› dr. stefan weishaar, m.sc., ll.m. › associate professor of law and economics › faculty of...
TRANSCRIPT
› Dr. Stefan Weishaar, M.Sc., LL.M.
› Associate Professor of Law and Economics
› Faculty of Law, Department of Law and Economics
› Groningen Centre of Energy Law
Hybrid emissions trading systems: what about efficiency?
Carbon Ambition:
› Intensity targets› - 17% carbon intensity below 2005 levels by 2015› - 40 -45% carbon intensity below 2005 levels by
2020
› => Moving target• GDP growth?• Economic transition?
Instruments:
› Command and control› Natural limits
› Market based• Setting Q: ETS• Setting P: Tax
› For the NDRC (Energy Research Institute) ETS and Tax are NOT mutually exclusive!
Taxes: targeting P
› Price signal => innovation => abatement › Tax Revenue› Adjustable by law› Not protecting incumbents
› Emissions vary › Optimal tax rate requires optimal information › Effectiveness depends heavily on demand and supply
functions (price should be elastic to induce change)› Flat tax vs. Pigou
ETS: targeting Q
› Trade => lowest abatement costs › Adapt to inflation› Automatic stabilizer› Politically feasible (permits; taxes)› Common and differenciated responsibility
› Price volatility=> investment uncertainty => limited innovation
› Optimal Q requires optimal information› Windfall profits› Leakage (offsets)
L & E insights
› ETS: high admin. Costs for small installations› Tax: falt tax easily applied but suboptimal› => ETS for large, Tax for small installations
Policy goals› Primary goal: Carbon intensity per unit of GDP› Equal?: Carbon limitation &
investment/innovation
› Dynamic caps (Guangdong?)› Continuous price signal
› Could a Carbon Tax + ETS combination offer a solution?• Base price signal => innovation• (Dynamic) cap
Hybrids + efficiency?
Dr. Jiang Kejun, Director of the Energy Research Institute of the NDRC
“Carbon tax and an ETS are not mutually exclusive”
› => Inefficiencies:› Distortions of competition• ETS covered installations pay more
› Double payment for emissions?› Distortions of the abatement market› Higher administrative costs than one scheme
Other options:
› Price corridors (ETS with a price floor and ceiling)
› Govt. buys allowances back / prints allowances
› McKibbin and Wilcoxen (2002)› Significant efficiency improvements, Pizer (2002)› Easy linking, PWC (2009)
› China + financial commitment?
A solution for China?
› Substantial auctioning with a reserve price allows government to guide secondary market prices• (Dynamic) cap can be safeguarded• Price declines are short lived• Positive allowance price => investment
incentives
• Centralization (?)