Inclusion of forestry offsets in emission trading schemes:insights from global experts

Emissions trading schemes(ETSs)have been a central component of international climate change policies,as a carbon pricing tool to achieve emissions reduction targets.Forest carbon offset credits have been leveraged in many ETSs to efficiently meet emission reduction targets,yet there is little knowledge about the perceptions,experiences,and challenges associated with the forest carbon offsetting in existing and pilot ETS.Given that the future inclusion of forest carbon offset in ETS management activities and policies will require strong support and acceptability among the institutions and experts involved in ETS,this study explores the experiences and lessons learned with 16 globally engaging experts representing major existing ETSs(North America,Europe,and New Zealand)and Chinese pilot ETSs towards the inclusion of forestry offsets,major concerns and challenges with existing implementation models.Findings revealed that many respondents particularly from North America,New Zealand,and Chinese pilot systems portrayed positive attitudes toward the inclusion of forestry carbon offsets and its role in contributing to a viable ETS,while European experts were not supportive.Respondents cited leakage,permanence,additionality,and monitoring design features as the major challenges and concerns that inhibit the expansion and inclusion of forest carbon offsetting.Respondents from Chinese pilot schemes referenced a unique set of challenges related to implementation,including the increasing cost of afforestation and reforestation projects,the uncertainty in the future supply and demand for their national Certified Emissions Reduction(CER)scheme and landowner engagement.Existing and future ETSs should learn from and address the challenges experienced by global experts and carbon pricing mechanisms to design,evaluate,or enhance their forest carbon offset programs for an effective and viable system that successfully contributes to GHG mitigation practices globally.We recommend inclusion of forest carbon offsets at the early stages of ETS improves the perceptions and experience of policy makers and practitioners toward the success and potential of forestry offsets in ETS ensuring familiarity and confidence in the mechanism.

Booming or sinking: How does an emission trading scheme affect enterprise value?

Unlike prior research that shows climate policy improves enterprise value,this study reveals the negative im‐pact of emission trading schemes(ETSs)on enterprise value under China’s unique institutional backdrop and identifies the mechanism through which this impact occurs.Data from a sample of 1267 listed companies in the Chinese stock market from 2005 to 2018 models are analyzed using difference-in-differences(DID)and propensity score matching methods(PSM).The results suggest that ETSs have an average short-term negative impact on enterprise value,which peaks in the second year of the ETS and diminishes from the fourth year.Further analysis reveals that ETSs did not cause significant operating losses for firms but reduced their value through the market response mechanism.ETS enterprises experienced significant declines in their annual stock transaction amounts and in returns on individual shares.This indicates that investors expect ETSs to ad‐versely affect pilot enterprises and accordingly adopt disinvestment strategies.Despite the short-term negative effect,ETSs effectively encourage enterprises to innovate green technologies to mitigate long-term carbon risk.

Policy Diffusion of the Emission Trading Scheme in China:Progress and Prospects

Chinese national emissions trading scheme(ETS)of greenhouse gas(GHG)was scheduled to start simulation trading in the power sector in 2020.Now it is good timing to review its progress and prospect.This study first examines policy diffusion in relation ETSs in China and particularly those for CO2 emissions,including the causes,determinants,process,and impacts.It argues in a centralized political system with highly and widely differentiated local circumstances,policy diffusion is progressed through a more complicated process,presented as a three-tier process in the paper,illustrating how international arrangement,national jurisdiction,and local administration interact and influence policy-making in a follower’s jurisdiction.China,which is now the biggest GHG emitter,has been preparing to establish a national ETS since 2017.So far,eight sub-national governments have introduced ETS pilot programs to feedback their experiences and to determine best practice for the national scheme.These eight pilots,especially the relatively successful ones,are found to be motivated by a competitive relationship that aims to stabilize its carbon market,which may eventually contribute to the progress of policy diffusion of the ETS in China.

Market-based solution in China to finance the clean from the dirty

Financial incentives play a key role in promoting renewable energy investments that can help China achieve the‘dual carbon’goal.The national emissions trading scheme(ETS)and the renewable energy portfolio standard(RPS)are two existing market-based policy instruments that can generate stable expected returns for low-carbon projects.This paper studies the interactive distribution effects of these two market-based instruments.We use the micro-level thermal power plant data to investigate the abatement effects of the national ETS,in which the details show that the existing rate-based ETS will result in higher negative impacts on power units,whose installed capacities are smaller than 400 MW.The interactive distribution effects between the two markets will occur when the permit allocation standards of the national ETS become stricter than the existing ones.Provinces in Eastern China and Northern China will face high pressure on costs in both ETS and RPS markets.When the levels of the permit allocation standards are set as 70%of the existing ones and the carbon price is assumed to be 200 yuan/ton in 2030,the annual market size of the national ETS will be nearly 100 billion yuan,and the annual market size is predicted to be 250 billion yuan.In the existing rate-based national ETS,the China Certified Emission Reduction(CCER)mechanism will have an offsetting effect,which should be taken into serious consideration during the policy-making processes in the future.

