the impact of the eu emissions trading system on low carbon technological change the empirical evidence abstract this paper reviews the empirical literature analysing the effects of the eu emissions trading system eu ets on low carbon technological change the emerging evidence is assessed with references to both relevant economic concepts and the evolving regulation of the eu ets through the years the two most robust indications of the literature are a free allocation grandfathering tended to hamper low carbon investments in phases i 2005 2007 and ii 2008 2012 and b the eu ets appears to have been relatively more effective in stimulating innovation of low carbon technologies than their adoption importantly however a complete general picture of the impact of the eu ets on low carbon technological change is missing the main gap regards the lack of empirical evidence for phase iii 2013 2020 especially econometric studies are only few due to the lack of suitable databases accessible to researchers a problem that the relevant public authorities are urged to address thanks to the recent reforms of the eu ets the incentives for innovation and adoption of low carbon technologies are probably stronger today than ever before

unintended consequences of price controls an application to allowance markets abstract price controls established in a cap and trade allowance market are intended to reduce cost uncertainty by constraining allowance prices between a ceiling and floor however they could provide opportunities for strategic actions by firms that would lower government revenue and increase emissions in particular when the ceiling price is supported by introducing new allowances into the market firms could choose to buy allowances at the ceiling price regardless of the prevailing market price in order to lower the equilibrium price of all allowances those purchases could either be transacted by firms intending to manipulate the market price or be induced through the introduction of inaccurate information about the cost of emissions abatement theory and simulations using allowance elasticity estimates for u s firms suggest that the manipulation could be profitable under the stylized setting and assumptions evaluated in the paper although in practice many other conditions will determine its use

environmental regulation technological diversity and the dynamics of technological change inducing technological progress is an important objective of environmental regulation we investigate under which conditions regulation induced technological progress pursues the best technological option we analyze a setting with vertical and horizontal technological progress cost uncertainty time limited patent protection and a case that is typical for some emissi4on intensive industries like electricity generation or the chemical industry under taxes and standards only the current least cost technology is used and developed implying a lock in into a possibly inferior technology tradable permits yield slower progress but can facilitate the simultaneous development of technologies rendering lock ins less likely

lessons from the polder energy tax design in the netherlands from a climate change perspective this paper evaluates energy tax reform in the netherlands between 1988 and 2002 from a climate change perspective in particular the introduction of two indirect taxes on energy products is now responsible for a considerable amount of tax revenue from a green tax base the paper discusses the energy tax base and rate structure from a modern pigovian tax perspective and illustrates the practical difficulties involved in the indirect and non uniform taxation of emissions also further improvements of the energy tax structure are discussed such as a better targeting of the energy tax base and tax rate to fuel characteristics

the merits of new pollutants and how to get them when patents are granted the performance of market based environmental regulation is affected by patents and vice versa this interaction is studied for a type of innovation where a new technology reduces emissions of a specific pollutant but at the same time causes a new type of damage if the new pollutant associated with this technology is sufficiently different from existing ones such that marginal damage is increasing in each of them but additive across pollutants a diversification of the pollution portfolio is socially desirable in a situation where the incentives to develop such a technology are created by patents the efficiency of permits is affected by monopoly pricing of the patent holding firm this result carries over to other types of innovation the performance of taxes is limited by either the inability to implement specific pollution mixes or monopoly pricing for constant returns to scale at the industry level the combined use of taxes and permits ensures the first best mix of technologies and provides positive research incentives

climate policy with technology transfers and permit trading in this paper we analyze technology transfers tt and tradable emission rights which are core issues of the ongoing climate negotiations subsidizing tt leads to the adoption of better abatement technologies in the south thereby reducing the international permit price this is beneficial for the north as long as it is a permit buyer hence it chooses to subsidize tt by contrast the permit selling south suffers from the lower permit price and its welfare usually deteriorates despite receiving subsidies we also consider how tt affects countries non cooperative choices of permit endowments and find that it tends to reduce overall emissions finally a simple numerical simulation model illustrates the results and explores some further comparative statics

when are concerted reforms feasible explaining the emergence of social pacts in western europe under what conditions do governments employers and unions enter formal policy agreements on incomes employment and social security such agreements widely known as social pacts became particularly prominent during the 1990s when european economies underwent major adjustment this article seeks to explain national variation in adjustment strategies and specifically why concerted agreements were struck in some countries but not in others a fuzzy set qualitative comparative analysis of 14 european countries is employed to assess main arguments about the emergence of pacts the analysis yields two key findings first although prevailing arguments emphasize economic and monetary unionrelated pressures or alternatively unemployment these factors were neither necessary nor in themselves sufficient for pacts to materialize rather a high economic problem load appears to be causally relevant only when combined with particular political and institutional conditions namely the prevalence of electorally weak governments and or an intermediate level of union centralization second the analysis refines existing multicausal explanations of pacts by demonstrating three distinct theoretically and empirically relevant causal pathways to concerted agreements

prices vs quantities the effects on technology choice abstract it is well known that price and quantity based regulation approaches provide different investment incentives but usually only the effect on the level of investment is studied in this paper we show that under uncertainty they also lead to the adoption of different technologies due to the disparate risks that a regulated firm is exposed to different regulatory instruments induce different technologies and this effect cannot be compensated by varying the design of the instruments furthermore price based instruments lead to the adoption of a socially suboptimal technology so that the inclusion of technology choice provides a bias in favor of a quantity based regulation compared with weitzman s weitzman m l 1974 prices vs quantities review of economic studies 41 477 491 criterion

