هزینه های بهره وری از جداسازی بازارهای کربن تحت طرح انتشار تجاری اتحادیه اروپا : یک ارزیابی کمی برای آلمان

From 1 January 2005 onwards the European Union has launched the first large-scale international carbon emissions trading program. As the EU Emissions Trading Scheme (EU-ETS) covers only part of domestic carbon emissions, it implies a segmented environmental regulation scheme: Each EU Member State must specify additional domestic abatement policies for the sectors outside the EU-ETS in order to meet its emissions budget under the EU Burden Sharing Agreement. We highlight the generic problems of segmented carbon regulation in terms of information requirements for international carbon prices and domestic abatement costs of sectors outside the EU-ETS. Based on numerical simulations for Germany, we quantify the excess costs of segmented carbon regulation and conclude that inefficiencies can be much better explained by lobbying of influential EU-ETS sectors than by information problems.

Since long, economists have advocated the efficiency advantages of market-based instruments, i.e., emission taxes or tradable emission allowances over command-and-control standards. The basic reasoning behind this is that taxes or tradable allowances can achieve the same marginal costs for each use of a given pollutant so that the economy as a whole will employ the cheapest abatement options. While a deliberate design of standards could in principle also achieve cost-effective abatement, the fundamental advantage of market-based regulation is that cost-efficiency can be obtained by decentralized market mechanisms: There are no information requirements for the regulator on the specific abatement options across different pollution sources to assure equalization of marginal abatement costs. During the last decade, in particular emission taxes have played a growing role in domestic environmental policies of OECD countries—not at least because efficiency arguments promoted overall political feasibility (OECD, 2001). The most recent prominent example for the market-based course in environmental policy design is the European Union's Emissions Trading Scheme (EU-ETS) in force since the first of January 2005 (EU, 2003a). Its key objective is to foster cost-efficiency of carbon reduction under the EU Burden Sharing Agreement (EU-BSA) that entails specific emission reduction targets across EU Member States (EU, 1999) in line with the EU's overall reduction commitment under the Kyoto Protocol.1 Initially, the EU-ETS will only cover carbon dioxide (CO2) emissions from selected energy-intensive sectors including: production and processing of iron and steel; production of cement, glass, or ceramic; energy transformation (electricity generation and oil refineries). According to Article 10 of the EU-ETS-Directive, emission allowances to these sectors will be grandfathered, i.e., given for free.2 Each Member State is obligated to set up a National Allocation Plan (NAP) where it defines the cap on emission allowances for sectors (installations) included in the trading scheme and the specific allocation rule for grandfathering. The NAPs for the first trading period from 2005 to 2007 had to be submitted to the EU Commission by April 2004 for official review and approval. As the EU-ETS covers only a part of CO2 emission sources, it implies a segmented environmental regulation scheme. Each Member State must complement the EU-ETS with specific domestic abatement policies for the sectors outside the EU-ETS in order to meet the country's total emissions budget under the EU-BSA. The segmentation of the emission market into multiple domestic markets and a single international market creates a fundamental information problem for environmental regulation that seems to be widely ignored in the public policy debate. Under a segmented scheme, the domestic regulator must have perfect information on the international price of tradable emission allowances and the marginal abatement cost curves across all domestic emission sources that are not included in the emissions trading scheme in order to implement the (single) cost-minimizing NAP. Hence, segmented emission regulation as implied by the EU-ETS discards a key element of market-based regulation, i.e., the rigorous use of decentralized market mechanisms. In this paper, we investigate the potential efficiency costs of segmented carbon emission regulation. We start with a simple analytical partial equilibrium framework to demonstrate the fundamental information problems of segmented regulation. We then quantify the potential excess costs of segmented regulation for Germany using marginal carbon abatement cost curves based on empirical data (see Böhringer et al., 2005 for an interactive multi-regional assessment of NAPs). Our simulation results suggest that the inefficiencies of the actual German NAP can be better explained by lobbying of influential sectors within the EU-ETS rather than by information problems of regulatory authorities. Our analysis complements more recent research on the economic impacts of the EU-ETS and complementary environmental policy measures. Johnstone (2002) as well as Sorrel and Sijm (2003) investigate the interaction between the EU-ETS and existing policy instruments such as energy taxes, subsidies to renewable energies, or energy efficiency standards. In their qualitative analysis, they conclude that the rationale for sticking to the existing policy instruments must rely on their contribution to overcome market barriers and market failures (other than carbon externalities) or in contributing to social objectives other than economic efficiency. Klepper and Peterson (2004) use a computable general equilibrium model for the European Union to quantify the economic impacts for a range of likely implementations of NAPs. Although their analysis implicitly captures inefficiencies due to diverging marginal abatement costs between sectors inside and outside the EU-ETS, the focus is on the role of accession countries for alleviating overall compliance costs and adverse competitiveness effects. Another strand of the literature emphasizes the distortionary effects of dynamic (updating) allocation rules (see e.g. Böhringer and Lange, in press) or competitive distortions between similar energy-intensive firms across EU Member States (see e.g. Böhringer and Lange, 2005).

