Worse off from reduced cost? The role of policy design under uncertain technological advancement

A simple model is used to illustrate the effects of a reduction in (marginal) abatement cost in a two country setting. It can be shown that a the country experiencing a cost reduction can actually be worse off. This holds true for a variety of quantity and price based emission policies. The most important channel is that a country with lower abatement costs engages in additional abatement effort for which it is not compensated. Under a quantity based policy with a given allocation, a seller of permits can also be negatively affected from a lower carbon price. We also argue that abatement cost shocks to renewable energy and carbon capture and storage (CCS) are different in terms of their effects on international energy markets. A shock to renewable energy reduces fossil fuel rents benefiting energy importers, while the opposite holds for a shock to CCS. The channels obtained in the theoretical model can be confirmed in a more complex global computable general equilibrium model. Some regions are indeed worse off from shock that lowers their abatement costs

Reassessing renewable energy

This policy brief presents a long term assessment of low-carbon energies including renewables, nuclear and fossil energy with CCS. It targets the electricity sector from a global to a regional perspective and from centralized to decentralized energy systems. The policy brief aims at finding answers to the following questions: What role can and should renewable energy play in the next decades on the way to a low-carbon energy future? What is the optimal electricity mix (now and in the future)? What are the impli-cations of the optimal mix regarding renewable energy investment and policy? What framework would be needed to enhance international coordination

Reaching a climate agreement: Do we have to compensate for energy market effects of climate policy?

Because of large economic and environmental asymmetries among world regions and the incentive to free ride, an international climate Regime with broad participation is hard to reach. Most of the so far proposed Regimes base on an allocation of emission rights that is to be perceived as fair. Yet, there are also some arguments to focus more on the actual welfare implications of different Regimes and to aim for a "fair" Distribution of resulting costs. Using the Cpmputable General Equilibrium model DART, we analyze the driving Forces of welfare implications in different Scenarios where a global Emission target derived from the 2 degree target is reached. These include two Regimes that are often presumed to be "fair", namely a harmonized international carbon tax and a cap and trade System based on the convergence of per capita Emission rights, and additionally an "equal loss" Scenario where welfare losses relative to a Business as usual Scenario are equal for all Major world regions. We show that "eqaual losses" would mean in particular to compensate for the effects of climate policy on energy markets and e.g. to compensate for the loss of oil revenues as the Organization of Petroleum Exporting Countries (OPEC) argues for

Emissions embodied in Chinese exports taking into account the special export structure of China

Quantification of CO2 emissions embodied in China's trade is important for an informed debate on whom to blame for the recent rise in Chinese emissions or the calculation of border carbon adjustments. Applying input output techniques, we calculate these emissions in (1) a standard model, (2) a regionally disaggregated model, taking into account that export production is concentrated in more advanced and more emission efficient provinces and (3) in a model with export processing, taking into account that almost half of Chinese exports relies on a large share of imported intermediates and little domestic value and emissions added. We compare year 2007 emissions embodied for in Chinese exports in a unified framework. We also report emissions embodied in Chinese imports used for intermediate production of exports by combining calculations for China with data from global IO models. We find that both a model with 30 provinces (1730 Mt CO2) and a model accounting for export processing (1580 Mt) yield lower Chinese emissions embodied in exports compared to the standard model (1782 Mt). In the regional model, emissions are even lower (1522 Mt), if interprovincial trade is not taken into account

Effects of international climate policy for India: Evidence from a national and global CGE model

In order to reach the two degree target it is necessary to control CO2 emissions also in fast growing emerging economies such as India. The question is how the Indian economy would be affected by e.g. including the country into an international climate regime. Existing analyses with either a global model or a single country computable general equilibrium model miss important aspects such as distributional issues or international repercussions. By soft-linking models of these two classes, we provide a more detailed view on these issues. In particular, we analyze different options of transferring revenues from domestic carbon taxes and international transfers to different household types and how different assumptions on exchange rates affect transfer payments. We also show effects stemming from international price repercussions. Our analysis focusses on how these transmission channels affect welfare of nine different household types

Determinants of technology transfer through CDM: The case of China

Technology transfer (TT) is not mandatory for Clean Development Mechanism (CDM) projects, yet proponents of CDM argue that TT in CDM can bring new technologies to developing countries and thus not only reduce emissions but also foster development. We review the quantitative literature on determinants of TT in CDM and estimate determinants for CDM projects in China. China is by far the largest host country of CDM projects and it is therefore crucial to understand the factors that drive TT there. We focus on heterogeneity within a single country and results can thus be linked to specific policies of the country for better interpretation. Our probit estimations confirm results of international cross-country studies, indicating that larger projects and more advanced technologies are more likely to involve TT. In addition, we find evidence that agglomeration effects are more pronounced on the province level rather than larger regions. We also find a positive effect of FDI on TT and a complementary role of academic R&D engagement to TT

Waveform control of orientation-dependent ionization of DCl in few-cycle laser fields

Strong few-cycle light fields with stable electric field waveforms allow controlling electrons on time scales down to the attosecond domain. We have studied the dissociative ionization of randomly oriented DCl in 5 fs light fields at 720 nm in the tunneling regime. Momentum distributions of D+ and Cl+ fragments were recorded via velocity-map imaging. A waveformdependent anti-correlated directional emission of D+ and Cl+ fragments is observed. Comparison of our results with calculations indicates that tailoring of the light field via the carrier envelope phase permits the control over the orientation of DCl+ and in turn the directional emission of charged fragments upon the breakup of the molecular ion

Consumer demand in EU member states

By combining econometric estimations with the calibration of consumer expenditure data, this study estimates a linear expenditure system (LES) for the 27 EU countries. We use the EU Household Budget Survey (HBS) data for the reference years of 2010 and 2015, which provide data for about 275, 000 and 276,100 EU households, respectively. In addressing the challenge of insufcient price variability in cross-sectional data, we first construct household-specific pseudo unit values, which enable us to derive the estimates of countryspecific Frisch parameters by expenditure decile for all EU countries. The obtained variability of the Frisch parameters across countries and household income groups underscores the importance of properly accounting for and incorporating this heterogeneity in modelling exercises that are based on the parameter in question. Subsequent estimations of the LES model differentiate households by three urbanization degrees of household residence and ten income groups. To take full advantage of consumer microdata, the resulting income elasticities for 23 commodity groups are calibrated within a relative entropy optimization framework to obtain consistent estimates of household-specific income and price elasticities. Finally, the study illustrates the richness of this combined approach in accounting for heterogeneity and nonlinearities in household consumption behavior.JRC.C.6 - Economics of Climate Change, Energy and Transpor