should renewable energy policy be renewable political flexibility brings about trade offs for policy makers aiming to support the deployment of renewable energy sources res on the one hand it allows incorporating new information on ex ante uncertain benefits and costs of res policy on the other hand it may deter res investments this paper scrutinizes how these trade offs play out economically and politically when res policy makers choose the degree of flexibility as well as the instruments to implement flexibility the analysis builds on a theoretical framework distinguishing between flexibility by design and by adjustment it is complemented by a discussion of three case studies res support schemes in germany and the united kingdom and the eu emissions trading scheme theoretical as well as empirical results suggest that the politically chosen degree of flexibility by policy design may be sub optimally low in contrast flexibility by policy adjustment is often excessively high

stimulating different types of eco innovation in the uk government policies and firm motivations in this paper we adopt a recent oecd framework and examine the role of external policy tools and internal firm specific factors for stimulating three different types of eco innovations that range on a spectrum of lower to higher technological and environmental impacts end of pipeline pollution control technologies integrated cleaner production technologies and environmental r d using a novel firm level dataset from a defra survey we estimate a tobit model which provides empirical evidence showing that these eco innovations are motivated by different external policy tools and internal firm specific factors our findings indicate that end of pipeline technologies and integrated cleaner production technologies are mainly driven by equipment upgrade motives with a view of improving efficiency while environmental regulations are effective in stimulating the end of pipeline technologies and environmental r d interestingly alongside government induced regulations we find that market factors mainly motivated by cost savings are effective in driving environmental r d finally iso14001 certification is effective in strengthening the positive impact of environmental management systems on both end of pipeline technologies and environmental r d while csr policies have no significant impact on motivating any of the eco innovations

firm incentives to promote technological change in pollution control reply abstract the process of technological change in pollution control is broken into three basic steps innovation diffusion and optimal agency response firm incentives to promote these steps are then examined under five regulatory regimes direct controls emission subsidies emission taxes free marketable permits and auctioned marketable permits on a relative basis emission taxes and auctioned permits provide the highest firm incentives to promote technological change at times free permits generate lower incentives direct controls which are common regulatory tools usually provide the lowest relative firm incentives to promote technological change

optimal offering and operating strategies for wind storage systems with linear decision rules the participation of wind farm energy storage systems wf ess in electricity markets calls for an integrated view of day ahead offering strategies and real time operation policies such an integrated strategy is proposed here by co optimizing offering at the day ahead stage and operation policy to be used at the balancing stage linear decision rules are seen as a natural approach to model and optimize the real time operation policy these allow enhancing profits from balancing markets based on updated information on prices and wind power generation our integrated strategies for wf ess in electricity markets are optimized under uncertainty in both wind power and price predictions the resulting stochastic optimization problem readily yields optimal offers and linear decision rules by adding a risk aversion term in form of conditional value at risk into the objective function the optimization model additionally provides flexibility in finding a trade off between profit maximization and risk management uncertainty in wind power generation as well as day ahead and balancing prices takes the form of scenario sets permitting to reformulate the optimization problem as a linear program case studies validate the effectiveness of the strategy proposed by highlighting and quantifying benefits w r t other existing strategies

trading wind generation in short term energy markets even with state of the art forecasting methods the short term generation of wind farms cannot be predicted with a high degree of accuracy in a market situation these forecasting errors lead to commercial risk through imbalance costs when advance contracting this situation is one that needs to be addressed due to the steady increase in the amount of grid connected wind generation combined with the rise of deregulated market orientated electricity systems in the presence of imbalance prices and uncertain generation a method is required to determine the optimum level of contract energy to be sold on the advance markets such a method is presented here using markov probabilities for a wind farm and demonstrates substantial reductions in the imbalance costs the effect of market closure delays and forecasting window lengths are also shown

party politics and the reemergence of social pacts in western europe conventional accounts of the reemergence of social pacts in western europe argue they are a governmental response to economic pressures in particular the requirements for joining the european monetary union emu the authors analyze three case studies the netherlands ireland and austria to illustrate the usefulness of an alternative explanation centering on electoral calculations by political parties in choosing pacts parties forge social pacts not only to deal with economic problems but also when they perceive them to be helpful in reducing the potential electoral costs of economic adjustment and wage policies alternatively parties may forgo negotiations with social partners for electoral gain the authors extend the analysis to seven additional countries to apply the analysis more broadly by combining the separate literatures on political economy and party politics they are able to shed new light on the dynamics of social pacts in western europe

the optimal initial allocation of pollution permits a relative performance approach the initial allocation of pollution permits is an important aspect of emissions trading schemes we generalize the analysis of bohringer and lange 2005 eur econ rev 49 8 2041 2055 to initial allocation mechanisms that are based on inter firm relative performance comparisons including grandfathering and auctions as well as novel mechanisms we show that using firms historical output for allocating permits is never optimal in a dynamic permit market setting while using firms historical emissions is optimal only in closed trading systems and only for a narrow class of allocation mechanisms instead it is possible to achieve social optimality by allocating permits based only on an external factor which is independent of output and emissions we then outline sufficient conditions for a socially optimal relative performance mechanism

price effects inefficient environmental policy and windfall profits we examine conditions under which a new or tighter restriction on emissions from a competitive polluting industry creates price effects in adjacent markets price effects may arise when a quantity restriction on emissions causes output to fall and therefore output price to rise they may also arise when the required reduction in output causes the price of a polluting input to fall we model emissions as a fixed proportion of output limiting the possibilities for input substitutions the possibility of price effects exists whenever the set of regulated firms is large relative to its input or output markets a possibility that is expressly ruled out in montgomery s j econ theory 5 395 418 1972 paper two potential implications of price effects are explored one is an efficiency concern a welfare maximizing regulator who neglects price effects will require more than the optimal level of abatement the other is a distributional concern an emissions restriction might create windfall profits for the polluting industry