Alternative industrial carbon emissions benchmark based on input-output analysis

Some problems exist in the current carbon emissions benchmark setting systems. The primary con- sideration for industrial carbon emissions standards highly relate to direct carbon emissions （power-related emissions） and only a portion of indirect emissions are considered in the current carbon emissions accounting processes. This practice is insufficient and may cause double counting to some extent due to mixed emission sources. To better integrate and quantify direct and indirect carbon emissions, an embodied industrial carbon emissions benchmark setting method is proposed to guide the establishment of carbon emissions benchmarks based on input-output analysis. This method attempts to link direct carbon emissions with inter-industrial economic exchanges and systematically quantifies carbon emissions embodied in total product delivery chains. The purpose of this study is to design a practical new set of embodied intensity-based benchmarks for both direct and indirect carbon emissions. Beijing, at the first level of carbon emissions trading pilot schemes in China, plays a significant role in the establish- ment of these schemes and is chosen as an example in this study. The newly proposed method tends to relate emissions directly to each responsibility in a practical way through the measurement of complex production and supply chains and reduce carbon emissions from their original sources. This method is expected to be developed under uncertain internal and external contexts and is further expected to be generalized to guide the establish- ment of industrial benchmarks for carbon emissions trading schemes in China and other countries.

Impacts of Market-based Environmental Regulation on Green Total Factor Energy Efficiency in China

This study employed a difference-in-differences design to assess the effect of marketbased environmental regulation on green total factor energy efficiency(GTFEE)in a quasi-natural experiment that investigated China's carbon emissions trading scheme(ETS).The empirical results show that ETS had a positive effect on GTFEE.A series of robustness tests revealed that the results were robust.Potential mechanisms through which ETS can improve GTFEE include the promotion of technological innovation and the upgrading of industrial structure.The positive effects varied in different cities and diferent regions-the result was pronounced in eastern China and developed cities,but it was insignificant in central and western areas and developing cities.This study confirms the satisfactory performance of China's ETS in improving GTFEE,and this is relevant for other emerging countries.

Will auctioning promote the renewable energy generation in China?

Renewable energy generation,as part of the global effort to mitigate climate change,will play a central role in reducing greenhouse gas emissions and achieving China's goal of carbon emissions peak before 2030 and carbon neutral before 2060.However,the impact of carbon quota auctions on renewable energy generation has not been sufficiently discussed.The main purpose of this study is to investigate whether China can rely on quota auctions to increase renewable energy generation in the short term,and to demonstrate which is more effective in promoting renewable energy development,policy enforcement or auction constraints?The improved neo-trans-log production model,the multiobjective linear programming model and the dispatch heuristic were used to predict additional emission reduction cost,optimized power mix with different auctioning rates,with economic development,technological progress and the unique characteristics of China's power generation industry being taken into consideration.The results show that the auctioning rate will have little influence on the optimized energy production structure,especially on the share of renewable energy resources;when the total on-grid electricity generation ranges from 7625 to 7926 billion kW h and the auctioning rate ranges from 0% to 5%,policy enforcement will influence the generation of renewable energy to a greater extent than auctioning in the near future.

Optimal Policy for Remanufacturing Firms with Carbon Options under Service Requirements

This paper studies the procurement management of carbon financial instruments and the production decisions for an emission-dependent remanufacturing firm under service requirements.In the presence of demand uncertainty,carbon emission options are introduced to hedge risks for the firm who purchases carbon financial instruments under a cap-flexible emission trading scheme(ETS)and then conducts remanufacturing.We develop three optimization models to determine the optimal remanufacturing quantity(procurement quantity of carbon financial instruments)maximizing the firm's expected profit under three contracts:a pure wholesale price contract,a pure carbon option contract,and a portfolio contract.Through analyses and comparisons of optimal solutions,we demonstrate the values of introducing carbon options and committing to service levels for the firm.Compared with the other two pure contracts,the portfolio contract makes the firm better off.However,high service requirements may lead to a profit loss to the firm.We generalize to the cases when the yield rate is dependent on the quality of used products,when the yield is stochastic,and when carbon price performs volatility.Discussion of these extensions illuminates how the variability of used product quality,yield rate and carbon price influences the firm's performances.