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While a firm knows the carbon price with certainty under a tax, it must form an expectation about future allowance prices to identify its cost-effective abatement investment under a capand-trade program. We illustrate graphically how errors in forming this expectation increase the costs of irreversible pollution abatement investment under cap-and-trade relative to a tax. We describe empirical “cost-effectiveness anomalies” in allowance markets that may be attributed to cap-and-trade's inherent uncertainty. We model investment under simulated US carbon tax and cap-and-trade policies and find that allowance price uncertainty can increase resource costs 20 percent for a given quantity of emission abatement.

While a firm knows the carbon price with certainty under a tax, it must form an expectation about future allowance prices to identify its cost-effective abatement investment under a capand-trade program. We illustrate graphically how errors in forming this expectation increase the costs of irreversible pollution abatement investment under cap-and-trade relative to a tax. We describe empirical “cost-effectiveness anomalies” in allowance markets that may be attributed to cap-and-trade's inherent uncertainty. We model investment under simulated US carbon tax and cap-and-trade policies and find that allowance price uncertainty can increase resource costs 20 percent for a given quantity of emission abatement.

Environment-friendly treatment of sewage sludge has become tremendously important. Conversion of sewage sludge into energy products by environment-friendly conversion process, with its energy recovery and environmental benefits, is being paid significant attention. Direct liquefaction of sewage sludge into bio-oils with supercritical water (SCW) was therefore put forward in this study, as de-water usually requiring intensive energy input is not necessary in this direct liquefaction. Supercritical water may act as a strong solvent and also a reactant, as well as catalyst promoting reaction process. Experiments were carried out in a self designed high-pressure reaction system with varying operating conditions. Through orthogonal experiments, it was found that temperature and residence time dominated on bio-oil yield compared with other operating parameters. Temperature from 350 to 500°C and reaction residence time of 0, 30, 60min were accordingly investigated in details, respectively. Under supercritical conversion, the maximum bio-oil yield could achieve 39.73%, which was performed at 375°C and 0min reaction residence time. Meanwhile, function of supercritical water was concluded. Fuel property analysis showed the potential of bio-oil application as crude fuel.