Reimund Schwarze

Sulfur Allowance Trading and the Regional Clean Air Incentives Market: A Comparative Design Analysis of two Major Cap-and-Trade Permit Programs?

This paper investigates in detail the design parameters of the two mostprominent US cap-and-trade permit program – the US EPA Sulfur AllowanceTrading Program and the South Californian Regional Clean Air IncentivesMarket (RECLAIM). In contrast to expectations the two programs turn out to be rather different in several important design parameter choices.Common elements emerge primarily in the existence of an ambitious, quantifiedenvironmental target, mandatory use of stringent emission monitoring methodsand stiff penalties for non-compliance, coexisting command-and-controlregulations, the creation of a competitive permit market structure, andsome distributional concessions in the initial permit allocation. Generalizing from these common features we find that provisions to assurepolitical acceptance, functional interdependencies and overlapping regulation are the most important influences on the design of applied cap-and-trade permit programs.

Activities implemented jointly: another look at the facts

Abstract The first Conference of the Parties to the United Nations Framework Convention on Climate Change in Berlin established a pilot phase of so-called Activities Implemented Jointly (AIJ). This pilot phase started in 1995 and was to end in 1999. It was prolonged at the fourth Conference of the Parties in Buenos Aires (1998) for a yet undetermined period after 2000. This paper is an empirical study of AIJ experience in the first five years (1995–1999) based on 96 AIJ from the UNFCCC’s web site as of April 30, 1999, and a separate study on seven AIJ projects of Japan. The main results of this study are: (1) AIJ investment shows a pattern of regional-specificity with rather divergent regional investment portfolios in the United States, Japan and Europe. This pattern can be traced back to differences in the national AIJ programs of investors and hosts, on the one hand, and to specific ways of minimizing transaction cost on the other, e.g. by attaching AIJ to established institutional links of development co-operation or by ‘trading in the neighbourhood’; and (2) AIJs are overwhelmingly no regret-measures with almost zero or negative cost. Transaction costs of reporting have been minimized by applying simple and straightforward methods of baseline determination. The exception to this is the verification procedure where expensive external verification prevails.

Does the CDM contribute to sustainable development? Evidence from the AIJ Pilot Phase

The purpose of the Activities Implemented Jointly (AIJ) programme is to foster the transfer of technology for global warming abatement from developed to developing countries. Projects should not only reduce greenhouse gases, but also contribute to the sustainable development goals of host countries. However, given the lack of consensus regarding the definition and measurement of sustainable development, it is difficult to gauge to what extent the AIJ phase has been useful for developing countries. In this paper, we adopt a macro perspective and analyse the real-life data of 210 projects with respect to equity and financial issues related to sustainable development in the broad sense. We focus only on three aspects (financial additionality, credit sharing and geographical distribution) and conclude that the performance of the AIJ programs was in general fairly poor. Because the AIJ experience prepares the grounds and is fundamental for the design of two project-based mechanisms from the Kyoto Protocol (JI and CDM), these failures must be overcome and strong sustainable development criteria must be set for each project.

The role of common law in environmental policy: Comment

In a recent contribution to this journal Fritz Sillner (1994) provides a rather harsh critic of the working of common law in environmental policy and a strict recommendation to rely on statutory law only in this field. In this comment, I will argue that the distinction of the small versus the large number case, which is central to his argument, is an oversimplification and misleading. Moreover, I will argue that judge made law does actually play an important role as part of an environmental policy mix. S6llners line of reasoning proceeds as follows: If you take a look at the state of the environment in common-law-countries (e.g., USA or Great Britain), and compare them in this respect to civil-law-countries (e.g., France or Germany), you will not find that the former have done better on that account, as should be expected following the efficiency hypothesis of common law as proposed by Posner (1986), Priest (1977) and others. A further look will show you that, opposed to their naming, common law does only play a minor role in the environmental policy of the common-law-countries. This gives, according to Sallner, a strong indication that the alleged tendency of common law towards efficiency does not hold in this particular case. He provides two explanations for this finding:

Allokationswirkungen einer Umwelthaftpflicht-Versicherung

Das Umwelthaftungsgesetz schreibt eine obligatorische Deckungsvorsorge, typischerweise in Form einer Umwelthaftpflicht-Versicherung, fur besonders umweltgefahrdende Anlagen vor1 und begrundet dies mit der Gewahrleistung von Schadensersatzanspruchen auch bei Uberschreiten der finanziellen Leistungsfahigkeit des Schadigers.2 Dieser „Opferschutz“ stellt sich aus Sicht der betroffenen Industrie als Schutz vor im Einzelfall unkalkulierbaren Zahlungsrisiken dar, die Versicherbarkeit als Gewinn an wirtschaftlicher Betriebssicherheit. Von den Kritikern dieser Regelung wird eingewandt, eine Umwelthaftpflicht-Versicherung konterkariere das eigentliche Ziel des Umwelthaftungsrechts, die Vermeidung von Umweltschaden. Mit der Uberwalzung der Haftung an die Versicherer gehe von der Haftpflicht kein Anreiz zur Risikovorsorge mehr aus, die Versicherbarkeit berge im Gegenteil das „moralische Risiko“ eines fahrlassigen Umgangs mit Umweltrisiken.3

Pitfalls in Restructuring the Electricity Industry

Abstract This paper models some reductions in output that may follow the opening of electricity markets to competition. Specifically, we show that vertical separation of electricity generation, transmission and distribution could reduce welfare compared to the previous system of vertically integrated monopoly, if grid owners can act as monopolistic retailers or, alternatively, set access prices that maximize merchandizing surplus. Moreover, we show that a rule of non-discriminatory pricing would not remedy any of these problems. Hence, to secure the efficiency gains of deregulation, the re-regulation of the remaining monopolistic core - the electric grid - cannot rely on simple rules like cost-based non-discriminatory pricing.