From 1 January 2005 onwards the European Union has launched the first large-scale international emissions trading program. The EU Emissions Trading Scheme (EU-ETS) in principle has the opportunity to advance the role of market-based policies in environmental regulation and to form the basis for future European and international climate policies. In this paper, we have highlighted a central pitfall of the current EU-ETS that could seriously limit its efficiency, thereby weakening arguments for a market-based regulation course. The EU-ETS under the European Burden Sharing Agreement implies a segmented regulation scheme as sectors of domestic economies that are not covered by the emissions trading scheme require complementary emission regulation. Under a segmented scheme, the domestic regulator must have perfect information on the international emissions price as well as the (marginal) abatement cost curves across all domestic emission sources that are not included in the international emissions trading scheme in order to implement the single cost-minimizing abatement policy. Therefore, the current EU policy design for emission abatement discards a central element of market-based regulation, i.e., decentralized markets that autonomously achieve efficient use of scarce resources. The pitfall of segmented regulation becomes particularly policy-relevant when we account for distributional constraints or lobbying activities for the amount of grandfathered emissions allowances. Under segmented regulation, the efficient partitioning of the national emission budget provides an upper bound to the amount of emission allowances that can be grandfathered lump-sum to EU-ETS sectors without efficiency trade-off. In policy practice, allocation of free emission allowances to EU-ETS sectors may exceed the efficient upper bound in order to achieve political feasibility. Our numerical simulations based on empirical data for Germany illustrate the relevance of political economy considerations. The quantitative results show that the choice of efficient allocation factors is rather insensitive with respect to sensible assumptions on the international emissions price. This, in turn, means that the actual implementation of the German NAP with generous allocation of free emission allowances to emission-intensive industries should be rather explained by lobbying efforts of these industries than by expectation errors of the regulation authorities on uncertain international emissions prices. The deficiency of current EU emission regulation, however, should not be construed as an argument against emissions trading or market-based instruments per se. The informational requirements of achieving an efficient solution under the EU-ETS arise from segmented regulation that creates separate emission markets. Segmentation of carbon emission regulation – as implied by the current EU-ETS under the EU Burden Sharing Agreement – is also likely to foster lobbying success of emission-intensive industries that are covered by the trading scheme at the expense of sectors outside the EU-ETS: As a matter of fact, emission-intensive industries in Germany were able to negotiate generous allocation of free emissions allowances with the national authorities whereas the sectors outside the EU-ETS had not been involved in the implicit burden sharing debate. As a consequence, the EU-ETS should be expanded in the future to include all domestic sectors of EU economies thereby creating a single emission market. A comprehensive market-based trading regime will avoid the information problems of the regulator and is likely to reduce lobbying power of emission-intensive industries as burden shifting between different affected parties becomes more explicit.