achieving behavioural change .policy ......- hybrid vehicles - compressed natural gas - synthetic...

ACHIEVING BEHAVIOURAL CHANGE –POLICY INSTRUMENTS AND THE

MANAGEMENT OF CLIMATE CHANGE

Frank J. Convery, Project Director – SynthesisLouise Dunne, Project Manager - Web site (taxation) Luke Redmond - Web Site (emissions trading)Lisa Ryan - Transport and Climate Change

Tokyo, March 3-4 2004

A. Objectives of the research

1. Integrate key Collaboration into:- Policy Instrument framework- Accessible to stakeholders and general public

(Frank Convery)2. Detailed analysis of policies designed to address

(increasing) greenhouse gas emissions from road transport in Europe, the US and Japan (Lisa Ryan)

3. Economic Instruments Information System (EIIS)- web based (Louise Dunne)

B. Context• Japan faces serious challenge • Kyoto Protocol 6% reduction below the 1990

level by 2010. • But emissions have grown by 5% over the

1990-2001 period during a decade of economic stagnation.

• Growth recommencing• Introduce strong and effective policies that

encourage energy conservation and fuel switching

Recent reports on the Japanese economy

Financial Times Feb 19, 2004, p.1 Japan’s gross domestic product expanded at an annualized 7 per cent in the three months to December 03…Corporate bankruptcies fell last year for the first time in four years; unemployment is at a two and a half year low; banks are bringing their bad loans under control, and consumer prices rose late last year for the first time since 1998. Economic recovery – failure to meet Kyoto target unless..

B. Context

Previous Work

• Specifying the baseline against which to judge progress; Identifying least cost abatement options

• Psychology and instrument choice• Market-based instruments (emissions trading,

and taxes and charges)• European emissions Trading Directive• Research and Development (R&D) as policy

instrument for greenhouse gas emissions agabtement

B. Context

C. Some key insights 1. Compliance is technologically feasible2. Need skilful use of a range of policy instruments,

integrated to stimulate conservation fuel switching, innovation

3. Market signals to stimulate effective performance –(a) Create a market in emission allowances (emissions trading)

(b) Carbon taxation

Will support effectiveness of other instruments

· - Research and development- Good information - Regulation (command and control) - Stimulate supply of carbon free renewable energy sources

Key Insights

4. Competitive difficulties

- Carbon taxation exemptions for those who meet the benchmark

- Emissions trading – European solution – give generous allowances (free). But electricity price ‘pass through’ the main worry.

Key Insights

5. Very promising opportunities for investment in Clean development mechanism (CDM) projects in China

GDP is very strong and reflects the recovery of the global economy and the strength of exports. Sales of

digital cameras to the US and machinery to China are booming, but equally important is that the effects have begun to flow through to the domestic economy, with companies increasing their capital spending to

upgrade production capacity. (Financial Times, February 19, 2004, p.1)

Benefits• China by bringing clean investment into the

country• Japan

– Generating l ow cost carbon allowances that contribute to meeting the Kyoto target

– Generating industrial output in Japan– Helping give the Japanese carbon-

reducing products (especially cars), technologies, and renewables a competitive advantage in global markets

Key Insights

Key Insights

7. The Russian conundrum and post-Kyoto options

Road transport (Lisa Ryan)Information system (Louise Dunne)

Policy instruments to reduce CO2 emissions

1. Introduction 2. Policy Instruments applied to transport

2.1 Command and Control 2.2 Negotiated Agreements2.3 Information2.4 Indirect and Direct Market-Based Instruments2.5 R&D

3. Conclusions

Outline

CO2 Emissions from Transport

1. Introduction

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253

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3299

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Mt

19801999

OECD, 2004

Projected growth of CO2 emissions

Region CO2emission growth 1997-2020All sectors

CO2emission growth 1997-2020Transport

Transport share of CO2emissions1997

Transport share of CO2emissions2020

WorldOECD countriesOECD EuropeOECD North AmericaOECD Pacific

60%25%23%28%

18%

75%41%41%43%

32%

21%27%24%30%

24%

23%31%28%24%

27%

IEA 20001. Introduction


2.1 Command and Control - Regulation of greenhouse gas emissions- Regulation of technology- Regulation of fuel2.2. Negotiated Agreements2.3. Information2.4. Indirect and Direct Market-Based

Instruments2.5. R&D

2.1 Command and Control - Regulation of greenhouse gas emissions- Regulation of technology- Regulation of fuel2.2. Negotiated Agreements2.3. Information2.4. Indirect and Direct Market-Based

Instruments2.5. R&D

2. Policy instruments applied to transport

Regulation of CO2 emissions worldwide

• Corporate Average Fuel Economy (CAFE) standard in U.S.

• 14% reduction compared to counterfactual to date.

