Climate Change is real, and the impacts on ecology, economy and human lifestyle are expected to be tremendous.
In order to effectively but also cost efficiently combat climate change, market based instruments are being used in environmental policy. Certificate schemes have been and are being created for trading of greenhouse gas reductions (Grey Certificates), renewable energy (Green Certificates) and energy efficiency (White Certificates).
So far, Europe is the frontrunner in implementing especially Greenhouse Gas emission trading schemes. However, as climate change is a global problem, similar markets should be established all over the world and ideally be linked in order to achieve economic optimal solutions.
This thesis describes characteristics of the different instruments and trading schemes (Grey, Green and White Certificates) and identifies major design parameters of the systems with the focus on compatibility and potential for establishing links between schemes of the same type or among the certificate types. Implications of establishing links, which can be planned and wanted but also conflicting with other goals, are discussed. As greenhouse gas emissions trading schemes are the most developed and experienced trading schemes in climate change policy, the focus of this work lies on the analysis of the different Greenhouse Gas emission trading schemes (ETS). For the compatibility analysis of ETS, the EU ETS is chosen as reference system.
An outlook for near-term linking options and a summary conclude the analysis based on the findings of the work.
As more and more environmental policies and instruments emerge around the world due to rising awareness for the problem of climate change, this thesis gives an overview but can not cover all different certificate systems in place and planned.
Table of Contents
1 Introduction
1.1 Problem description
1.2 Goal of the master thesis
2 The reasoning for climate protection
2.1 Global Warming and anthropogenic CO2
2.2 Sources of Greenhouse Gas Emissions
2.3 The UNFCCC Agreement on Climate Protection
2.4 The cost of combating climate change
2.5 European energy policy and the 2020 / 2050 targets
2.6 Overview of ways for reducing greenhouse gas emissions
2.6.1 Greenhouse gas abatement
2.6.2 Increase of renewable energy
2.6.3 Increase of Energy Efficiency
2.6.4 Implementation of Carbon Capture and Storage
3 Certificate trading schemes for climate protection
3.1 Background of Market based instruments in environmental policy
3.2 The evolution of trading schemes in environment policy
3.3 Deployment of Environmental Trading Schemes
3.4 Design characteristics of Emission Trading Schemes
3.4.1 Cap setting
3.4.2 Allocation of allowances
3.4.3 Coverage
3.4.4 Offsets
3.4.5 Cost control measures
4 Greenhouse Gas Emissions Trading (Grey Certificates)
4.1 Overview and Functioning of GHG Emission Trading Schemes
4.2 The global market for Greenhouse Gas emissions trading
4.3 GHG Emission Trading Schemes in place or proposed
4.3.1 European Emission Trading Scheme
4.3.2 Norwegian ETS
4.3.3 Chicago Climate Exchange
4.3.4 New South Wales Greenhouse Gas Abatement Scheme (Australia)
4.3.5 Japanese Voluntary Emissions Trading Scheme
4.3.6 Alberta´s Climate Change and Emissions Management Act (Canada)
4.3.7 Swiss Emission Trading Scheme
4.3.8 Australian ETS (announced)
4.3.9 Canadian ETS (announced)
4.3.10 New Zealand ETS (announced)
4.3.11 Proposed initiatives in the United States of America
5 Linking GHG Emission Trading Schemes
5.1 Types of Links
5.1.1 Direct Linking
5.1.2 Indirect Linking
5.2 Impacts of Linking
5.3 Examples of links between GHG ETS
5.4 Prospects and near-term opportunities for linking GHG ETS
6 Renewable energy trading (Green Certificates)
6.1 Options for promoting renewable energy production
6.2 Overview and Functioning of Tradable Green Certificates
6.3 The Guarantees of Origin system in the EU
6.4 Implementation of TGC Systems
6.5 Voluntary TGC schemes - the example of RECS
6.6 The proposed EU-wide Guarantees of Origin Trading Scheme
6.7 Possibilities of Linking Green Certificate Schemes
7 Energy efficiency trading (White Certificates)
7.1 Overview and Function
7.2 White Certificate Systems in place
7.2.1 Tradable White Certificates in Italy
7.2.2 Tradable White Certificates in UK
7.2.3 Tradable White Certificates in France
7.3 Opportunities and barriers for White Certificates
7.4 Outlook for White Certificate Systems within the EU
7.5 Possibilities for Linking TWC Systems
8 Interaction of Grey, Green und White Certificate Trading Schemes
8.1 Linking Emissions Trading with Green Certificates
8.2 Linking Emissions Trading with White Certificates
8.3 Linking White and Green Certificates
9 Summary
Objectives and Scope
The thesis aims to illustrate the rationale for utilizing market-based instruments in environmental policy and provides an extensive overview of global certificate trading schemes. By analyzing the design characteristics of various trading mechanisms—specifically Grey, Green, and White Certificates—it investigates the potential for establishing compatibility and linkages between different schemes to achieve cost-effective climate mitigation.
- Rationale and functioning of market-based environmental policy instruments
- Comprehensive analysis of Greenhouse Gas (Grey) Emission Trading Schemes
- Evaluation of renewable energy (Green) and energy efficiency (White) certificate systems
- Compatibility assessment and potential for linking distinct trading schemes
- Analysis of the EU Emission Trading Scheme (EU ETS) as a primary reference system
Excerpt from the book
3.1 Background of Market based instruments in environmental policy
Economic theory tells that treating resources as common goods that are shared jointly by many users brings the risk of over-exploitation of the good as long as there is no regulation to the access. Environment is a classical example of such a common good: air quality, atmosphere, landscape etc. are goods without clearly defined ownership and usage rules. The answer to the question of how to set up and define these access rules is not so simple.
