• Energy Research
• 8. Economic growth close
• 1. No poverty close

The emissions trading scheme (ETS) has been long advocated to address climate change not only because it is cost effective but also because it can provide economic incentives for the adoption of new technologies. The emissions abatement of the energy-intensive sector covered by ETS is of great significance for the whole nation to attain sustainable and low-carbon development, especially for developing countries. This paper investigates the effect of market power in the emissions trading market on the diffusion of a new emissions abatement technology when firms in the energy-intensive sector interact in an imperfectly competitive output market. In the model, each firm needs to determine the optimal time to adopt the new emissions abatement technology, taking into account its benefits and costs, as well as its rival’s strategic behavior. With this framework, the results suggest that firms will delay adoption of the new emissions abatement technology in the presence of market power. Moreover, when the output demand is larger and more elastic, emissions abatement technology diffusion will occur earlier. It implies that the technology diffusion in the weak elastic sector, such as the Chinese iron and steel sector, may have more barriers than that in the strong elastic sector, such as the Chinese nonferrous metals sector.

The petroleum refining sector is energy intensive and has been identified as one of the target industries for CO2 emissions control by China’s emissions trading scheme. A detailed accounting of the cost of emissions reduction is of great significance for the petroleum refining sector to comply with emission reduction target. In this paper, six categories of CO2 abatement technologies are identified in China’s petroleum refining sector, their CO2 emissions reduction cost as well as the potential are estimated using a bottom-up method. Most of the technologies in the sector are cost-effective, which has contributed approximately 76.4% of sectoral total emissions reduction. New equipment technology provides the greatest contribution to emissions reduction, while new materials technology offers the lowest contribution. The implementation of the emissions trading scheme will increase the potential for emissions reduction only if the CO2 price can be higher than 200 CNY/t. Given the amount of emissions reduction that technologies can provide will not exceed 40% of the total emissions; firms must find more diversified ways when facing more stringent emissions control.

ABSTRACTThus far, efforts of the Green Climate Fund (GCF) to mobilize finance have failed to meet the needs of developing countries for addressing climate change. How the GCF’s limited funds could ...

China has surpassed the United States to be the world's largest energy consumer, but a lot of energy was used to produce products for exporting to other countries. Presently, China faces a great challenge in energy security and environmental protection. This paper focuses on the energy embodied in China's foreign trade with a multi-regional input–output approach. Three versions of the GTAP (Global Trade Analysis Project) database were used to capture the trend and distribution of the embodied energy flows for China during 2001–2007. The results indicate that the energy embodied in the global trade is increasing rapidly, growing faster than the total direct energy exported in the same period. China is shown as an energy exporter in terms of embodied energy, and the embodied energy trade surplus increased from 156 million tons of oil equivalents (Mtoe) in 2001 to 514 Mtoe in 2007, with a proportion of domestic energy consumption increased from 14% to 23%. This paper also studies the effects of the energy-intensive industry restrictive export policy of China, and we find that this policy could reduce the national energy consumption and promote industrial structure upgrades effectively. However, the expansion of energy-intensive industries in other countries may reduce China's efforts for global energy saving and global warming alleviation. Our simulation shows that carbon leakage is about 50%.

Abstract Though sharing a similar practice form, the emission trading scheme is distinguished from traditional financial markets: firms coordinate three abatement options at the micro level, including allowance trading, output adjustment, and low-carbon technology adoption. Then, at the macro level, this leads to dynamic interactions among allowance market, output market, and low-carbon technology diffusion. This is the fundamental characteristic of the emission trading scheme, and modeling the dynamics behind is a major difficulty for relevant studies, especially when following complexities are considered: (1) different planning horizons of the three abatement options, (2) heterogeneity among sectors and firms, and (3) details of firms’ production and optional low-carbon technologies. Aiming at this difficulty, we establish an agent-based model for the emission trading scheme, and within a novel multi-level time frame, the fundamental characteristic is reflected and the complexities are considered. Firms’ production and low-carbon technologies are discretely modeled at a process level from a bottom-up perspective, and based on European data, our model is calibrated to cover 5 industrial sectors, 11 emission-intensive products, 25 production processes, and 52 low-carbon technologies. With this model, the emergence properties and uncertainty of the system are captured, and the non-linear impact of the abatement target is reflected and discussed. We find that, after a certain level, higher target leads to lower allowance price uncertainty but stronger output impact, which is a trade-off for setting the abatement target.