stochastic joint optimization of wind generation and pumped storage units in an electricity market one of the main characteristics of wind power is the inherent variability and unpredictability of the generation source even in the short term to cope with this drawback hydro pumped storage units have been proposed in the literature as a good complement to wind generation due to their ability to manage positive and negative energy imbalances over time this paper investigates the combined optimization of a wind farm and a pumped storage facility from the point of view of a generation company in a market environment the optimization model is formulated as a two stage stochastic programming problem with two random parameters market prices and wind generation the optimal bids for the day ahead spot market are the ldquohere and nowrdquo decisions while the optimal operation of the facilities are the recourse variables a joint configuration is modeled and compared with an uncoordinated operation a realistic example case is presented where the developed models are tested with satisfactory results

environmental policy incentives to adopt advanced abatement technology abstract we investigate incentives through environmental policy instruments to adopt advanced abatement technology first we study the case where the regulator makes long term commitments to policy levels and does not anticipate arrival of new technology we show that taxes provide stronger incentives than permits auctioned and free permits offer identical incentives and standards may give stronger incentives than permits second we investigate scenarios where the regulator anticipates new technologies we show that with taxes and permits the regulator can induce first best outcomes if he moves after firms have invested whereas this does not always hold if he moves first

instrument choice for environmental protection when technological innovation is endogenous this paper compares qualitatively and quantitatively the welfare effects of emissions taxes auctioned emissions permits and free grandfathered permits when technological innovation is endogenous we find that there is no unambiguous case for preferring any of these policy instruments the relative welfare ranking of instruments depends on the costs of innovation the extent to which innovations can be imitated the slope and level of the marginal environmental benefit function and the number of polluting firms we illustrate the types of situations when there can be significant welfare discrepancies between the policies and when there are not

investment incentives under emission trading an experimental study this paper presents the results of an experimental investigation on incentives to adopt advanced abatement technology under emissions trading our experimental design mimics an industry with small asymmetric polluting firms regulated by different schemes of tradable permits we consider three allocation auction policies auctioning off costly permits through an ascending clock auction grandfathering permits with re allocation through a single unit double auction and grandfathering with re allocation through an ascending clock auction our results confirm both dynamic and static theoretical equivalence of auctioning and grandfathering we nevertheless find that although the market institution used to reallocate permits does not impact the dynamic efficiency from investment it affects the static efficiency from permit trading

organizational determinants of wage moderation this article contributes to the political economic literature regarding the effects of industrial relations institutions on national economic outcomes based on an econometric analysis of the determinants of wage moderation in sixteen industrialized countries between 1974 and 2000 it argues that the organizational characteristics of trade unions have a significant impact on wage dynamics controlling for a number of institutional and economic factors the countries in which trade union confederations directly involve workers in the process of collective bargaining ratification have on average lower wage growth relative to productivity than others the authors also find that collective bargaining coordination and contract ratification magnify each other s wage dampening effect through case studies of ireland and italy the article examines the causal mechanisms underlying the uncovered statistical regularities and concludes that particularly at a time in which classic political exchange is waning worker involvement in contract ratification allows confederation leaders to resolve conflicting claims inside their organizations at lower wage levels than are achieved by a less participatory governance process

the timing of taxes on co2 emissions when technological change is endogenous abstract how do technology spillovers affect the relationship between emissions taxes and technological change without spillovers a regulator applies pigovian taxes which lead to a first best optimum optimal emissions and optimal technology investment given spillovers pigovian taxes are likely to be second best optimal if emissions saving technology and production technology are equally undersupplied raising taxes above the pigovian level boosts emissions saving investment but only at the expense of production investment the technologies are equally undersupplied when there is a degree of symmetry between the sectors and the economy is on a balanced growth path on a transition path with rising atmospheric stocks and a high level of investment in emissions saving technology a regulator may raise carbon taxes above the pigovian level in order to encourage investment in emissions saving technology at the expense of production technology i show this using both analytical and numerical results

technical change and the marginal cost of abatement abstract we address one aspect of the treatment of technical change in the environmental economics literature how technical change impacts the marginal cost of abatement we review a selection of papers that employ a variety of representations of technical change and show that these representations have quite different and sometimes surprising effects on the marginal costs of pollution reductions we argue that these varied representations in fact correspond to a variety of different technology options we then present results indicating that this representation matters the impacts of technical change on the marginal cost of abatement can crucially impact policy analysis

incentives to diffuse advanced abatement technology under environmental liability law polluting firms with advanced abatement technology at their disposal have incentives or disincentives to share this technology with other polluting firms the direction and extent of those incentives depends on the liability rule applicable and the way technical change impacts marginal abatement costs we establish that incentives for diffusion are socially optimal under strict liability and socially suboptimal under negligence if technical change lowers marginal abatement costs for all levels of abatement negligence may however induce better diffusion incentives than strict liability if technical change decreases increases marginal abatement costs for low high levels of abatement

does more stringent environmental regulation induce or reduce technology adoption when the rate of technology adoption is inverted u shaped abstract we show that for a broad class of technologies the relationship between policy stringency and the rate of technology adoption is inverted u shaped this happens when the marginal abatement cost mac curves of conventional and new technologies intersect which invariably occurs when emissions are proportional to output and technological progress reduces emissions per output this outcome does not result from policy failure on the contrary in social optimum the relationship between the slope of the marginal damage curve and the rate of technology adoption is also inverted u shaped under more general conditions these curves can look even more complicated e g such as inverted w shaped

the macroeconomics of social pacts in this paper we analyze macroeconomic interactions between trade unions the central bank and the fiscal policymaker we explicitly model unions concern for public expenditure paving the way for an analysis of the potential gains from cooperation between the fiscal policymaker and the unions i e the so called corporatist or social pacts that have characterized economic policies in a number of european countries in the last few decades we also highlight the profoundly different incentives generated by institutional arrangements such as the maastricht criteria and the stability and growth pact the former has unambiguously induced more efficient outcomes the latter is likely to backfire

