Abstract
This chapter is divided into two sections. In Sect. 7.1, international policies and measures are discussed. First, a theoretical comparison of cap and trade and carbon tax under uncertainty is described. Then reflecting the global paradigm shift from a top-down to a bottom-up approach since 2009 (COP15), the focus is mainly on policies under the pledge and review regime such as a sectoral approach. Other policies that have indirect effects for mitigation such as trade liberalization of climate friendly goods and services, green growth including removal of environmentally harmful subsidies, and financial assistance are also discussed. In Sect. 7.2, the discussion focuses on domestic policies. Firstly, the author compares economic incentive and direct regulations, then analyzes specific policies that have been actually introduced into several countries or regions. They are the EU Emissions Trading Scheme (EU ETS), cap and trade and voluntary measures in Japan, and policies to promote renewable energy (Feed-in Tariff).
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Notes
- 1.
Two other instruments are Joint Implementation (JI) and Clean Development Mechanism (CDM). Both accrue credits from GHG reduction projects. Among these, JI applies to projects between developed countries, and CDM between developed and developing countries.
- 2.
Theoretically speaking, there is a case where tax will be collected by an international organization. But this is quite unrealistic. In this book, when the word (carbon) tax is used in the context of international policy, this always means a harmonized (carbon) tax where each government levies an internationally harmonized tax.
- 3.
Cost to abate an additional 1 ton of CO2 or GHG.
- 4.
It is the author’s view that, despite the adoption of the wording “a protocol, legal instrument or an agreed outcome with legal force” at COP 17, the situation remains unchanged, as the wording is too vague and does not necessarily mean a “Kyoto-style” legally binding treaty.
- 5.
Environmental damage caused by an additional 1 ton of CO2 or GHGs. The damage avoided by reducing an additional 1 ton of CO2 or GHGs is called marginal benefits.
- 6.
Note that Pizer admits that by including an assumption of abrupt catastrophic damage—with damage rising from 1 % to 9 % as the temperature increases from 3 to 4 °C—it is sufficient to reverse the preference for price controls (p. 432).
- 7.
PgC is equal to GtC.
- 8.
Note that both the price and quantity policies were expected to reduce global emissions by 10 % in 2020 and by 60 % by 2100 in comparison with the level in the year 2002, a very moderate reduction compared to the case of achieving the 2 degree target.
- 9.
Just take the most complicated case, for example, that is not extraordinary but rather quite plausible. The point is to what country CO2 emissions from a bulk carrier built in Korea, owned by Greek, registered in the Marshall Islands, and chartered by a Japanese company, carrying iron ore, headed to China from Brazil with Filipino officer/crews to produce steel products to be exported to the United States, should be counted.
- 10.
Second IMO GHG Study 2009, MEPC 59/INF, 9 April 2009.
- 11.
Green growth itself is rather a domestic policy concept. However, as the concept is discussed frequently in several international fora, the author decided to take this up here.
- 12.
It is interesting to know that the calculation is based on the carbon price of $20–25/tCO2 in 2020. This shows the level of carbon price that experts imagine.
- 13.
There are two similar but different concepts; efficiency and cost-effectiveness. In the situation where MAC is equalized to marginal benefit, economic welfare is maximized and this situation is called efficient or optimal. In this situation, the MAC of all players is also equalized. On the other hand, the situation where MAC is not equalized to marginal benefit but MAC is equal among all players is called cost-effective, although these two are sometimes used in a confused way.
- 14.
http://www.ipcc.ch/pdf/assessment-report/ar4/wg3/ar4-wg3-chapter13.pdf. Refer to Table 13.1 for evaluation of each policy and measure (p. 767).
- 15.
Refer to Sect. 7.1.2 for a theoretical argument on superiority regarding the price approach and quantity approach under uncertainty. The exactly same argument applies to domestic policies.
- 16.