Since the late 1950s, economists with Professor A.C. Pigou as a prominent representative, have taken the approach that in the face of an externality such as pollution, the solution would be to impose a per-unit tax on the emissions from a polluting activity (Pigouvian Tax). The tax rate should be equal to the marginal external social damage caused by the last unit of pollution and therefore internalize the external effect. As firms and private persons would strive to minimize their costs, they would either pay the tax or reduce the pollution.
The opinion group of policy makers, however, did not follow the ideas of Pigou, as they thought the information burden imposed on the bureaucracy by design of efficient taxes was unrealistically high. In their point of view, the proper way to control pollution was through a series of legal regulations which should define amounts, access rights, spatial distribution and other aspects of emissions (Tietenberg, 2006). Ronald H. Coase, a british economist, argued in 1960 in his article "The problem of social cost", that well-defined property rights could overcome the problems of externalities (University of Berkeley, 2008). This theory became well-known as the Coase Theorem.
Coase was convinced that, when property rights are clear and enforceable, all economic agents have full information and transaction costs are low, there is no need for government intervention to correct externalities, because the economic agents can bargain to achieve a Pareto optimal allocation of resources - no matter which economic agent is given the property rights (University of Berkeley, 2008; see Figure 3.1).
Summary of Chapters
1 Introduction: Introduces the climate change challenge and the role of market-based instruments in environmental policy, establishing the thesis goal of analyzing certificate trading scheme linkages.
2 The reasoning for climate protection: Provides scientific background on anthropogenic greenhouse gas emissions, the importance of international agreements like the UNFCCC, and the economic rationale for abatement.
3 Certificate trading schemes for climate protection: Explores the theoretical foundations of market-based instruments, including the Coase Theorem, and details the design characteristics necessary for effective emission trading schemes.
4 Greenhouse Gas Emissions Trading (Grey Certificates): Offers a detailed global overview of current and proposed GHG emission trading schemes, highlighting the EU ETS as a key reference model.
5 Linking GHG Emission Trading Schemes: Analyzes the mechanics, types, and impacts of linking different emission trading schemes, identifying challenges related to design disparities and system integrity.
6 Renewable energy trading (Green Certificates): Examines policies for promoting renewable electricity, specifically focusing on Tradable Green Certificate schemes and the proposed EU-wide Guarantees of Origin system.
7 Energy efficiency trading (White Certificates): Investigates the application of Tradable White Certificates in Europe, discussing their design complexities, market barriers, and potential for energy savings.
8 Interaction of Grey, Green und White Certificate Trading Schemes: Explores the potential interactions and risks of linking distinct certificate markets, emphasizing the complexities of preventing double-counting.
9 Summary: Synthesizes the main findings regarding the efficacy of certificate systems and the prerequisites for successful international linking in climate policy.
Keywords
Climate Change, Emission Trading Scheme, Carbon Credits, Greenhouse Gas, Renewable Energy, Green Certificates, White Certificates, Energy Efficiency, EU ETS, UNFCCC, Carbon Abatement, Market-based Instruments, Kyoto Protocol, Sustainability, Certificate Linking
Frequently Asked Questions
What is the core focus of this thesis?
The thesis focuses on market-based instruments in climate policy, specifically analyzing different certificate trading schemes for greenhouse gases, renewable energy, and energy efficiency, and how these systems can be linked.
What are the central thematic fields covered?
The work covers Greenhouse Gas (Grey) Certificates, Renewable Energy (Green) Certificates, and Energy Efficiency (White) Certificates, along with their respective design parameters and linking potential.
What is the primary research goal?
The primary goal is to illustrate the rationale for market-based environmental instruments and to identify the design requirements and challenges for linking various international certificate trading schemes.
Which scientific methodology is applied?
The author employs a comparative analysis of system design characteristics (e.g., cap setting, allocation methods, coverage) across various existing and proposed global trading schemes, using the EU ETS as a reference.
What is treated in the main body of the work?
The main body systematically describes the mechanics of specific schemes like the EU ETS, CCX, and RGGI, and evaluates the technical and legal implications of creating direct or indirect links between these diverse markets.
Which keywords best characterize this work?
Key terms include Emission Trading Scheme (ETS), Climate Change mitigation, Certificate Linking, Tradable Green Certificates, and White Certificates.
How does the author evaluate the "Rebound Effect" in White Certificate schemes?
The author notes that increased energy efficiency can paradoxically lead to higher overall consumption because efficiency makes energy usage cheaper, and recommends that this effect be factored into the design of energy efficiency policies.
Why is the EU ETS used as the primary reference system?
The EU ETS is chosen as the reference system because it is currently the largest and most experienced carbon market, offering the most comprehensive set of design features for compatibility analysis.
What challenges does the author identify for linking White Certificate systems?
Linking White Certificate systems is deemed difficult due to a lack of harmonized standards for energy savings and the significant disparity in eligible project types and baseline definitions across different countries.
- Arbeit zitieren
- DI Mag. Gudrun Senk (Autor:in), 2008, Linking certificate trading schemes for greenhouse gas emissions, renewable energy and energy efficiency, München, GRIN Verlag, https://www.grin.com/document/142754
