Adverse Selection in an Opt-in Emissions Trading Program: The Case of Sectoral Crediting for Transportation
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Sectoral crediting mechanisms such as sectoral no-lose targets have been proposed as a way to provide incentives for emission reductions in developing countries as part of an international climate agreement, and scale up carbon trading from the project-level Clean Development Mechanism to the sectoral level.
Countries would generate tradable emission credits (offsets) for reducing emissions in a sector below an agreed crediting baseline. However, large uncertainties in the regulator's predictions of the counterfactual business-as-usual baseline are likely to render sectoral no-lose targets an extremely unattractive mechanism in practice, at least for the transportation case study presented here. Given these uncertainties, the regulator faces a tradeoff between efficiency (setting generous crediting baselines to encourage more countries to opt in) and limiting transfer payments for non-additional offsets (which are generated if the crediting baseline is set above business-as-usual).
The first-best outcome is attainable through setting a generous crediting baseline. However, this comes at the cost of either increased environmental damage (if developed country targets are not adjusted to account for non-additional offsets), or transfers from developed to developing countries that are likely to be too high to be politically feasible (if developed country targets are made more stringent in recognition that many offsets are nonadditional). A more stringent crediting baseline still generates a large proportion of non-additional offsets, but renders sectoral no-lose targets virtually irrelevant as few countries opt in.
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Program on Energy and Sustainable Development
Research Experience in Carbon Sequestration 2010
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Research Experience in Carbon Sequestration 2010
Student Union Building
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University of New Mexico
Albuquerque, NM 87131
Gang He
616 Serra St.
E420 Encina Hall
Stanford, CA 94305
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ghe@stanford.edu
Research Associate
Gang He's work focuses on China's energy and climate change policy, carbon capture and sequestration, domestic coal and power sectors and their key role in both the global coal market and in international climate policy framework. He also studies other issues related to energy economics and modeling, global climate change and the development of lower-carbon energy sources.
Prior to joining PESD, he was with the World Resources Institute as a Cynthia Helms Fellow. He has also worked for the Global Roundtable on Climate Change of the Earth Institute at Columbia University. With his experiences both in US and China, he has been actively involved in the US-China collaboration on energy and climate change.
Mr. He received an M.A. from Columbia University on Climate and Society, B.S. from Peking University on Geography, and he is currently doing a PhD in the Energy and Resources Group at UC Berkeley.
Workshops
Carbon Capture and Storage (CCS): Creating a Framework for U.S.-China Cooperation on Climate and Energy
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PESD researcher Gang He is invited to the Asia Society and Center for American Progress's roundtable Carbon Capture and Storage (CCS): Creating a Framework for U.S.-China Cooperation on Climate and Energy to discuss core policy, financing, and technological and intellectual property rights questions that need to be addressed between China and the U.S. over a commercial-scale, demonstration CCS plant in China.
This joint initiative by Asia Society and the Center for American Progress aims to bring together key stakeholders for a lively discussion with the objective of producing a document that lays the framework for both countries to cooperate on the joint research, development and deployment of one or more pilot CCS facilities in China.
Center for American Progress
1225 Eye Street NW 3rd Floor
Washington D.C., 20001
Gang He
616 Serra St.
E420 Encina Hall
Stanford, CA 94305
0
ghe@stanford.edu
Research Associate
Gang He's work focuses on China's energy and climate change policy, carbon capture and sequestration, domestic coal and power sectors and their key role in both the global coal market and in international climate policy framework. He also studies other issues related to energy economics and modeling, global climate change and the development of lower-carbon energy sources.
Prior to joining PESD, he was with the World Resources Institute as a Cynthia Helms Fellow. He has also worked for the Global Roundtable on Climate Change of the Earth Institute at Columbia University. With his experiences both in US and China, he has been actively involved in the US-China collaboration on energy and climate change.
Mr. He received an M.A. from Columbia University on Climate and Society, B.S. from Peking University on Geography, and he is currently doing a PhD in the Energy and Resources Group at UC Berkeley.
Workshops
Guest Lecture: China’s Coal and Power Conflict and Its Broad Impacts
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PESD researcher Gang He will be guest lecturing in Stanford University's China Energy System course on China's coal and power conflict and its broad impacts on Chinese energy and climate policy. He will discuss the most important feature in China's energy market - coal and power conflict, explain why there is a conflict and how it come into being, and analyze the broad impacts of the conflict on deploying CCS at scale and applying CDM in the Chinese power market. Gang will also highlight some possible solutions to the coal and power conflict in China's energy market.
China Energy System(CEE 276F) is a directed readings course that studies the energy resources and policies in use and under development in the world's most populous nation. As a country undergoing rapid and sustained economic growth, China's decisions as to how to meet its energy requirements will affect global energy markets and impact the global environment. This course focuses on the areas of major impact that are forecast and will present a comparative analysis of China's energy management strategies.