The effect of an EU emission trading scheme (EU ETS) on CO2 abatement technology development is limited, according to many empirical studies. This is the result of an existing low carbon price and the future uncertainty of the development of the carbon market. Carbon price stabilisation mechanisms, especially the carbon price floor, may serve to supplement the ETS and cope with this problem. We are concerned with how the carbon price floor affects the investment in carbon abatement technology, the resulting CO2 abatement, and how to best design such a carbon floor price. In this paper, we focus on carbon capture and storage (CCS) technology by building a CCS investment and operation decision model based on real options theory. We consider investment timing and CCS operation flexibility and we also design a model for carbon price evolution with a carbon price floor using the Monte Carlo simulation method. We determine the floor prices above which immediate CCS investment is occuring, and those at which CO2 emissions can be eliminated. According to the simulation results, the carbon price floor has a significant effect on promoting CCS investment. The marginal effect of an increasing carbon price floor first rises and then falls; when the floor price reaches a threshold value, its marginal effect becomes minimal. Based on the simulation results, the carbon floor price for EU ETS could be set at about 20 EUR/t CO2 to stimulate the CCS investment, while it should be increased to 30 EUR/t CO2 to sufficiently promote CO2 abatement.

Abstract This paper applies real options theory to overseas oil investment by adding an investment–environment factor to oil-resource valuation. A real options model is developed to illustrate how an investor country (or oil company) can evaluate and compare the critical value of oil-resource investment in different countries under oil-price, exchange-rate, and investment–environment uncertainties. The aim is to establish a broad model that can be used by every oil investor country to value overseas oil resources. The model developed here can match three key elements: 1) deal with overseas investment (the effects of investment environment and exchange rates); 2) deal with oil investment (oil price, production decline rate and development cost etc.); 3) the comparability of the results from different countries (different countries' oil-investment situation can be compared by using the option value index (OVI)). China's overseas oil investment is taken as an example to explain the model by calculating each oil-investee country's critical value per unit of oil reserves and examining the effect of different factors on the critical value. The results show that the model developed here can provide useful advice for China's overseas oil investment program. The research would probably also be helpful to other investor countries looking to invest in overseas oil resources.

Abstract Due to the high adoption cost, large uncertainty, and ignorance of the positive externalities for private entities, additional incentives are needed for the development of carbon dioxide removal (CDR) technology. And there is a trade-off between the government and investors on how to ensure the effectiveness of the incentive policy and optimally allocate subsidized capital. This paper proposes a nonlinear dynamic programming model that combines real options method to study the optimization of dynamic subsidies for CDR technology. Using the endogenous learning effect, technological advance, and technology applicability, we modeled the investor decisions under uncertainty, as well as the government's effective use of incentive policies. Our model is available for deriving the development path of CDR technology with optimized subsidies and research and development (R&D) input across multiple periods. We use China's carbon capture and storage (CCS) development as a case study. The results show that, unlike other kinds of low-carbon technology such as renewable energy, the subsidy level of CCS may not decrease in the future because of rising trend of fuel costs and worse technology applicability in large-scale deployment. The achievement of large-scale CCS development will rely more on second-generation CCS. The levelized policy cost of incentivizing CCS technology in China can be high, and thus the target should be prudently set based on an evaluation of its socioeconomic burden. A supplementary measure that caps the CCS installation in each period is recommended to prevent excessive development.

Abstract Outdated capacity and substantial potential for energy conservation are the two main features of energy-intensive sectors in developing countries. Such countries also seek to implement market-based options to further control domestic carbon emissions as well as to promote the withdrawal of outdated capacity and upgrade production level. This paper presents a quantitative assessment of the emission trading scheme (ETS) for China's iron and steel industry. The diverse array of normal and outdated capacities was modeled in a two-country, three-good partial equilibrium model. Simulation results show that the abatement potential can be underestimated if the energy-saving effects that result from emission abatement are not considered. In the scenario analysis, we demonstrated that the free allocation of allowances can cause a competitiveness distortion among domestic normal and outdated capacities. Given the government's intention to promote outdated capacity withdrawal and production-level upgrading, an output-based allocation approach is strongly suggested for China's iron and steel sector.