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The document assesses the 2008 proposal for the Australian Carbon Pollution Reduction Scheme, focusing on its mechanisms for price control and international linking. It examines the implications of a domestic price cap and the potential for bilateral linking with the European Union and New Zealand, while analyzing the impact of 'hot air' units from Russia and Eastern Europe on the global carbon market.

The document analyzes the role of carbon markets in financing climate action in developing countries, estimating potential revenues and evaluating different market mechanisms. It argues that while the Clean Development Mechanism (CDM) has provided a starting point, expanding to sectoral and allocation-based mechanisms is necessary to cover the high-emitting electricity and industrial sectors of Major Developing Economies (MDEs). The paper proposes a phased approach to developing country participation, moving from broadened CDM and other market mechanisms for sustainable development (MMSDs) toward sectoral and economy-wide commitments, contingent on developed countries meeting their own stringent targets.

The report examines the EU ETS, concluding that emissions trading is effective and has modest macroeconomic impacts, though it can create windfall profits and price volatility. It argues that international competitiveness risks are limited to a few carbon-intensive sectors and recommends maximizing auctioning over free allocation to maintain economic efficiency and innovation incentives. The authors caution against unilateral border adjustments, suggesting multilateral arrangements instead to prevent trade disputes and carbon leakage.

The document analyzes the cement industry's CO2 emissions, which stem from limestone calcination, fuel combustion, and electricity use. It identifies abatement options including energy efficiency, alternative fuels, clinker substitutes, and carbon capture and storage (CCS). The paper examines the economic impact of carbon pricing, noting that high carbon costs can lead to carbon leakage—where production shifts to regions with laxer regulations—due to the industry's capital-intensive nature and the high cost of transportation. It suggests that border carbon adjustments may be more effective than fixed free allocation of allowances in mitigating leakage.

The report argues that Europe can lead a global transition to an eco-efficient economy by synchronising climate, energy, and industrial policies. It examines sector-specific experiences in energy efficiency, district heating, biofuels, renewable electricity, automotive, chemicals, and steel to demonstrate that environmental regulation can drive innovation and competitiveness. The authors propose a strategic agenda focusing on resource systems efficiency, new technology markets, and global carbon pricing, supported by hybrid governance arrangements and a systems-based approach to policy evidence.

The study examines how carbon pricing affects the chemical sector by analyzing individual production processes to identify specific leakage risks. Using Germany as a representative example, it finds that while most chemical sub-sectors face moderate cost increases, certain basic chemicals—such as calcium carbide, chlorine, and soda ash—experience significant cost increases relative to their net production value. The report suggests that for some substances, like chlorine, high transport costs and risks may mitigate leakage, while others may require tailored policy instruments such as conditional free allowances or state aid.

The document presents a portfolio of 2008 research by Climate Strategies, focusing on the EU ETS, the Clean Development Mechanism (CDM), and G8 climate opportunities. Key analyses include the risks of carbon leakage in industrial sectors, the underperformance of CDM projects in terms of certified emission reductions, and the economic rationale for transitioning from free allowance allocation to auctioning in the EU ETS. It also includes the Eliasch Review on financing global forests and a study on the development of mandatory emissions trading in Japan.

The report details a workshop on border adjustment mechanisms (BAMs) as a tool to combat carbon leakage and transition from free allowance allocation to full auctioning of carbon permits. It argues that BAMs should be limited to a narrow set of carbon-intensive commodities (1-2% of GDP) to avoid becoming protectionist 'sticks' or non-tariff trade barriers. The discussion explores implementation options, such as basing adjustments on 'best available technology' or 'average domestic production', and suggests international coordination to define eligible products, harmonise procedures, and provide flexibility for least developed countries.

The report argues that auctioning emissions allowances in the EU ETS is superior to free allocation because it removes price signal distortions, prevents windfall profits, and generates public revenue for climate action and social compensation. While carbon leakage is a primary concern for a small number of energy-intensive manufacturing sub-sectors, the authors find that leakage in the power sector is unlikely due to limited interconnection capacity and long investment cycles. The report recommends a simple, high-frequency, uniform-price auction design and suggests that leakage be addressed through targeted State Aid or border adjustments rather than broad free allocation. Additionally, it highlights that auction revenues can mitigate the regressive nature of carbon pricing by supporting low-income households.

The document examines the economic rationale for auctioning emissions allowances in the EU ETS, arguing that free allocation distorts carbon price signals and creates windfall profits. It suggests that auctioning provides a more transparent framework for low-carbon investment and generates public revenue to support poor households and innovation. While acknowledging carbon leakage as a concern, the report asserts it affects only a narrow range of sectors and can be addressed through targeted State Aid or border adjustments rather than broad free allocation. For the power sector, the report finds no serious leakage concerns and recommends full auctioning. It proposes a simple auction design using single-round, sealed-bid auctions with a uniform market-clearing price.