• CARB obliged to introduce CO2 regulation by 2005

• Japan is considering fuel efficiency standards for LPG vehicles

• No regulation in Europe

2.1 Command and Control

U.S. CAFE standards


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mpg CAFE standard

Fleet performance

Regulation of technology- ZEV law

• Zero Emission Vehicles Programme in California forces alternative fuels vehicle technology

• Large vehicle manufacturers required to sell 10% of vehicles as pure or partly zero-emitting vehicles from 2005

• Technologies encouraged are electric, fuel cell, natural gas, hybrid, efficient gasoline.

• 4,000 electric vehicles sold 1998-2003• Banking and early credits permitted


2.1 Command and Control- Regulation of fuel

Regulation of fuel- European Biofuels Directive

• Recommends Member States to substitute a minimum of 2% of transport and heating fuels with biofuels and other alternative fuels by 2005.

• Targets raised to 5.75% by 2010• Fuels included are biofuels such as bioethanol,

biodiesel, vegetable oil etc.• Projected CO2 savings as a result of introduction

controversial, depending on fuel type, production process and use of by-products.

Situation worldwideJapan• Renewables Portfolio Standard introduced in 2001-

Some subsidies available for projects to test biodiesel.

• Currently 33 biodiesel production facilities in operation in Japan

US• Flexible fuelled (ethanol/gasoline) vehicles –

200,000 in 1998Brazil• Largest bioethanol production and use worldwide,

however government incentives now reduced

2.1 Command and Control- Regulation of fuel


2.1. Command and Control2.2. Negotiated Agreements2.3. Information2.4. Indirect and Direct Market-Based Instruments2.5. R&D

2.1. Command and Control2.2. Negotiated Agreements2.3. Information2.4. Indirect and Direct Market-Based Instruments2.5. R&D

Overview• Voluntary approaches (VA) to manage

environmental problems gaining popularity in addressing climate change

• Literature is growing• Negotiated agreement between European

Commission and global vehicle manufacturers is main measure to reduce CO2 emissions from passenger cars

• Target - to reduce CO2 emissions to a specific vehicle average of 140g/km by 2008

• 35Mt CO2 emissions reduced between 1998-2001

2.2 Negotiated agreements

Reduction of CO2 emissions_Auto VA

2.2 Negotiated Agreements

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g/km

ACEAJAMA KAMA

2008

Comparison of EU VA with OECD guidelinesOECD Recommendations ACEA CO2 agreement

Clearly defined targets Short-term- Yes; 140g/km by 2008;Long-term- maybe 120g/km

Characterisation of a business-as usual scenario

No

Credible regulatory threats Moderate, perhaps carbon tax

Credible and reliable monitoring Yes, annually by industry and the Commission

Third-party participation Unclear

Penalties for non-compliance Introduction of legislation if the targets are not met

Information-orientated provisions Indirectly, though the labelling directive

Provisions reducing the risk for competition distortions

No

2.2 Negotiated Agreements


2.1. Command and Control 2.2. Negotiated Agreements2.3. Information2.4. Indirect and Direct Market-Based Instruments2.5. R&D

2.1. Command and Control 2.2. Negotiated Agreements2.3. Information2.4. Indirect and Direct Market-Based Instruments2.5. R&D

Vehicle labelling initiatives• Providing consumer information

crucial to influencing consumer purchasing.

• Wide literature on green purchasing and ‘eco-labelling’

• European Directive on vehicle labelling introduced in 2001.

• No estimates made yet of resulting CO2 savings.

• Type of labels important.• Performance assessment

remains to be done2.3 Information as a policy measure

Vehicle Labels

xModel Y

Petrol Manual

xy5

56.5

140 g/km

xModel Y

Petrol Manual

xy5 56.5

140 g/km

2.3 Information as a policy measure


2.1. Command and Control 2.2. Negotiated Agreements2.3. Information2.4. Indirect and Direct Market-Based Instruments- Emissions trading- Taxes and charges2.5. R&D

2.1. Command and Control 2.2. Negotiated Agreements2.3. Information2.4. Indirect and Direct Market-Based Instruments- Emissions trading- Taxes and charges2.5. R&D

Overview

• Fiscal measures third pillar of EU strategy to reduce GHG from passenger cars

• No greenhouse gas emissions trading scheme includes transport sector

• Challenges include baseline emissions and life cycle analysis

2.4 Market-based Policy Instruments

Taxes• Economists preferred measure to reduce

greenhouse gas emissions from transport• EU taxes- Vehicle acquisition tax

–Ownership tax–Fuel tax

• No EU-wide CO2 emissions taxes on vehicles but some Member States initiatives

• Japan has green tax on vehicles since 2001 to encourage purchase of low-emitting vehicles

