Search Climate Insights Directory

The study investigates the optimal abandonment of coal-fired power plants in the EU, considering uncertainties in coal, gas, and CO2 emission allowance prices. Using a three-dimensional binomial lattice, the authors find that abandonment is unlikely unless CO2 prices reach very high levels, particularly because plants can operate as peaking units. The decision is heavily influenced by the plant's remaining lifetime, thermal efficiency, and the volatility of carbon prices.

The document analyzes the risk of carbon leakage in the Basque economy, defining vulnerability as a combination of high carbon costs and high trade intensity with non-EU countries. Using 2005 data, it finds that 11 sectors are at risk, representing 4-6% of productive activity and 6.5% of the total Gross Value Added (GVA). Key vulnerable sectors include oil refining and steel, while the majority of the economy (77.4% of GVA) remains unaffected. The author recommends protecting vulnerable sectors while transitioning toward a value-based rather than volume-based production model.

The report examines carbon leakage—the migration of emissions to regions with laxer carbon pricing—specifically focusing on the EU ETS Phase III. It criticizes the European Commission's broad identification of 164 sectors at risk, arguing that the criteria used were too simplistic and failed to account for the 2008 economic recession or the actual auctioning rates. The authors suggest that leakage risk is actually concentrated in a few sectors, including steel, cement, and aluminium, and recommend tailored policy responses such as border adjustments for cement and investment subsidies for aluminium, rather than a one-size-fits-all approach of free allowance allocation.

The response argues that while a UK carbon price floor aims to increase the viability of low-carbon investments, a unilateral approach may be discounted by investors due to regulatory instability and inconsistency with the EU Emission Trading Scheme (EU ETS). It suggests that strengthening the EU ETS targets would provide greater clarity, regulatory stability, and market scale for low-carbon technologies like CCS and nuclear power, compared to a national tax-based supplement.

The research investigates how asymmetric global climate policies can lead to carbon leakage, specifically the relocation of CO2-intensive industries like iron and steel. Using the Basque Country as a representative Old Industrial Region (OIR), the authors demonstrate that while relocation impacts may be negligible at a national level, they can significantly reduce regional GDP. The study finds that reducing emissions through industrial relocation is far more costly in terms of GDP loss than achieving the same reductions through cost-effective mitigation policies.

The report identifies 'Carbon Fat Cats'—companies that received excessive free emissions permits under Phase 2 of the EU ETS (2008-2012). It finds that the top ten companies held 35 million surplus permits in 2008, valued at €500 million, with projected surpluses reaching 230 million permits (€3.2 billion) by 2012. This over-allocation in industrial sectors like iron, steel, and cement means that a small number of power companies, specifically RWE and EON, must deliver the majority of the scheme's net emissions reductions. The report argues that this creates competitive distortions and undermines climate targets, recommending higher ambition (a 30% cut by 2020), limited access to overseas offsets, and the cancellation of Member State reserves.

The report assesses the impact of carbon pricing on Poland's industrial competitiveness, noting that while Poland has benefited from a favorable 1990 emissions baseline and the EU ETS, certain carbon-intensive sectors remain at risk. Due to significant data constraints, the authors identify six specific sectors for further detailed analysis to prevent carbon leakage and economic loss.

The report evaluates two scenarios for the UK transport sector's CO2 emissions by 2050: Business-as-usual (BAU) and Maximum Impact (MI). While road and rail transport can achieve total decarbonisation through a combination of demand reduction and a shift to carbon-neutral electricity, aviation and shipping remain problematic. The MI scenario achieves a 76% overall reduction in transport CO2 emissions compared to BAU, but falls short of zero carbon due to the technical challenges of the aviation and shipping sectors. Key recommendations include the re-introduction of a fuel price escalator, urban densification, and the complete electrification of the rail network.

The paper evaluates the feasibility of implementing a Personal Carbon Trading (PCT) scheme in Sweden, comparing it to existing UK-based models and current Swedish climate policies. It concludes that a standard PCT scheme would not be an efficient approach for reducing emissions in Sweden's housing and transport sectors due to high administrative costs and the effectiveness of existing policies. However, it suggests that PCT-like concepts could be explored to address emissions embedded in global supply chains.

The document examines the steel sector's role in global emissions, focusing on abatement opportunities in China and India. It identifies four currently available abatement categories—closing inefficient plants, improving efficiency in existing plants, using best available technology (BAT) for new builds, and increasing scrap recycling—and notes that deep cuts will require carbon capture and storage (CCS) or breakthrough technologies after 2020. The report argues that carbon pricing alone is insufficient to overcome barriers like high capital costs and lack of policy, suggesting that Sectoral Approaches and Agreements should combine price and non-price incentives. Initial modelling suggests that with a carbon price of $25/tCO2, China could abate up to 150 MtCO2/year and India up to 40 MtCO2/year, potentially generating $2bn and $0.5bn in annual credits respectively.