a statistical model for wind power forecast error and its application to the estimation of penalties in liberalized markets the problem of accurately forecasting wind energy has garnered a great deal of attention in recent years there are always some errors associated with any forecasting methodology although it is sometimes assumed that the forecast errors are normally distributed it is a special case arising from the geographical dispersion of wind resources as shown in this paper the distribution of the forecast error needs to be examined individually for every wind farm to determine the impact of this error on trading energy in electricity markets this paper addresses the problem of modeling the distribution of the forecast errors associated with persistence forecasts at the level of a single wind farm and develops a novel mixed distribution based model to approximate the distribution of these errors the model is then used to estimate the penalties for imperfectly forecast energy injections in the short term markets the results from the application of this model to trading are further used to assess the feasibility of energy storage in hedging against imperfect forecasts

do exogenous shocks better leverage the benefits of technological change in the staged elimination of differential environmental regulations evidence from china s cement industry before and after the 2008 great sichuan earthquake abstract technological modernization is crucial for productivity and environmental management and has profound implications for china where both overproduction and industrial pollution are serious issues this study reports empirical results for existing cement plants in sichuan province in china capturing changes in productivity and environmental performance between 2007 and 2010 during this time period as the moratorium period of differential environmental regulations came to an end certain existing plants modernized their production processes after the great sichuan earthquake in 2008 using primary data and the directional distant function approach this study investigates the financial and environmental benefits of technological modernization by examining improvements in productivity and environmental performance we find that the decision to modernize by changing the production process from conventional vertical shaft kilns vsks to modern dry rotary kilns as part of a cleaner production strategy yields significant savings in pollution abatement costs without compromising production efficiency we compare this modernization strategy to a reference strategy whereby firms continued to use vsk technology and invested in end of pipe technology to satisfy stricter environmental regulations we find that the environmental benefits of technological modernization are approximately three times greater than the non environmental financial benefits when environmental benefits are considered the payback period is significantly reduced going from 8 97 years to 2 26 years

commitment versus discretion in climate and energy policy to decarbonize the power sector policy makers need to commit to long term credible rules for climate and energy policy otherwise risk of opportunistic policy making will impair investments into low carbon technologies however the future benefits and costs of decarbonization are subject to substantial uncertainties thus there may also be societal gains from allowing policy makers the discretion to adjust the policies as new information becomes available we examine how this trade off between policy commitment either unconditional or state contingent and discretion affects the optimal intertemporal design of market based instruments in the power sector using a dynamic partial equilibrium model we show that commitment to a state contingent level of ambition for the market based instrument leads to higher welfare than both unconditional commitment and discretion with benefit uncertainty the choice between the practically more feasible approaches of unconditional commitment and discretion is analytically ambiguous a basic numerical illustration suggests that policy discretion may outperform unconditional commitment in terms of welfare however this result is reversed when only a limited fraction of benefit uncertainty resolves in reasonable time when future policy makers have own agendas or when investors are risk averse with cost uncertainty policy discretion is welfare superior if the government can commit to a technology deployment target

trading wind generation from short term probabilistic forecasts of wind power due to the fluctuating nature of the wind resource a wind power producer participating in a liberalized electricity market is subject to penalties related to regulation costs accurate forecasts of wind generation are therefore paramount for reducing such penalties and thus maximizing revenue despite the fact that increasing accuracy in spot forecasts may reduce penalties this paper shows that if such forecasts are accompanied with information on their uncertainty i e in the form of predictive distributions then this can be the basis for defining advanced strategies for market participation such strategies permit to further increase revenues and thus enhance competitiveness of wind generation compared to other forms of dispatchable generation this paper formulates a general methodology for deriving optimal bidding strategies based on probabilistic forecasts of wind generation as well as on modeling of the sensitivity a wind power producer may have to regulation costs the benefits resulting from the application of these strategies are clearly demonstrated on the test case of the participation of a multi mw wind farm in the dutch electricity market over a year

r d and abatement under environmental liability law comparing incentives under strict liability and negligence if compensation differs from harm abstract this paper analyzes equilibrium r d in pollution control and equilibrium pollution abatement by polluters who are subject to environmental liability law when the level of compensation differs from the level of environmental harm we contrast the performance of strict liability with that of the negligence rule privately optimal levels necessarily deviate from socially optimal ones under strict liability whereas private decisions are first best under negligence unless compensation is much smaller than harm it is established that the way in which privately optimal r d deviates from the first best level depends on the kind of technical change in pollution abatement counterintuitively polluters might overinvest into r d in pollution control if compensation falls short of harm and may underinvest if compensation exceeds harm

abatement and allocation in the pilot phase of the eu ets we use historical industrial emissions data to assess the level of abatement and over allocation that took place across european countries during the pilot phase 2005 2007 of the european union emission trading scheme using a dynamic panel data model we estimate the counter factual business as usual emissions scenario for eu member states comparing this baseline to allocated and verified emissions we find that both over allocation and abatement occurred along with under allocation and emissions inflation over the three trading years of the pilot phase we find over allocation of approximately 280 million euas and total abatement of 247 mt co2 however we calculate that emissions inflation of approximately 73 mt co2 also occurred possibly due to uncertainty about future policy design features

