Browsing by Subject "Carbon Pricing"
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Item Open Access Aligning NYISO's Carbon Pricing with Existing Climate Policy(2019-04-24) Stutt, JordanStates across the Northeast and Mid-Atlantic have implemented particularly ambitious policies to deploy clean energy and reduce carbon dioxide (CO2) emissions from the electric sector. These policies create a challenge for the region's electric grid operators, who must oversee the achievement of clean energy and climate targets while ensuring grid reliability and maintaining cost-effective electric service. To harmonize those objectives, three of the region’s grid operators have considered incorporating the cost of CO2 emissions into their competitive wholesale electricity markets. This project examines the effects of the carbon pricing policy proposed by NYISO (New York's grid operator) and offers recommendations on how such a policy could be designed to maximize low-cost emissions reductions and help to achieve the state's existing climate and clean energy objectives.Item Open Access Analyzing How Carbon Offsets in Compliance Pricing Schemes Impact Market Carbon Price(2023-04-28) Bernal Temores, Maximiliano; Barrales, Rachel; Carroll, Grace; Liu, Suwan (Abby)Key Objectives & Results The value of carbon offsets as a tool for reducing greenhouse gas emissions has been the subject of many recent debates. With an increasing number of governments instituting compliance carbon pricing schemes to economically motivate emissions reductions, it is imperative for policymakers to understand the implications of allowing for offset use within these schemes. However, few studies have investigated the impact that offset use allowance within compliance schemes has on scheme ambition and emissions reduction potential. Our paper seeks to fill this gap by quantitatively researching the impact of offset use on the carbon price within compliance schemes. Through a panel data regression model analyzing data across 68 national and sub-national compliance schemes from 2010 to 2021, we have determined that schemes that allow for offset use have higher carbon prices than those that do not. These results indicate that allowing for carbon offset use can help governments increase their emissions reductions potential in compliance pricing schemes. Summary In an effort to curb greenhouse gas (GHG) emissions to avoid the worst impacts of climate change, carbon pricing mechanisms have become a popular tool for countries to incorporate into their emissions reductions plans (Caciagli, 2018; Jernnäs et al., 2019). The most common pricing mechanisms are carbon taxes and emissions trading systems (ETS) (World Bank, 2022). A carbon tax is a policy that places a fee on each unit of GHG emissions emitted, while an ETS sets a cap on emissions through tradable emission permits (World Bank, 2022). There are currently 47 national and 36 subnational jurisdictions across the globe implementing compliance carbon pricing schemes, which collectively cover about 23% of global annual GHG emissions (World Bank, n.d.). Compliance schemes can differ in a variety of design factors, such as the emissions cap or sector coverage. Each of these features can impact the carbon price level of the scheme, which in turn impacts the scheme ambition, or its potential for reducing GHG emissions. Our project focuses on one particular carbon pricing scheme feature: the use of offsets. A carbon offset “is a reduction [or removal] in emissions of carbon dioxide or greenhouse gasses made in order to compensate for or to offset an emission made elsewhere” (Tsai et al, 2020). Carbon pricing schemes can include carbon offset mechanisms by allowing regulated entities to buy up to a certain number of carbon offsets as an alternative to tax payments or carbon allowance purchases. It is currently a subject of debate if allowing for offset use affects the ambition of compliance schemes. Advocates for offset use argue that it incentivises emissions reductions beyond what is achievable within the regulated sectors and provides a cost-effective, flexible way for regulated entities to meet compliance targets (La Hoz Theuer et al., 2023). Meanwhile, critics argue that offset programs do not have sufficiently stringent protocols to ensure actual or additional GHG reductions (Badgley et al. 2021). However, no studies have quantitatively investigated the impact that offset use has on the emissions reduction potential of compliance schemes. As carbon pricing mechanisms continue to increase their coverage of global emissions, and as offsets continue to become more prominent, it is imperative that decision makers have the knowledge and tools to understand how offset inclusion may impact the carbon price and the ambition of schemes. Our research aims to fill the research gap by answering the question: Does allowing for carbon offset use within compliance pricing schemes impact the carbon price signal? To answer our research question, we used a clustered standard errors random effects panel data regression model to analyze the impact carbon offset use has on our continuous dependent variable, carbon price. We analyzed 68 schemes across national and subnational jurisdictions from 2010 to 2021 and collected approximately 50 variables for the model. The variables include scheme characteristic and design, offset use properties, and external socio-economic variables that have been shown to impact carbon price (Best & Zhang, 2020; Levi et al., 2020; Lin & Jia, 2019; Batten et al., 2020). Our final statistical model included carbon price as the dependent variable and a binary variable for allowing offset use. Additional explanatory variables include a binary variable determining if the scheme is a tax or an ETS, an interaction binary variable describing if the scheme is a tax that allows for offsets, GDP per capita, GHG emissions per unit of GDP, the government effectiveness index, the renewable energy consumption in the country, the jurisdictional emissions covered by the pricing scheme, the globalization index, the climate awareness index, and maximum temperature. Our model results demonstrate that offset use within carbon compliance pricing schemes has a positive significant (p<0.05) impact on carbon price, meaning that the carbon price is higher for schemes that allow offset use. Higher carbon prices motivate greater emissions reductions, thus increasing the GHG reduction potential of the compliance scheme. We believe that these results potentially indicate that governments allowing for offset use in compliance schemes are leveraging the flexibility of offset mechanisms to further reduce their GHG emissions. Our research only scratches the surface of the potential impacts of offsets and ambition of carbon compliance pricing schemes. Future research should delve into the impact of offsets on other proxies for ambition, such as the size of an emissions cap within an ETS or the emissions coverage of a scheme. In addition, in-depth attention should be paid to equity concerns caused by increased carbon prices. Lastly, we believe future research focusing on how offsets can impact corporate climate