percent of U.S. lobbying on climate policy has been conducted by an extended coalition of firms, associations, and other groups that have publicly opposed reducing carbon emissions. Public opposition to climate action by carbon‐connected industries is therefore broad‐based, highly organized, and matched with extensive lobbying.     

The EU’s Emissions Trading System,Part 1: Taking Stock

This is part 1 of a paper that revisits the European Union’s Emissions Trading System (EU ETS) in an attempt to take stock of how the system has worked and evaluate it from the standpoint of radical political economy. The paper briefly discusses the basics of the scheme, including its design as a financial instrument and its performance during the first trading period (2005–2007). It then moves to elaborating on the workings of the scheme during phase 2 (2008–2012) and on the initiation of phase 3 (2013–2014). This analysis discusses the adjustments and the extensions of the scheme, compliance results and allowance trades and prices with a critical eye. The paper reveals the unsatisfactory results of the scheme (even in its own proclaimed aims), which include allowances surplus, allowance trades for pure financial purposes, low and volatile price of allowances, windfall profits, extensive use of Kyoto project-based credits, and several malfunctions and instances of fraud. These findings set the ground for part 2 of the paper which offers a critical assessment of ETS from the standpoint of radical political economy, putting emphasis on the needs and interests of the unprivileged working people.     

The impact of clean energy consumption on economic growth and CO2 emissions in BRICS countries: Does the environmental Kuznets curve exist?

This paper examines the impact of clean energy consumption (CEC) on economic growth (EG) and CO₂ emissions (CO₂) within a framework of environmental Kuznets curve (EKC) hypothesis in a panel of BRICS countries for the period 1992–2014. The results indicated that CEC and EG have a significant positive impact on EG, while CO₂ has a negative impact on it. Our results also found that EC and EG increase CO₂ while CEC significantly reduces it. Further, we found that the EKC hypothesis is valid in the BRICS countries. Finally, panel causality test indicated that unidirectional causality running from EC to EG. However, we did not find a causal relationship between CEC and EG. Based on these results, some of the policy implications have proposed for these emerging market economies.     

Netzwerke und Koppelgeschäfte in der europäischen Elektrizitätspolitik

Within the field of political science package deals have come to be well known as a strategy to overcome decision blockades within the European Council. However, the following essay argues that besides the Member States’ Heads of State or of Government the European Commission and large firms can agree on package deals within negotiations at European level as well. By means of the example of the liberalisation of the electricity market this article shows that networks of European electricity policy constitute the institutional framework in which options for package deals between the two actors may arise. In addition, three main dimensions are examined to demonstrate the plausibility of package deals empirically. Firstly, the formal powers of the EC Commission and the exchange resources of large electricity firms respectively, secondly, the divergence of interests as well as, thirdly, the short-termed change in preferences of the Commissions’ and firms’ actors involved in an exemplary elucidated merger decision.     

Economic interdependence and the making of trade policy: Industrial demand for an open market in Japan

Abstract

The central question of this article is how the internationalization of corporate activity has changed the trade policy preferences of Japanese corporations. Using case studies of the automobile and textile industries, the paper tests the hypothesis that as firms strengthen multinational operations, they become more committed to trade liberalization of their home market. Growing multinational operations are one of the major reasons why internationally‐oriented automakers have committed themselves to promoting the opening of keiretsu groups as well as the market access for foreign products. In the textile industry, apparel makers opposed import restrictions because of their overseas productions and intra‐firm trade. Towel manufacturers also opposed restrictions on imports of cotton yarn because they were users of imported yarn. However, large textile producers supported import restrictions in spite of their international links. Their preferences stemmed largely from their desire to maintain their domestic linkages with downstream producers.     

Limits of market-based strategies for slowing global warming: The case of tradeable permits

Concern over an enhanced greenhouse effect has yielded interest in an international effort to control rising concentrations of greenhouse gases. Among the possible mechanisms for doing this is a comprehensive marked-based approach. This approach would establish a global system of tradeable permits for the sources and sinks of the major greenhouse gases: carbon dioxide (CO₂), nitrous oxide (N₂O), methane (CH₄), and tropospheric ozone (O₃). (Chlorofluorocarbons (CFCs) are not closely considered here because they are already controlled under the Montreal Protocol on Substances that Deplete the Ozone Layer.)The main finding is that - with the possible exception of CO₂ - not enough is currently known about these gases to accurately monitor such a system of tradeable permits. The main argument is made on the basis that the anthropogenic sources and sinks of non-CO₂ gases are quite uncertain, making nation-by-nation monitoring very difficult. Also, monitoring many of the sources and sinks for these non-CO₂ gases will be very complicated - the administrative costs of the endeavor may be much larger than benefits of including these gases in a global system of tradeable permits. One alternative to the proposed comprehensive marked-based approach is a more limited system that includes only CO₂. This finding has broader application to all greenhouse control mechanisms, not just tradeable permits.In addition to these natural science-related issues, the paper also briefly raises several other issues such as fear that markets will allow firms to buy up the environment.