The document compares different policy instruments for increasing energy efficiency in appliances across several EU member states, finding that while subsidies often lead to greater CO2 reductions, energy taxes generally provide higher welfare gains and lower administrative costs. The effectiveness of these policies varies significantly by product type and country, with tax credits for boilers proving highly cost-effective in Italy and Denmark, and the ban of inefficient washing machines being preferable to manufacturer tax credits in Italy and Poland, despite high overall welfare costs.

The study demonstrates that the EU can achieve domestic emission cuts of 40% by 2020 and 90% by 2050 through radical energy efficiency, a shift to renewables, and the phase-out of fossil fuels and nuclear power. It argues that such a transition is technically possible and economically bearable, costing approximately 2% of the EU's cumulative discounted GDP between 2010 and 2020. To achieve climate justice, the report asserts the EU must also provide between €150 billion and €450 billion annually by 2020 to support mitigation in developing countries.

The research employs a three-dimensional binomial lattice and real options analysis to determine the trigger investment cost for energy efficiency projects. It finds that the 'energy efficiency paradox'—where worthwhile projects are not undertaken—can be explained by the value of the option to wait, particularly when the remaining useful life of a facility is short.

The 2009 Research Highlights from Climate Strategies provides a comprehensive overview of projects addressing the operational challenges of the EU ETS, the feasibility of linking emissions trading schemes, and the design of financial mechanisms for the UNFCCC. It specifically investigates carbon leakage in energy-intensive sectors like cement and steel, the potential for 'Green Investment Schemes' in Central and Eastern Europe, and the implementation of Nationally Appropriate Mitigation Actions (NAMAs) in countries including Ghana, South Africa, Brazil, and India. The document also assesses the impact of carbon pricing on the chemical sector and the evolving climate policy landscape in Russia.

The document outlines ten key insights from the EU Emissions Trading System (EU ETS), arguing that while the system is effective at reducing emissions and has a minimal impact on GDP, its design—particularly regarding allowance allocation and carbon leakage—requires careful calibration to avoid economic inefficiencies and 'windfall profits'. It recommends a phased approach to system improvement and a gradual shift toward auctioning allowances to maximize economic rationality and fund low-carbon innovation.

The report argues that carbon trading is a fundamentally flawed mechanism that fails to drive real emissions reductions or technological innovation, instead creating risks of financial speculation and locking economies into high-carbon infrastructure. It specifically critiques the use of offsetting as an unjust 'escape hatch' that shifts responsibility from developed to developing nations. The authors advocate for a shift toward direct government interventions, including carbon taxation, strict regulation, and massive public investment in low-carbon infrastructure, while calling for developed countries to provide at least €200 billion per year in new and additional climate finance to the global South.

The document argues that carbon trading is an ineffective and dangerous approach to climate mitigation, failing to drive necessary emissions cuts or technological innovation. It highlights six central problems: inefficiency in driving reductions, failure to stimulate innovation, lock-in of high-carbon infrastructure, reliance on flawed offsetting, the risk of a financial bubble similar to the subprime mortgage crisis, and its use as a smokescreen for the developed world's failure to provide climate finance. The report recommends halting the global expansion of emissions trading and instead deploying direct tools such as carbon taxes, regulation, and public investment. It further calls for developed countries to reduce emissions by at least 40% by 2020 (excluding offsets) and provide at least 200 billion in annual public funds to developing countries by 2012.

The document examines 'carbon leakage'—where EU production moves to non-EU territories lacking carbon pricing—and critiques the European Commission's broad identification of 'at risk' sectors. While the EU ETS aims to stimulate low-carbon investment, the author argues that excessive free allocation of allowances may undermine the carbon price signal and encourage lobbying. The briefing suggests a more targeted screening process for high-emitters and proposes a portfolio of measures, including border adjustments based on CO2 emissions and sectoral agreements, to maintain competitiveness without sacrificing climate goals.

The report examines carbon leakage risks for energy-intensive industries—specifically cement, steel, and aluminium—when facing unequal global carbon prices. It evaluates tools such as free allocation of emission rights and border adjustments, noting that while free allowances can reduce leakage, they may distort carbon price signals and reduce incentives for low-carbon investment. The analysis suggests that border adjustments are particularly suitable for the cement sector due to the homogeneity of production technologies and carbon intensity across regions.

The report analyzes carbon leakage, which occurs when production shifts from regions with high carbon prices to those with lower or no prices, undermining climate policy effectiveness. It examines the EU ETS as a frontrunner and compares it with emerging systems in the US and Japan. The document evaluates mitigation strategies, including free allowance allocation, investment subsidies, and border adjustment measures (BAMs). It specifically analyzes the leakage potential of energy-intensive sectors like cement, steel, and aluminium, and discusses the legal and multilateral challenges of implementing border adjustments under WTO rules.