on the efficient market diffusion of intermittent renewable energies abstract capacity costs of renewable energies have been decreasing dramatically and are expected to fall further making them more competitive with fossils building on an analytically tractable peak load pricing model we analyze how intermittency of renewable energies affects the market diffusion that results from these lower costs in particular once renewables have become competitive by attaining the same levelized cost of electricity lcoe as fossils the marginal increase in efficient capacities due to a further cost reduction varies substantially initially it is small then it rises but it falls again once renewable capacities are large enough to satisfy the whole electricity demand at times of high availability if external costs of fossils are internalized by a pigouvian tax then perfect competition leads to efficient investments in renewable and fossil capacities even though we assume that only a subgroup of consumers can adapt their demand to price fluctuations that are caused by the intermittency of renewables moreover fossils receive a capacity payment through the market for their reliability in serving demand of non reactive consumers maximum electricity prices rise with the share of renewables if regulators impose a price cap this initially raises investments in renewables but the effect may reverse if the share of renewables is large

the value of intra day markets in power systems with high wind power penetration in this paper the value of intra day markets in managing wind power uncertainty in competitive electricity markets is analyzed a competitive electricity market model consisting of a day ahead market and a number of intra day markets is considered real time operation adjustment is also taken into account stochastic programming is used to model decision making under wind power uncertainty numerical simulations based on two test systems are presented

navigating institutional change the accord rogernomics and the politics of adjustment in australia and new zealand this article uses a transactions approach to examine the ability of governments to develop and sustain negotiated solutions to major economic challenges where actors are embedded in long term repeated interaction have long time horizons and invest in monitoring and enforcement technologies effective political exchange is more likely in good transactions environments policy bargains will be more easily renegotiated and therefore more flexible and durable to examine the expectations the author looks to the puzzle posed by events in australia and new zealand 1983 1996 facing similar macroeconomic crises and with historically similar wage bargaining institutions and levels of union density both elect labor governments which then make opposite choices a negotiated solution emerged in australia but not in new zealand relying on the secondary literature and interviews with key actors the author finds support for the transactions approach findings here point to ways in which to broaden the study of

the innovation effects of environmental policy instruments a typical case of the blind men and the elephant abstract in this paper we examine the innovation effects of environmental policy instruments in four literatures theoretical models on incentives for eco innovation econometric studies based on observed data survey analysis based on stated information and technology case studies the aim of this paper is to critically examine the methods and the results we argue that the case studies literature even when its results are specific and difficult to generalise is a necessary source of empirical evidence about policy impacts and the factors responsible for these impacts pointing to issues that are neglected in the theoretical and econometric literature such as the specifics of the innovation context and policy interaction effects the paper states five synthesised findings and makes a plea for multi method analysis one other important synthesised finding is that the influence of market based instruments on innovation such as emission trading and taxes is far weaker than assumed

efficiency productivity and environmental policy a case study of power generation in the eu this study uses the eu public power generating sector as a case study to investigate the environmental efficiency and productivity enhancing performance of the european union s co2 emissions trading scheme eu ets in its first phase using data envelopment analysis methods we measure the environmental efficiency and the productivity growth registered in public power generation across the eu over the 1996 2007 period in the second stage of our analysis we attempt to explain changes in productivity and efficiency over time using econometric techniques our analysis suggests two conclusions carbon pricing led to an increase in environmental efficiency and to a shift outwards of the technological frontier and the overly generous allocation of emission permits had a negative impact on both measures these results are shown to be robust to changes in controls and specifications

union density and political strikes why do trade unions organize antigovernment strikes in some countries but not in others this article argues that there is a curvilinear relationship between union density and political strike activity political strikes are rare in countries with low union density since effective protests require a basic level of organizational capacity they are also rare in countries with high union density since a government that faces a strong union movement has powerful incentives to adjust its policies in order to avoid open confrontation but political strikes are relatively common in countries with moderate levels of union density since it is difficult for governments and unions to find viable compromises when the strength of the unions is not secure the empirical part of the article estimates the relationship between union density and the likelihood of political strikes in two samples of advanced democracies

a paler shade of green environmental policy under induced technical change conventional wisdom argues that environmental policy is less costly if it induces the development of cleaner technologies in contrast to this argument we show that once the second best nature of actual economies is taken into account the cost of environmental policy may well be larger with induced technical change itc than without thus itc may lower both the emissions reductions and the welfare gains associated with environmental policy in an endogenous policy framework itc may reduce the desired stringency of the policy

end of pipe or cleaner production how to go green in presence of income inequality and pro environmental behavior in this paper we consider a vertically differentiated duopoly model in which a green producer competes with a brown rival in a market in which consumers are environmentally concerned in particular consumers are assumed to value not only the intrinsic quality of a certain product but also its environmental impact this environmental valuation has a positional content consumers attach a positive attribute to the green product while penalizing the brown one in this context we consider the choice of the green firm between cleaner and end of pipe abatement efforts we find that the interplay between the intensity of market competition consumers income disparity and environmental concern can play a crucial role in directing the green producer towards one or the other technological choice more precisely the adoption of cleaner production technologies can be discouraged by low average income and by tough competition while it can be spurred by the moral social incentive towards pro environmental behavior

the political economy of social democratic economic policies the pasok experiment in greece this article looks at the political economy of social democratic economic policies it focuses on those policies that seek to extend democracy to the social and economic spheres and examines why such experiments have met with limited success in the past it compares external constraints on the viability of such policies such as the freedom of capital movements and globalization with internal constraints since social democratic policies rely on promoting coordination and cooperation between economic agents and groups it is argued that an important but often neglected internal constraint is the extent to which social democracy can draw upon or if they are lacking foster those institutions within society which promote coordination and cooperation the paper examines in detail the social democratic experience of pasok in greece and draws some conclusions for the wider relevance of the future viability of social democratic economic policies copyright 1998 by oxford university press

