Oscar Couwenberg

Survival Rates in Bankruptcy Systems: Overlooking the Evidence

Extensive research on bankruptcy still has not made it possible to end the efficiency discussion concerning the need for a reorganization provision in bankruptcy laws. In this paper, I discuss the pervasiveness of asset sales in bankruptcy procedures and the effect it has on survival rates. Without these figures on going concern asset sales Western countries show astonishingly low firm survival rates. In addition, it becomes clear that the bankruptcy system in the US may be under-researched to such an extent that it seriously confounds our view of bankruptcy resolution.

Absolute vs. Intensity-based Caps for Carbon Emissions Target Setting

Linking the European Union Emissions Trading System (EU ETS) to the Chinese national ETS promises considerable economic and political benefits. However, different policy choices regarding cap setting between the systems are likely to impede a potential linking. A striking distinction is that the EU ETS relies upon an absolute cap, while the Chinese national ETS appears to apply an ‘intensity-based cap’ during the early stages. The current linking literature focuses on mapping legal barriers in general and has not yet focused on EU and China, let alone the intricacies of policy design. This article seeks to fill this gap by concentrating on (static and dynamic) efficiency and environmental effectiveness implications of linking and cap design. From the analysis of the cap we derive policy implications for a hypothetical ETS linking between the EU and China. In response, comprehensive and predictable regulation is needed to ensure the attainment of ETS targets and thus facilitate better regulation.

Carbon Leakage, Free Allocation and Linking Emissions Trading Schemes

A sub-global emissions trading scheme (ETS) risks harming competitiveness and causing carbon leakage. These concerns cast doubt on the efficiency and environmental effectiveness of unilateral climate policies. ETSs implemented thus far include measures to address competitiveness and leakage concerns. This paper analyses the extent to which these unilateral measures affect linking of ETSs by taking the European Union Emissions Trading Scheme (EU ETS) and the Australian Carbon Pricing Mechanism (ACPM) as case studies. In both the EU ETS and the ACPM, the free allocation of allowances to emissions-intensive trade-exposed sectors is the primary instrument of addressing leakage and competitiveness concerns. They, however, use different systems of free allocation. Although linking ETSs with different systems of allocation is technically possible, certain differences give rise to efficiency, competitiveness, equity, and environmental effectiveness concerns.

Carbon Capture and Storage in the European Emissions Trading Scheme

Carbon Capture and Storage (CCS) is a new combination of technologies that may become available to firms that emit CO2 under the European Union’s emissions trading scheme (EU ETS). An example is an electricity producer that captures its CO2 and transports it to a depleted gas field where it is permanently stored. In the short term, CCS is more expensive than either buying emission rights on the market or reducing emissions within the firm itself. Therefore, the EU provides for substantial subsidies of several billions of euros to installations under the EU ETS that apply CCS. Although it is to be applauded that the EU has avoided several uneconomical alternatives, our analysis shows that these subsidies are inefficient. First, the EU ETS was created to let emitters choose the least-cost option to comply with their emission targets. Policymakers should not undermine this market by picking winners: the CO2 price should and can determine when CCS becomes attractive. Second, we question the design of the CCS subsidies. For instance, emission rights will be taken from the new entrants reserve to fund CCS projects, which creates a barrier to entry, and allowance auction revenues will be given to CCS users, whereas it is more efficient to use that money for reducing distortionary taxes (such as taxes on labour). Nevertheless, we find it economically reassuring that the EU restricts the subsidies both in scope and in time, which significantly limits the associated inefficiency.

Sustaining Climate Policy Reforms: A Tale of Two Reforms

In July 2014, Australia abolished the Australian carbon pricing mechanism introduced in 2011. In comparison, the EU emissions trading scheme has been up and running since 2005 despite critical challenges at various junctures. What explains the quick unravelling of the former and the sustainability of the latter? The reasons may be three fold. First, the multiplicity of preferences among Australian veto players, coupled a partisan climate politics, has made climate policy inherently unstable. In the EU, on the other hand, a less divisive climate politics set the stage for an inter-temporally stable climate policy. These led to a divergence in interest groups’ feedback to the introduction of the respective climate policies. While Australian partisan climate politics incentivised businesses to fight back, a less partisan politics in the EU sent a unified message for businesses to adapt. Finally, Australia’s climate policy lacked effective adhesion and flexibility mechanisms to prosper in an uncertain political future.

Carbon Leakage in the Regional Greenhouse Gas Initiative: Lessons Learnt for the European Union Emissions Trading Scheme

Emissions trading systems (ETSs) are emerging around the globe in response to climate change concerns. A severe side effect that may flow from an ETS is carbon leakage, which is generally understood as the shift of production to less regulated jurisdictions as a result of carbon pricing policy, and affects the environmental effectiveness of any ETS. In the US Regional Greenhouse Gas Initiative (RGGI) concerns about carbon leakage are related to electricity production. In the EU Emissions Trading Scheme (EU ETS), by contrast, concerns focus on industrial production as opposed to electricity production. This paper formulates policy lessons from the carbon leakage discussion in RGGI about the factors that will make carbon leakage in the electricity generation sector (electricity leakage) a problem in the EU ETS.First, electricity leakage depends on the physical opportunity for importing power into the ETS region, which is determined by the existence of cross-border transmission lines, available transmission capacity and demand for imported electricity in the ETS region. Second; leakage occurs when there is a net financial incentive to import electricity. This arises when the costs related to cross-border transmission, including line loss costs, congestion charges and long-term contracts on the electricity market, are outweighed by the existence of considerable production cost differentials between regulated and unregulated out-of-region electricity generation. The paper analyzes how ambitious emission reduction targets and current developments in the framework of the Energy Community Treaty will bring about electricity leakage in the EU ETS. This inevitability requires timely regulatory clarification from the legislator for the purpose of preventing inefficiency from investments that turn out to be redundant ex post (stranded costs).

Redeeming Art. 13 of the European Insolvency Regulation: A Law and Economics Argument to Help Financially Distressed Companies to Restructure

This contribution focuses on the interaction between three phenomena: corporate restructuring, choice of law, and transaction avoidance. In this context, scholars have criticised Art. 13 of the European Insolvency Regulation for providing a possibility for forum shopping. This article enables firms to declare the law of the eu Member State where the provisions on transaction avoidance allow for the most freedom to take restructuring measures applicable to contracts. Literature on company restructuring shows that a combination of restructuring measures – usually additional credit for additional conditions and/or collateral - helps companies overcome financial distress. We argue that rules on transaction avoidance should take this balance into account when voidance is demanded. Using the example of Dutch and German rules on transaction avoidance, we argue that the German rules are more accommodative than the Dutch rules. Therefore, firms may benefit using the German rules on transaction avoidance rather than the Dutch rules.