Y2E2 111
Gang He
616 Serra St.
E420 Encina Hall
Stanford, CA 94305
0
ghe@stanford.edu
Research Associate
Gang He's work focuses on China's energy and climate change policy, carbon capture and sequestration, domestic coal and power sectors and their key role in both the global coal market and in international climate policy framework. He also studies other issues related to energy economics and modeling, global climate change and the development of lower-carbon energy sources.
Prior to joining PESD, he was with the World Resources Institute as a Cynthia Helms Fellow. He has also worked for the Global Roundtable on Climate Change of the Earth Institute at Columbia University. With his experiences both in US and China, he has been actively involved in the US-China collaboration on energy and climate change.
Mr. He received an M.A. from Columbia University on Climate and Society, B.S. from Peking University on Geography, and he is currently doing a PhD in the Energy and Resources Group at UC Berkeley.
Lectures
Climate Policy Instruments in the Real World
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On Tuesday, September 7, 2010, the Program on Energy and Sustainable Development in collaboration with the Stanford University's Graduate School of Business and Stanford Law School hosted a special conference on Climate Policy Instruments in the Real World.
This conference featured presentations by leading researchers on the political, economic, and regulatory challenges associated with major climate policy instruments. The goal of this conference was to transfer the state-of-the-art in policy-relevant academic research on key aspects of climate policy design and analysis to the business, regulatory and policymaking communities. Each presentation was followed by comments from two discussants that develop the practical implications of the research results presented for decision-makers in industry and government.
Topics our experts explored included: setting a price for carbon, engaging the developing world in climate change mitigation, the role of renewable energy sources in climate change mitigation, mechanisms for reducing greenhouse gases from the transportation sector, managing intermittency in the electricity sector, and mechanisms for adapting to climate change.
We would like to thank everybody for their participation on September 7, 2010.
For more conference information, please visit:
http://www.certain.com/system/profile/web/index.cfm?PKwebID=0x1992925e31&varPage=home
Thank you to all our sponsors:
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Bechtel Conference Center
Robert Stavins
Speaker
Kennedy School of Government
Richard K. Morse
Speaker
Severin Borenstein
Speaker
Haas School of Business, UC Berkeley
Christopher Knittel
Speaker
Department of Economics, UC Davis
Frank Wolak
Stanford University
Economics Department
579 Jane Stanford Way
Stanford, CA 94305-6072
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wolak@zia.stanford.edu
Senior Fellow at the Freeman Spogli Institute for International Studies
Holbrook Working Professor of Commodity Price Studies in Economics
Senior Fellow, by courtesy, at the Stanford Institute for Economic Policy Research
Frank A. Wolak is a Professor in the Department of Economics at Stanford University. His fields of specialization are Industrial Organization and Econometric Theory. His recent work studies methods for introducing competition into infrastructure industries -- telecommunications, electricity, water delivery and postal delivery services -- and on assessing the impacts of these competition policies on consumer and producer welfare. He is the Chairman of the Market Surveillance Committee of the California Independent System Operator for electricity supply industry in California. He is a visiting scholar at University of California Energy Institute and a Research Associate of the National Bureau of Economic Research (NBER).
Professor Wolak received his Ph.D. and M.S. from Harvard University and his B.A. from Rice University.
Director of the Program on Energy and Sustainable Development
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Matt Kahn
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Institute of the Environment and Department of Economics, UCLA
Conferences
CURC Fall General Membership Meeting
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PESD research associate Richard K. Morse will be presenting "The Real Drivers of CCS in China and Implications for Climate Policy" at the Coal Utilization Research Council's Fall 2009 General Membership Meeting. Richard's presentation will reflect the research and publication of PESD's Working Paper #88.
Richard's CCS technology collaborative briefing is from 2:15PM to 2:30PM at the L'Enfant Plaza Hotel
8:30AM to 12:30PM
Capitol Visitors Center
(Below the East Plaza of the Capital Building)
Room SVC 209
1:00PM to 3:30PM
L'Enfant Plaza Hotel
Washington, D.C. 20024
Richard K. Morse
Panelist
Conferences
SLAC Colloquium: Reconciling the Rapid Growth of Coal and CO2 Emissions in Global Energy Markets
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Coal is both the world's fastest growing fossil fuel and a leading contributor to greenhouse gas emissions. While in the West coal use is under pressure, much of the developing world is predicating economic growth on cheap, reliable electricity from coal. As a result, the next few decades are likely to witness a massive build out of coal capacity.
Morse will explore where coal markets are growing, examine what economic and political variables have the greatest impact on coal use and the global coal trade, and discuss possible leverage points for CO2 mitigation. One mitigation option is a technology called carbon capture and storage, or CCS. Should we place big bets on this expensive and largely unproven option? Morse will discuss whether the current state of CCS deployment for coal-fired power falls short of mitigation levels required by many widely publicized targets and proceed to analyze the potential for commercial deployment of CCS technology at scale.
SLAC National Accelerator Laboratory
Panofsky Auditorium
Building 43
Richard Morse
Speaker
Seminars