firm incentives to promote technological change in pollution control comment following on from an analysis by milliman and prince this article considers further the relative incentives for technical change provided by different pollution control instruments the comments involve the recognition that emission targets are typically chosen fairly arbitrarily because of regulators lack of knowledge of abatement cost schedules there is also a more detailed discussion of the practicability of auctioning emissions permits as these have been less thoroughly covered in the literature than the other instruments

assessment of the cost associated with wind generation prediction errors in a liberalized electricity market in this paper a probabilistic methodology for estimating the energy costs in the market for wind generators associated with wind prediction errors is proposed generators must buy or sell energy production deviations due to prediction errors when they bid in day ahead or hour ahead energy markets the prediction error is modeled through a probability density function that represents the accuracy of the prediction model production hourly energy deviations and their associated trading costs are then calculated three study cases based on real wind power installations in spain are analyzed the three study cases show that the error prediction costs can reach as much as 10 of the total generator energy incomes

a note on clean technology adoption and its influence on tradeable emission permits prices in this paper we give an example in which the price of tradable emission permits increases despite firms adoption of less polluting technology a result that is in contrast with montero j environ econ 44 23 44 2002 and parry j regul econ 14 229 254 1998 among others if two cournot players switch to a cleaner technology the price for permits may increase due to an increase in the net demand for permits and a decrease in the net supply of permits after the clean technology is adopted this is only the case when output demand is quite elastic

intra firm diffusion of green energy technologies and the choice of policy instruments environmental benefits only unfold if green environmentally friendly technologies are widely diffused and intensively deployed within a firm we investigate how different types of policies directly and in combination affect the number of different green energy technologies adopted by a single firm intra firm diffusion using data from a dedicated survey on the diffusion of green energy technologies of 1200 swiss firms and applying well identified econometric models we found that energy taxes are a very effective policy instrument for the intra firm diffusion of green energy technologies even more important however are non political measures that show the largest effect among all tested instruments additional analyses show that a time consistency in policy making is more important for energy tax regimes than for regulations and b no evidence for complementarities between the policy types could be identified

on reducing the windfall profits in environmental subsidy programs investment subsidies are widely used to induce adoption of new technologies that can lower the marginal cost of reducing emissions to economize on these subsidies governments would like to distinguish between firms that need to receive a subsidy to adopt a new technology and firms that would adopt that technology even without subsidies we show that policies consisting of a menu of emission taxes and investment subsidies can potentially induce firms to self select

pollution permits and compliance strategies abstract this paper analyzes the impact of spot and futures markets for tradeable pollution permits on the potential polluters compliance decisions polluters can buy permits invest in pollution abatement or else stop production or source out we show that stand alone spot markets induce excessive investment the introduction of a futures market reduces this incentive to invest but is not the optimal way to control pollution a menu of options on pollution rights possibly coupled with intertemporally bundled sales yields higher welfare because of its focus on long run demand elasticities and rent extraction this paper can be applied to a variety of situations such as demand side management public transportation bypass in telecommunications or forward sales by a private monopolist

case study evidence that direct regulation remains the main driver of industrial pollution avoidance and may benefit operational efficiency abstract environmental regulation is required to reduce industrial pollution to levels that are socially acceptable and economically efficient but there is debate over the most efficient form of such regulation typically a limited range of environmental and economic parameters are accounted for in the econometric studies that inform that debate this paper integrates evidence from two separate studies to assess a broad range of parameters related to the efficiency of industrial environmental regulation questionnaire responses from 25 italian manufacturers of building chemicals and 28 irish pharmaceutical manufacturers provided evidence on the environmental effectiveness and operational impacts of different regulatory instruments combined with extensive emissions data from irish pharmaceutical manufacturers survey results enabled a quantitative estimation of pollution avoidance specifically attributable to direct regulation the monetised social benefit of avoided pollution was found to be equal to direct compliance costs chemical manufacturers in italy and ireland stated that direct regulation is a more important driver of industrial environmental performance than economic or voluntary regulation and their responses indicated that direct compliance costs may be countered somewhat by stimulated operational improvements it was concluded that direct regulation is an effective approach for multi pollutant control in an industrial context and that the efficiency of such regulation may be underestimated in studies that do not consider the full range of pollutants and operational effects

incentives for advanced pollution abatement technology at the industry level an evaluation of policy alternatives abstract in this research we evaluate the incentive effects of five environmental policy instruments to promote the development and adoption of advanced pollution abatement technology in a heterogenous industry from most to least incentive the policy instruments can be rank ordered as follows i auctioned permits ii emissions taxes and subsidies iii issued marketable permits iv performance standards including performance standards in this list necessitates the assumption that they are differentiated between heterogeneous firms before the technology adoption in a way which replicates the initial emissions control distribution of the efficient incentive based instruments with the starting point normalized in this fashion the instrument rankings are invariant with respect to the size of firms the size of the industry or the industry s abatement cost structure

does a recession call for less stringent environmental policy a partial equilibrium second best analysis this paper analyses second best optimal environmental policy responses to real and financial shocks in a two period partial equilibrium model with heterogeneous firms an environmental externality and credit constraints we show that to alleviate credit constraints and encourage investment the second best optimal emission tax falls short of marginal emission damages the optimal response to shocks depends on how the shock affects the size of the environmental and credit market failures and the effectiveness of the tax in alleviating these market failures under mildly restrictive assumptions on functional forms the optimal response to a persistent negative productivity shock or a tightening of credit is to reduce the emission tax our results are informative for how climate change policy should optimally change with the business cycle

optimal pollution standards and non compliance in a dynamic framework in this paper we present a stackelberg differential game to study the dynamic interaction between a polluting firm and a regulator who sets pollution limits overtime at each time the firm settles emissions taking into account the fine for non compliance with the pollution limit and balances current costs of investments in a capital stock which allows for future emission reductions we derive two main results first we show that the optimal pollution limit decreases as the capital stock increases while both emissions and the level of non compliance decrease second we find that offering fine discounts in exchange for firm s capital investment is socially desirable we numerically obtain the optimal value of such discount which crucially depends on the severity of the fine in the limiting scenario with a very large severity of the fine the optimal discount implies that no penalties are levied since the firm shows adequate adaptation progress through capital investment