To avoid confusion, the author would like to classify different terminologies as follows: market-based measures and economic incentives are to be regarded as the same concept. Under this concept come the quantity approach (or measures) and price approach (or measures), and the former includes cap and trade or emissions trading (those two expressions are treated the same in this section) while the latter includes carbon tax.
- 17.
A similar expression can be seen in IPCC (2001), i.e. “[r]ecent literature indicates that regulatory standards often precede market-based instruments and build institutional capacity in policy evaluation, monitoring, and enforcement …. This is especially true in developing countries that lack both trained personnel and the financial resources to implement market-based instruments” (p. 413).
- 18.
The reality is that, in the USA, direct regulation (Clean Air Act) is the major tool to tackle climate change.
- 19.
Although ET ETS is not a domestic policy, the author believes that it is more appropriate to discuss it in the domestic policy section, rather than in the international policy section.
- 20.
In Phase I, most countries allocated permits to players, including those in the power sector, free of charge. Theoretically, it is reasonable to raise electricity price as a marginal cost (in this case called opportunity cost) of generation increases by the amount of the permit price, and many power generators followed the theory. The revenue corresponding to this portion is called windfall profit, however, and this has invited criticism from the general public as well as many governments.
- 21.
Neuhoff et al. (2006) point out that “[a]llocation relative to past emissions is prevalent in current NAPS. If such direct updating continues, then the incentives that ETS could offer existing power stations to increase fuel and CO2 efficiency are severely reduced. Any improvement will reduce the future allowance allocation”.
- 22.
The permit price suddenly dropped in 2006 after it became apparent that actual emissions were less than those allocated to covered installations (over-allocation).
- 23.
- 24.
There were different views presented in the reports of two committees. The one submitted to the MOE (Ministry of Environment) was rather positive, and the other submitted to the METI (Ministry of Economy, Trade and industry) was rather reluctant to introduce of the ETS in Japan.
- 25.
As to the case of the iron and steel sector, refer to Sect. 9.1.
- 26.
For the review as of 31 March 2010, refer to the following URL. Owing to the earthquake on 11 March 2011, this review is the most recent one as of 20 February 2012. http://www.meti.go.jp/english/policy/energy_environment/global_warming/pdf/kyoto_protocol_fy2009.pdf
- 27.
Direct communication at the UK’s DEFRA (Department for Environment, Food and Rural Affairs) in 11 September 2003.
- 28.
The author has no value judgment, and just explains the difference of cultures objectively.
- 29.
As to the increase of CO2 emissions due to shut down of many nuclear power plants in Japan after the 11 March 2011 Earthquake and tsunami, please refer to Chap. 10.
- 30.
The amounts are not reported. Assuming the price as $15–20/tCO2, the total amount will be around $4.5–6 billion for the Kyoto period of 2008–2012.
- 31.
There are several variations. One variation is not to fix the purchasing price but fix the incentive price (sometime called a premium). In this case the purchasing tariff consists of the electricity wholesale market price and incentive price, and as the former fluctuates, purchasing price will also fluctuate. This is called “Feed in Premium”. Another example is the scheme called Feed-in Tariff with Contracts for Difference (FiT CfD) proposed in the UK. Under this scheme, a renewable generator and their contractor agree to the strike price. As long as the electricity market price (reference price) is below the strike price, a generator sells electricity at the strike price. If the reference price is above the strike price, the generator pays back the difference (UK Department of Energy and Climate 2011, pp. 37–38).
- 32.
This does not mean each year’s tariff stays at the same level as the first year. Due to technology improvement, the tariff itself will gradually be decreased. The point here is that once a contract has been concluded between generators and purchasers, the tariff is to continue for 25 years.
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Yamaguchi, M. (2012). Policies and Measures. In: Yamaguchi, M. (eds) Climate Change Mitigation. Lecture Notes in Energy, vol 4. Springer, London. https://doi.org/10.1007/978-1-4471-4228-7_7
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