• Huge effect on sales of alternative-fuelled vehicles in Japan (21% of small vehicles before, 57% in 2002)

2.4 Market-based Policy Instruments

Policy instruments to reduce CO2 emissions2.1. Command and Control 2.2. Negotiated Agreements2.3. Information2.4. Indirect and Direct Market-Based Instruments2.5. R&D- Conventional vehicle technologies- Hybrid vehicles- Compressed natural gas- Synthetic fuels- Hydrogen- Electric vehicles

2.1. Command and Control 2.2. Negotiated Agreements2.3. Information2.4. Indirect and Direct Market-Based Instruments2.5. R&D- Conventional vehicle technologies- Hybrid vehicles- Compressed natural gas- Synthetic fuels- Hydrogen- Electric vehicles

CO2 Ranking of Technologies

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Conventional

Advanced

Hybrid

2.5 R&D Investment

Fiat, 2003

Summary• CO2 emissions from transport continue to rise, in

spite of measures already implemented• Abatement in transport appears to be more

expensive than other sectors- ECOFYS report –2€/tCO2 eq. for industry compared with 51€/tCO2 for road transport

• Range of policy instruments in place to mitigate CO2emissions

• Very few cost/benefit analyses performed on greenhouse gas emissions policy instruments

• Efficiency and payoff of policies unknown

3. Conclusions

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WorldOECD Countries15 EU CountriesOECD N. AmericaOECD Pacific

CO2 Emissions from Road Transport

OECD 2001

Economic Instruments to reduce greenhouse gas emissions-

database and websiteLouise Dunne

Luke Redmond

www.economicinstruments.com


• Introduction and Aims• Recent Progress• Template• Instrument Coverage• Future

Outline

Introduction

• Web-based Information System on market based instruments for environmental policy

• Aims – To catalogue all economic

instruments internationally – To track interesting developments

• 250 entries

Introduction

• Sources– EU, policy instruments literature, EEA

publications, journal papers, Environment Ministries

• Other databases: – OECD/EEA environmentally related taxes

database: Only taxes – no evalution– IEA Climate Change Database: Only climate

change related policy– IETA Trading Database

Progress since Berlin meeting

• All emerging emissions trading allocation plans in Europe monitored and entered

• Taxes updated in light of new literature and evaluation studies

• Layout improved and modified• Emphasis on eliciting updated material • Questionnaire intended to produce useful feedback

and suggestions for improvements/gaps in information.

• Identification of gaps in the database and commissioning relevant country expert to translate documents and distill relevant information.

Template

• Background• Introduced• Achievements• Aims• Design• Expectations• Performance• Drawbacks

• References• Useful Information

Sources• Request for further

information• Last updated • Related Instruments• Notes

Economicinstruments.com

Japanese Instruments• Charges and Taxes

– Coal Tax– Green Taxation Plan - Automobiles– Anti Global Warming Tax– Compensation Law (SOx Charge)– Industrial Waste Tax– CFC User Fees– Municipal Waste Management

• Tradable Permits– Emissions Trading Regimes– Contribution to the Prototype Carbon Fund

Instrument coverage

Japanese Instruments• Subsidies/Grants

– Acceleration of the Diffusion of Photovoltaic– Building and Home Energy Management System– Contribution to the Prototype Carbon Fund– Promoting Low-Pollution Vehicles– Subsidies of Companies for the Diffusion of Renewable

Energy– Subsidies of Local Projects for Accelerating Introduction of

New and Renewable Energy– Telework– Green Power Certification Scheme

Instrument Coverage

Compensation Law (SOx charge)BackgroundThe Compensation Law for Pollution Law for Pollution-Related Health

Damage imposed a system of pollution load levies on stationary sources.

IntroducedPassed in September 1973, and came into effect in September 1974AchievementsThe CL framework essentially provided for the collection of levies from

SOx-emitting installaions and a certain supplementary amount from motor vehicle tonnage taxes and using this pool to compensate certified health sufferers. Compensation amounts were decided inadvance.

DesignA charge on SO2 emissions, payable by companies. The receipts are

used to fund state compensation to individuals suffering from chronic breathing problems brought on by air pollution.

Instrument coverage - Japanese Instruments

Compensation Law (SOx charge) ContinuedPerformanceSome investigators maintain that the CL levy system did not result in a pollution

reduction effect, while others assert that it did. Since the early 70s, SOxemissions have decreased in Japan. Reasons for this include the implementation of direct controls such as total pollutant load controls, higher prices for petroleum products caused by the oil crises, and the CL levy. Japan's industry has become less energy-intensive, cleaner, desulphurisation stack-scrubbers have been installed and low-sulphur fuels have been used.Matsuno and Ueta (2000), in their socio-economic evaluation of the SOx charge in Japan, concluded that in the Osaka Prefecture, the main factor inducing reductions in SOx emissions was not the CL levy but direct controls, especially those controls stemming from the pollution control agreement concluded with the regional electric utitlity. However, they state that the anti-pollution incentive effect of the CL levy does appear to have had a limited effect, and that this effect is seen to increase over time. Small and medium-scale power plants and manufacturing plants which are subject to weaker direct controls are examples of this effect.