rushing the impatient allowance reserves and the time profile of low carbon investments postponing the issue date of allowances in a cap and trade scheme by e g a reserve mechanism impacts the time profile of low carbon investments if the postponement constrains intertemporal arbitrage short term investments increase but long term investments are deterred this effect aggravates the shortage of long term investments at least partially attributed to firms impatience the cancellation of allowances agreed for phase iv of the eu ets is suitable to counteract the negative effects of cap neutral postponement on long term investments by making the reserve redundant all effects crucially depend on how firms form expectations about future allowance prices

markets and regulatory hold up problems abstract many regulatory programs such as environmental regulation are effective only if firms make irreversible investments that reduce the cost of compliance a firm potentially subject to regulation may therefore behave strategically by not investing thereby forcing the regulator to void the proposed regulation we show that such incentives which resemble a hold up problem may not be overcome when government s only tool is the imposition of an emissions tax the hold up problem can be overcome by the issuance of tradeable permits a time consistent equilibrium exists with all firms investing and the government imposing regulations even if no permits are traded and their market price is low indeed an observation of no trade may indicate that pollution abatement is great

innovation in pollution control comparisons of the various institutional arrangements for controlling pollutant emissions from individual sources effluent fees effluent control subsidies marketable permits and direct command and control regulation have usually focused on their static efficiency properties and institutional feasibility e g dales 1968 zerbe 1970 baumol and oates 1975 kneese and schultze 1975 marin 1978 mills and white 1978 spence and weitzman 1978 russell 1979 a relatively neglected area has been the study of how each arrangement influences innovation in pollution control a few studies e g kneese and schultze 1975 marin 1978 mills and white 1978 russell 1979 have casually claimed that the control methods that rely on economic incentives provide superior incentives for innovation but there have been few systematic studies of the question this paper provides a simple model of pollution control innovation by a profitmaximizing polluter who is subject to the various control methods the consequences of the methods will be explored in three major contexts first we assume that the polluter and the innovation is a small enough part of the overall pollution problem so that none of the important marginal conditions are changed by the innovation second we assume that the polluter and the innovation are important enough so that marginal conditions are changed by the innovations but that the governmental authority determining pollution control incentives or levels fails to make the appropriate adjustments third we again assume that the innovation causes marginal conditions to change but in this case the governmental authority makes the appropriate adjustments we use the term ratcheting to describe this last phenomenon in all cases we assume that the innovating polluter correctly predicts the reactions of the governmental authority and bases his innovation decisions on that prediction a profit maximizing entrepreneur would normally be expected to adopt any innovation that promised gains present discounted value to him in excess of initial

rolling optimization of wind farm and energy storage system in electricity markets intraday energy markets have been established in some power markets mainly because of large scale wind power integration inspired by the spanish power market this paper proposes a modified market design which contains day ahead and intraday energy bidding sections to better accommodate stochastic wind energy then coordinated operation of the wind farm wf and energy storage system ess is studied rolling stochastic optimization formulations for day ahead intraday biddings and real time operations are put forward to obtain the optimal bidding strategy of wf ess union in each bidding section to maximize its overall profit case studies and sensitivity analyses are carried out on a union of wfs and a pumped storage plant psp simulation results show that the proposed rolling optimization method can effectively utilize the updated wind power forecast data and regulation capability of ess and thus increase profit for the union prominently

linking induced technological change and environmental regulation evidence from patenting in the u s auto industry a b s t r a c t this article uses a carefully screened patent database in automobile emission control technologies and a detailed regulatory action analysis to examine firms innovation in response to u s technology forcing auto emissions standards enacted between 1970 and 1998 the study finds that under the performance based technology forcing pbtf auto emissions regulations both automakers and compo nent suppliers innovated and introduced more advanced emission control technologies for automobile applications the study also shows that stringent pbtf regulation temporarily induced domestic u s firms to become more innovative than foreign firms that operated in the local u s market during the early phase of the regulatory regime findings of this research strongly imply that government intervention in the form of technology forcing regulation can drive firms to invest in technological innovation

does host market regulation induce cross border environmental innovation this paper evaluates the effect of host country environmental policy stringency on the offshoring of environmental patents for 2000 top world r d performers it is shown that a more stringent environmental regulation triggers both the extensive and intensive margin of patent offshoring in the field of environmental technologies results are robust to various different specifications alternative definitions of innovation offshoring and of regulation restrictions and to the consideration of possible endogeneity of regulation it is suggested inter alia that r d subsidies and non market based regulatory measures are more important than market based instruments as drivers of cross border environmental innovation length 26 pages

dynamic incentives by environmental policy instruments a survey abstract in this paper i survey and discuss recent developments on the incentives provided by environmental policy instruments for both adoption and development of advanced abatement technology a main conclusion to be drawn from the literature is that under competitive conditions market based instruments usually perform better than command and control moreover taxes may provide stronger long term incentives than tradable permits if the regulator is myopic if the government can anticipate new technology or is able to react on it optimally regulatory policies by virtue of administered prices taxes and policies by setting quantities issuing tradable permits are almost equivalent the literature also shows that under competitive conditions there is no difference between auctioning permits and grandfathering moreover timing and commitment of environmental policy is not crucial for adoption under competitive conditions commitment has positive incentive effects however if an r d sector has market power in the presence of market imperfections the ranking of the different policy instruments is ambiguous