ambition would be very valuable to governments and NGOs designing the increasingly growing voluntary carbon market.Item Open Access Duke Carbon Offsets Initiative: Energy Efficiency Carbon Offsets(2013-04-26) Chen, Yunzhong; Chauhan, Sugandha; Lu, AaronDuke University aims to achieve carbon neutrality by 2024 by a combination of efforts to reduce on campus energy consumption and off campus carbon offset generation. One of the offset options that DCOI is evaluating is energy efficiency retrofits in residential buildings leading to indirect emission reductions. The problem we have attempted to address in our project is how Duke University can identify potential carbon offset opportunities in terms of improving energy efficiency in homes and businesses and how these offsets can be verified and quantified. In order to determine the feasibility of energy efficiency carbon offsets the team started with evaluating data from a similar residential retrofitting project implemented by the City of Durham’s Sustainability Office. The pre and post retrofit energy consumption data from these houses was analyzed to determine the energy savings and resultant carbon emissions reduction. The average emission reduction obtained from this project was then used to determine the carbon price. This carbon price was used to conduct a comparative analysis with carbon prices found in the market, literature and regulations. The second step of the project involved studying energy efficiency retrofit projects that have been undertaken in other regions at various levels and sizes. The last question that this project aimed to answer was regarding the suitability of various financing mechanisms for the retrofitting project. In order to address this question a demand assessment survey was designed to determine the willingness of Duke employees to participate in such a program and pay for the retrofits. DCOI plans to conduct the survey in the foreseeable future. The results of our analysis showed that average electricity savings of 113.13 KWh per month can be generated through retrofits including air and duct sealing and insulation enhancement. The average cost of retrofit was determined to be $1/sq feet of heated area. Using this investment cost and annual savings, the carbon price was determined to be 133.37 $/metric ton of CO2 equivalent reduction. Sensitivity analysis conducted for this carbon price showed that the factors that had the largest impact on carbon price are the initial investment and annual energy savings. To further evaluate the results, we compared the City of Durham’s returns on investment in terms of energy reduction, 0.97 kWh/$, and in terms of greenhouse gas reduction, 0.00046 metric ton of CO2 equivalent/$, to returns on investment of 22 other residential energy efficiency programs around the U.S. The City of Durham program lies in the middle of the range of return on investment indicators. The calculated carbon price of 133.37 $/metric ton of CO2 equivalent reduction, compared to 13.00 $/metric ton of CO2 equivalent reduction median of 44 other carbon prices found in regulation, literature, and market is extremely high. The final set of recommendations provided to DCOI are based upon the results obtained from the City of Durham data analysis and the comparative programs and carbon price study along with the essential project requirements for meeting the Verified Carbon Standard carbon offset program criteria.Item Open Access Global Trends and Drivers of the Invention of Carbon Capture, Utilization and Storage Technology(2024-04-26) Wang, YiningThe role of carbon capture, utilization and storage (CCUS) technology in achieving global and national climate targets hinges on a timely deployment of the technology in the most demanding sectors and regions. Innovation serves to drive down the cost of different technologies and improve the technological maturity for a successful deployment. Despite the current disparity between the demanding sectors and regions of the technology and their abatement cost, there is limited knowledge in the global trend and drivers of the innovation of CCUS technology across different application sectors. By refining global CCUS patent data into 6 technological categories and 11 application sectors using machine learning algorithm (random forest classification model), this paper aims to 1) Quantitively investigate a 30-year evolution of the invention and diffusion landscape of CCUS technologies, and 2) Employ a difference-in-difference model to examine the effect of carbon pricing on CCUS invention. We find a closing gap in the sectoral and regional disparity of CCUS technologies, characterized by a shift towards sector-specific technologies and a growth of invention in emerging markets. Global cooperation of CCUS innovation is highly concentrated within the leading countries, especially for nascent technologies. The sectoral and regional disparity is mainly bridged through diffusion from experienced and leading innovation countries to large emitters with high path dependency on fossil fuel. There exists a positive and significant effect of carbon pricing and path dependence on fossil fuel on CCUS invention, particularly for sectors that take CCUS as an abatement technology. However, the iron and steel sector remain far from demand-pull incentives, and may require further efforts in public R&D and financial incentives to direct resources towards technological innovation.Item Open Access Responses to EU Carbon Pricing: The Effect of Carbon Emissions Allowances on Renewable Energy Development in Advanced and Transitional EU Members(2019-04-24) Dearing, JackUsing electricity price, generation, installed capacity, and carbon price data from the European Union from January 2015 to December 2018, this study finds that the carbon pricing in the European Union Emissions Trading Scheme (EU ETS) incentivizes electricity sector carbon emission reductions through renewable energy deployment only for economically advanced EU members. Transitional economies show a weak to modest carbon emission increase despite a common carbon price. This study estimates an electricity supply curve, or merit order, for 24 EU ETS members using a Tobit regression model and analyzes changes in this curve using a linear bspline. These shifts provide insight into how carbon pricing affected energy generation, price, and CO2 emissions for two distinct categories of EU member states. The advanced category as a whole saw a strong electricity sector decrease in carbon emissions, both over time and from carbon pricing, while the transitional category as a whole saw a weak increase. This indicates that advanced EU members in Northern, Western, and Central Europe likely sold permits to transitional ones in Southern and Eastern Europe. While these findings may initially reflect the gains from trade of carbon emissions permits inherent in the European Union Emissions Trading Scheme’s design, the implications of how these two distinct groups have changed electricity generation present challenges to the ultimate long-term goal of EU-wide carbon neutrality by 2050, particularly in transitional economies’ electricity sectors.