ReferencesMatsuno, Y. and Ueta, K., 2000. A socio-economic evaluation of the SOx charge in

Japan. Wuppertal Institute. 1996. 'Japan Back as World-Beater - This Time with Green

Taxes?' Wuppertal Bulletin on Ecological Tax Reform 2, 3: 1-2. Information

Instrument coverage - Japanese Instruments

Emissions Trading Example– Federal NOx (US)AIMSThe aim of this programme is to get 392 facilities in Delaware, the District of Colombia, Indiana,

Kentucky, Maryland, Michigan, North Carolina, New Jersey, Ohio, Pennsylvania, Virginia and West Virginia to reduce annual NOx emissions by a total of nearly 510,000 tons from 2007

levels.COVERAGE - WHO IS INCLUDED

The EPA requires that large electric utilities and large industrial boilers in States whose emissions have been shown to significantly contribute to downwind nonattainment to control their NOx emissions in response to the Section 126 Final Action rulemaking. Fossil fuel boilers or combustion turbines that serve an electric generating unit with rated output of greater than 25 MW or that have a maximum rated heat input capacity of greater than 250 mmBtu/hr are included in the trading programme. Units that no longer operate or units that have a permitted limit to emit less than 25 tons of NOx during an ozone season (which runs from May 1 through to September 30) are exempt from most requirements of the programme. Individual units located in the affected States that are not otherwise subject to the programme may choose to opt into the trading programme. However, once a unit opts into the programme, that unit is subject to the same compliance, monitoring and reporting requirements as the units originally subject to the programme.

Instrument coverage

TRADING PROGRAMME CLASSIFICATIONThe Federal NOx Budget Program is a cap-and-trade programme. UNITS

The unit of the Federaal NOx Budget Trading Program is the “NOx Allowance”. One allowance authorises its holder to emit one ton of NOx emissions.

INTRODUCEDThe Federal NOx Budget Trading Program was introduced on May 1, 2003.

GEOGRAPHICAL SCOPEThis trading programme applies to 392 facilities in Delaware, the District of Colombia, Indiana, Kentucky, Maryland, Michigan, North Carolina, New Jersey, Ohio, Pennsylvania, Virginia and West Virginia.

UNIT ALLOCATIONThe EPA projected total uncontrolled ozone season NOx emissions for the year 2007 for the participating sources in each State. A state-wide emissions trading budget was then established by applying highly cost effective control measures to the named sources in each State. The EPA determined that a control level of 0.15 lbs/mmBtu for electric generating units and a 60% reduction in NOxemissions for industrial boilers were highly cost effective.

Instrument coverage

Emissions Trading Example– Federal NOx (US)

MONITORING AND ENFORCEMENTThe affected sources were required to begin monitoring on May 1, 2002. Full compliance with the Federal NOx Budget Trading Program is required starting May 1, 2003. Sources demonstrate their compliance by holding enough allowances in their accounts to cover their ozone season emissions. If sources do not have enough allowances to cover their emissions based on their initial allocation, they may take advantage of the flexibility provided by the allowance market and buy allowances. Sources have until November 30 each year, two months after the end of the ozone season, to ensure that they hold adequate allowances. The EPA verifies that sources hold adequate emissions allowances through standardised monitoring and reporting procedures.

BANKING AND BORROWINGBanking allowances for future use is permitted in this programme.

ADDITIONAL INFORMATIONThe Federal NOx Budget Trading Program is very similar to the NOx Budget Trading Program under the NOx SIP Call. Both programmes assume the same level of control for large electric generating units and industrial boilers and require the same compliance data. Sources trading under the Federal NOx Budget Trading Program and sources trading in the NOx Budget Trading Program under the NOx SIP Call, may trade allowances freely with each other.

Instrument coverage

Emissions Trading Example– Federal NOx (US)

Future• Continue to expand and update entries

– Input from individual country representatives– Japan updates weekly from Japan for

sustainability newsletter– Other updates from Environmental News

Daily • Gain wider circulation and usage, growing to

depend on outsider feedback• Become a tool for policy and decision makers


Future (Continued)

• Real effort to be made to track and evaluate performance and messages for policy makers – ‘If I were to implement this instrument in my area what could I expect’

• Get Japanese translation if desired• Link in with OECD/EEA database if possible,

adding value to it with evaluation studies


achieving behavioural change .policy ......- hybrid vehicles - compressed natural gas - synthetic...

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