technology diffusion with market power in the upstream industry this paper compares taxes and tradable permits when used to regulate a competitive and polluting downstream industry that can purchase an abatement technology from a monopolistic upstream industry second best policies are derived for the full range of the abatement technology s emission intensities and marginal abatement costs the second best permit quantity can be both above or below the socially optimal emission level explicit consideration of the output market provides further insights on how market power distorts the allocation in the downstream industry the ranking between permits and taxes is ambiguous in general but taxes weakly dominate permits if full diffusion is socially optimal in addition it is analysed how a cap on the permit price affects the diffusion of an abatement technology

environmental policy reconsidered the role of technological innovation abstract this paper discusses recent environmental policy wisdom in the light of technological and organizational innovation starting from empirical evidence it argues that the main econometric models which are used in environmental policy analysis do not consider properly the determinants and effects of innovation and offer unreliable estimates of policy effects some solutions to the latter problem show that the integration between environmental policy and industrial policy can be more efficient than traditional environmental policies in the protection of the environment technological cooperation moreover can be an important instrument to stabilize international environmental agreements

dynamic efficiency in experimental emissions trading markets with investment uncertainty this study employs a laboratory experiment to assess the performance of tradable permit markets on dynamic efficiency arising from cost reducing investment the permit allocation rule is the main treatment variable with permits being fully auctioned or grandfathered the experimental results show significant investment under both allocation rules in the presence of ex ante uncertainty over the actual investment outcome however auctioning permits generally provides stronger incentives to invest in r d leading to greater dynamic efficiency compared to grandfathering

the effect of allocation above emissions and price uncertainty on abatement investments under the eu ets abstract the european union emission trading scheme eu ets by far the largest in its kind has inspired several other carbon markets in the world based on interviews with plant managers from almost all belgian ceramics lime and cement producers this study describes how manager s perceptions on emission trading affected investment decisions in line with behavioural economics reference dependence is found to explain why free allocation below emissions creates a greater incentive to abatement investment compared to allocation above emissions in the ceramics sector allocation above emissions refrained managers from including carbon gains in payback times this contradicts the famous coase theorem which predicts that free allocation has no effect on abatement incentives the results indicate that auctioning part of the emission rights will reduce barriers to abatement investment carbon price uncertainty is seen as a disincentive for abatement investment by some managers and as an incentive by others intermediate levels of uncertainty add option value to abatement investments because the associated gradual learning adds flexibility in an uncertain carbon constrained future however high levels of uncertainty creating a risk of offshoring even when companies innovate creates an option value to postpone abatement investments narrow framing misperceiving the risk hedging counter cyclicality of carbon costs reinforces the option value to wait therefore policy should aim to reduce price uncertainty for very low and very high carbon prices not for an intermediary price range

timing and commitment of environmental policy adoption of new technology and repercussions on r d we investigate the interplay between environmental policy incentives to adoptnew technology and repercussions on r d we study a model where a monopolistic upstream firm engages in r d and sells advanced abatement technology to polluting downstream firms we consider four different timing and commitment regimes of environmental tax and permit policies ex post taxation or issuing permits interim commitment to a tax rate a quota of permits after observing r d success but before adoption and finally two types of ex antecommitment before r d activity one with a unique tax rate quota of permits the other one with a menu of tax rates permit quotas we study the second best tax and permit policies and rank these with respect to welfare in particular we find that commitment to a menu of tax rate dominates all other policy regimes

the structure of the climate debate first best climate policy is a uniform carbon tax which gradually rises over time civil servants have complicated climate policy to expand bureaucracies politicians to create rents environmentalists have exaggerated climate change to gain influence other activists have joined the climate bandwagon opponents to climate policy have attacked the weaknesses in climate research the climate debate is convoluted and polarized as a result and climate policy complex climate policy should become easier and more rational as the paris agreement has shifted climate policy back towards national governments changing political priorities austerity and a maturing bureaucracy should lead to a more constructive climate debate

command and control revisited environmental compliance and technological change in swedish industry 1970 1990 this paper addresses the issue of environmental policy instrument choice for achieving deep emission reductions in the industrial sector specifically it provides a a theoretical and empirical

ex post efficient permit markets a detailed analysis this paper provides a detailed analysis of ex post efficient permit markets after a short review of institutional designs that can achieve ex post efficiency under uncertainty and asymmetric information we analyze the effects of an ex post efficient regulation on the expected costs of the regulated firms on their investment behavior and on the incentives for strategic behavior on imperfectly competitive permit markets also we inquire about the budget effects of the regulation our results show that ex post efficient permit markets have considerable benefits beside the direct increase in expected social welfare

the role of investment in environmental lobbying contests this paper establishes that a lobbying stage following investment decisions regarding abatement technology may imply a positive strategic effect of investment pointing to relatively more investment in pollution abatement technologies than without lobbying the intuition is that polluting firms may choose to implement more advanced abatement technology as a credible commitment device in order to lower the investment of environmentalists in the lobbying contest that will ultimately determine whether or not an emissions tax is introduced

prices vs quantities technology choice uncertainty and welfare technological improvements have proven essential in mitigating environmental problems such as climate change depletion of the ozone layer and acid rain while it is well known that price and quantity based regulatory instruments provide different investment levels the effects on the choice between different technologies have received scant attention this paper expands on the prices versus quantities literature by investigating firms technology choice in the face of demand and supply side uncertainty i show that the regulator can not design tradable emissions permits and an emissions tax such that the two regimes are equivalent even in terms of expected values moreover a tax encourages the most flexible abatement technology if and only if stochastic costs and the equilibrium permit price have sufficiently strong positive covariance compared with the variance in consumer demand for the good produced finally the firms technology choices are socially optimal under tradable emissions permits but not under an emissions tax