Emission pricing competitiveness

The analysis showed, with various "value adders" (e.g., oxygen sales and carbon-emission-offset credits), the cost of wind-source gaseous hydrogen delivered by pipelines from production point to distant markets (about 200-1000 mi.) at an untaxed wholesale energy unit cost will be competitive with market prices (in 2005) of gasoline and hydrogen fuel made from natural gas by steam methane reforms (SMRs). 

Environmental pollution is the subject of many political and social discussions in the Netherlands. This is mainly caused by the concentration of the animal husbandry farms close to the villages and cities. There are technical treatments of air and slurry to decrease the odour of it. Anaerobic digestion is one of these. This technology is known from biogasproduction. Most countries in the western world have studied this possibility for renewable energy. A lot of technical problems are solved but on most places it is not possible to produce biogas from farm waste to a competitive price. What is the feasibility for biogas production if there is a need for reduction of the odour emission on the farm ... 

Coal, as the most abnndant and widely distribnted fossil fuel, can be mined with modem techniques, transported and stored efficiently and cost-effectively. International coal trade is growing steadily and there is vigorons competition on supply and price. But coal s future commercial development depends critically on its envi-romnental acceptability and in particular on the snccess of the power generation indnstry in reducing snlfurous and other polluting emissions. 

From an economic point of view, a machine, like the one which is currently used, would never be sold on a free market, where a client compares prices of cleaning equipments of different manufacturers. Very important and high-performing - and therefore expensive - components have been incorporated for reasons of reduced emission and energy consumption. By these means environmental standards are exceeded, a fact which is not rewarded in free market competition. 

Examples of fluoroplastics include polytetrafluoroethylene (PTFE), fluorinated ethylene propylene (FEP), ethylene—chlorotrifluoroethylene (ECTFE), ethylene—tetrafluoroethylene (ETFE), poly(vinylidene fluoride) (PVDF), etc (see Fluorine compounds, organic). These polymers have outstanding electrical properties, such as low power loss and dielectric constant, coupled with very good flame resistance and low smoke emission during fire. Therefore, in spite of their relatively high price, they are used extensively in telecommunication wires, especially for production of plenum cables. Plenum areas provide a convenient, economical way to run electrical wires and cables and to interconnect them throughout nonresidential buildings (14). Development of special flame-retardant low smoke compounds, some based on PVC, have provided lower cost competition to the fluoroplastics for indoors application such as plenum cable, Riser Cables, etc. 

Like any market, price is central and the key to prices is scarcity. The most fundamental difference between emissions trading and any normal market is that the amount available depends directly on government decisions about allocations. Recent events have underlined the need for robust allocation as the system moves into the Kyoto phase, and investors are already starting to look beyond that to the post-2012 period. Yet governments also have a duty not to undermine the competitiveness of their industries, and there are fears that the two aims could conflict. 

Some other analysts express the opposite concern, that prices might rise to levels deemed to pose an unacceptable risk to European industry, and that to prevent this risk the system should contain a price cap or safety valve (e.g. Bouttes et al., 2006). Our assessment of phase II, in terms of both supply-demand balance and the economics of competitiveness over the 5-year period, leads us to be sceptical that this is a realistic concern. It is, however, true that a planned response to any such eventuality would be better than a panic-based reaction such as occurred in the California NOx trading system. Should prices rise to levels that were judged to pose a credible threat to competitiveness of a particular sector, and State-aid rules prevented auction revenues being used to assist it (or the country concerned had not conducted any auctions), the most obvious first step would be to relax supplementarity constraints, and possibly expand the scope of emission credits that could qualify for compliance purposes. We do not consider issues of price ceilings or safety valves beyond this. 

PC and ST refer to two different model scenarios, i.e. perfect competition (PC) and oligopolistic (or strategic) competition (ST). Numbers attached to these abbreviations, such as PCO or PC20, indicate a scenario without emissions trading (C02 price is 0) versus a scenario with emissions trading (at a price of 20/tCO2). The additions ze and le refer to a zero price elasticity and low price elasticity (0.1), respectively, compared with the baseline scenario with a price elasticity of 0.2. 

If, conversely, the allowance allocation system is similar to output-based allocation for an allowance allocation ratio of 90% of historic unitary emissions, neither the production level nor the EBITDA is significantly impacted, even for a very high C02 price ( 50 per tonne). Only if the allocation ratio were to drop below 75% of historic unitary emissions (a very unlikely policy choice) would competitiveness impacts (on production and EBITDA) be severe (above 5%). For any allocation ratio, abatement is reduced compared with auctioning or grandfathering, but so is leakage, and finally world emissions are almost the same. 

Klepper, G., Peterson, S., 2004. The EU Emissions Trading Scheme Allowance Prices, Trade Flows, Competitiveness Effects. FEEM Working Paper 49.2004. 

The ideal trade-off between ensuring a competitive auction with low transactions costs and providing steady liquidity is difficult to judge before we have gained more experience with allowance auctions. If auctions were to be based on experience with electricity markets, then a frequent uniform price auction (e.g. weekly), would allow small participants to directly acquire the allowances they need to cover their emissions in the auction.34 High frequency would ensure that bidders pay a price close to the price on the secondary market at the time of emission, thus limiting risk exposure. In electricity markets this approach has been successfully implemented with low transaction costs (various pool type market designs). 

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