The report identifies a small number of German industrial sectors—specifically basic iron and steel, fertilizers and nitrogen compounds, aluminium and aluminium products, paper and paperboard, and other basic inorganic chemicals—that face both high carbon-related costs and high international trade intensity. It argues that these sectors are most susceptible to competitiveness distortions and carbon leakage. The analysis distinguishes between direct costs (emissions from production) and indirect costs (increased electricity prices), noting that for some sectors, indirect costs are the primary burden. The document also evaluates various policy mechanisms to mitigate these effects, such as free allocation of allowances, border tax adjustments, and sectoral agreements.

The paper concludes that linking the EU ETS with a US scheme based on the Lieberman-Warner proposal is unlikely to be acceptable to the EU due to significant design differences. The Lieberman-Warner scheme is characterized as systematically less stringent, featuring weaker caps, lower auctioning levels, and extensive cost-containment measures. Such a link would likely result in the EU ceding control over its allowance prices and emissions implications to the US, while also undermining the EU's policy of excluding carbon sink credits.

The report critiques the DfT's cost-benefit analysis for Heathrow expansion, arguing that the projected ₤9 billion in 'generated user benefits' is based on speculative and biased assumptions regarding airfare, fuel costs, and passenger demand. It contends that without these theoretical benefits, the project's costs would outweigh its benefits by ₤3-5 billion. The authors highlight ethical concerns, noting that the benefits accrue primarily to wealthy travelers and aviation investors, while the environmental and social costs are borne by local low-income communities.

The report analyzes DEFRA's 2007 approach to setting the UK's internal carbon price at £25 per tonne of CO2e. The authors argue that DEFRA's 'shadow price of carbon' (SPC) is fundamentally flawed because it is based on an assumed future stabilization trajectory of 550ppm CO2e rather than the actual 'business-as-usual' trajectory. This circular logic creates a low price that fails to discourage high-carbon projects. The report further critiques DEFRA's use of a 3.5% discount rate over the lower rate suggested by the Stern Review, and argues that the UK's carbon price should reflect historical responsibility and the need for early technological innovation.

The paper argues that the EU cement sector is more exposed to carbon leakage than generally assumed, particularly in coastal regions. Using two models with a CO2 price of 30 €/t, the author finds that short-term import levels in coastal regions would rise from 13% to 25%, with an overall EU leakage rate of 65%. In the long term, EU cement capacity is projected to decline by 13% as imports become more attractive during peak demand. The author concludes that while output-based allocation might mitigate financial pressure, a severe world recession would likely induce a similar industrial restructuring to that of a full auctioning scheme.

Jonathan Lash, representing the US Climate Action Partnership (US CAP), advocates for a federal cap-and-trade program and a long-term emissions roadmap to transition the United States to a low-carbon economy. He emphasizes that clear federal rules are necessary to avoid a regulatory patchwork of state laws and to provide the market certainty required for large-scale private investment in clean energy technologies.

The document analyzes the impact of climate policy uncertainty on investment decisions, highlighting how different actors—such as oil majors, utilities, technology developers, and banks—respond to CO2 price volatility and regulatory ambiguity. It explores various economic appraisal methods, including real options and risk premiums, to demonstrate how uncertainty can delay investments or bias them toward fossil fuels. The author argues that while governments value policy flexibility, stronger commitments and intermediary targets are necessary to provide the credibility required for private sector investment in low-carbon technologies.

The document evaluates two mechanisms to prevent emissions leakage: output-based allocation and sectoral agreements. It concludes that output-based allocation can reduce leakage if applied to the first tradable intermediary product, but it often undermines incentives for innovation and product substitution. Sectoral agreements are deemed more promising if led by governments rather than voluntary private action, potentially utilizing financial incentives and border adjustments to ensure a level playing field and long-term CO2 price internalization.

The submission argues that the EU ETS is the only credible mechanism for a common carbon price in Europe but requires reform post-2012 to be effective. The authors advocate for a shift from free allocation to auctioning to remove investment distortions and 'early action' problems. To protect low-carbon investments from price volatility, they suggest reserve prices for auctions or put options. While acknowledging carbon leakage, the report asserts it only affects a few specific sub-sectors—such as semi-finished steel and clinker—and suggests that border adjustments or sectoral agreements are preferable to free allocations, which are viewed as a second-best, temporary option.

The testimony argues that avoiding severe climate damage requires long-term global emissions reductions of 60-80% across all sectors. It emphasizes that because the 15 largest emitters account for 80% of global emissions, international solutions must align with national self-interests rather than uniform requirements. Proposed solutions include pricing greenhouse gas emissions, leveraging co-benefits for air quality and energy security, and investing in new technologies to maintain US competitiveness. The author also highlights the need for adaptation strategies to protect the poorest populations and calls for the US to take a more constructive role in the UN Climate Convention.