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Investing in Climate Change
Published in Gene Beck, Grid Parity, 2020
The law’s cap-and-trade measure, which was scheduled to begin on January 1, 2012, will now go into effect on January 1, 2013. The companies that will be covered under the program will have another year to comply before they are required to reduce emissions under the program. While compliance will be delayed by a year, the total amount of emission reductions required remain the same. After extensive stakeholder input, research and analysis, CARB decided to implement a cap-and-trade program as one of 70 separate measures to cut emissions. Cap-and-trade has been used many times before to successfully reduce pollution, and will complement other regulations like building, vehicle and appliance energy efficiency standards. Since cap-and-trade places an absolute limit (a cap) on the amount of pollution that can be released and creates a price for carbon emissions (through trading), the program as a whole creates a strong economic incentive to cut pollution quickly and at the lowest possible cost.
Fuels and the Environment
Published in Michael Frank Hordeski, Alternative Fuels—The Future of Hydrogen, 2020
The basis of emissions trading (cap and trade) is to provide economic incentives for achieving emissions reductions. A central authority sets a limit or cap on the amount of a pollutant that can be emitted. Emission permits are issued for allowances or credits which represent the right to emit a specific amount. The total amount of allowances and credits cannot exceed the cap, limiting total emissions to that level. Those that need to increase their emission allowance must buy credits from those who do not need them. This transfer of allowances is referred to as a trade. Thus, the buyer pays a charge for polluting, while the seller is rewarded for reduced emissions. The theory is that those who can reduce emissions most cheaply will do so, achieving emissions reduction at the lowest cost.
Climate change
Published in Sigrun M. Wagner, Business and Environmental Sustainability, 2020
Emissions trading could be called the inverse of offsetting (Robertson 2017). Known also as cap-and-trade systems, a maximum level for emissions is set, within which companies buy and sell permits (or allowances) to emit (see also Chapter 3 for a reminder of how cap-and-trade works). The EU’s Emissions Trading Scheme (ETS) was one of the first carbon markets, starting in 2005 with a generous initial allocation of permits to ease the transition (Hackett 2011). During the global economic crisis, prices fell due to excess permits, which in effect has made it cheaper for companies to emit GHGs rather than change their behaviour. In a report on carbon pricing, leading economists (among them Nobel laureate Joseph Stiglitz and Nicholas Stern of the Stern Review on the Economics of Climate Change) have argued that the price of carbon needs to rise significantly in order to incentivise businesses to lower their emissions even in the case of cheap fossil fuels, and the price should be in the form of a carbon tax (Inman 2017).
Joint pricing and lot-sizing for a production model under controllable deterioration and carbon emissions
Published in International Journal of Systems Science: Operations & Logistics, 2022
Arash Sepehri, Mohammad Reza Gholamian
Today, organisations associated with environmental activities are pushing companies to decrease their carbon emissions (Aliabadi et al., 2019). Hereof, many conferences have been organised to outline the challenge of carbon emissions, and the Kyoto protocol has been one of the most significant outcomes (Oberthür & Ott, 1999). One of the most frequent regulations in mitigating the amount of carbon emission is cap-and-trade in which an allowance of emitting carbon is assigned, and the surplus of the allowance can be sold by the company to accumulate revenue (Bai et al., 2019). This policy can encourage companies to mitigate their emissions and accumulate revenue. Moreover, another means to address emissions is to invest in carbon emission reduction technologies to decrease emissions and enhance sustainability (Toptal et al., 2014). This approach requires a trade-off between the cost of developing the technology and the saved costs from reducing emissions.
Remanufacturing and low-carbon investment strategies in a closed-loop supply chain under multiple carbon policies
Published in International Journal of Logistics Research and Applications, 2022
Jian Li, Kin Keung Lai, Yongming Li
From the perspective of external policy, various carbon policies are designed to encourage remanufacturing and low-carbon investment (Li et al. 2021). Carbon policies such as carbon tax and cap-and-trade can facilitate an evolution towards a green and sustainable closed-loop supply chain. Cap-and-trade means that emission permits can be bought and sold just like any product, but its disadvantage is that the excessive initial emission permits are prone to lead to market failure in carbon trading. Carbon tax means that emission penalty is imposed on emission sources, which can promote improved emission technologies and help reduce emission, but this seriously puts limitations on high-emission enterprises such as the energy and chemicals industry, which has a certain impact on economic development. Multiple carbon policies are gradually being implemented in some countries and regions such as France and the UK. Xu et al. (2017) studied the joint production and pricing mechanism of multiple product manufacturing enterprises under the system of total emission control and carbon tax. Li, Su, and Ma (2017) went a step further and designed joint carbon tax and cap-and-trade and compared production and transportation decisions under different carbon policies. Ding, Chen, and Wang (2020) examined the impact of carbon tax and take-back legislation on the production and carbon emission reduction decisions of firms.
Low-carbon technology transfer between rival firms under cap-and-trade policies
Published in IISE Transactions, 2021
Xu Chen, Xiaojun Wang, Yusen Xia
This section examines the effects of a carbon policy on a firm’s decision and performance as well as social welfare. Under a cap-and-trade policy, the policy maker sets an emissions “cap” that is the total quantity of emission allowance. The emissions trade price is determined by the market mechanism when the allowances are traded by the firms operating in a regulated region such as the EU-ETS. Theoretically, each firm’s decision affects the demand for emission allowances, and consequently, influences the emissions trade price. Practically, individual firms under the EU-ETS do not hold the market power to substantively alter the carbon price (Park et al., 2015). The emissions cap set by the regulator is more influential in determining the carbon price. Evidence also shows that caps on carbon emission permits can enhance firms’ market power when competing in the market (Kolstad and Wolak, 2003, Chen and Hobbs, 2005). Therefore, we assume meaning that a higher emissions cap causes a lower unit carbon emission trade price in the evaluation of the effects of the cap-and-trade policy. This assumption seems to be logical, as a higher cap will reduce the demand for carbon emission trading, and therefore, drive down the unit trade price. We start with the effect of a carbon policy on firms’ financial performance under different technology licensing strategies and derive the following proposition.