Seminar on Emissions trading

Denny Ellerman (MIT) & Olivier Godard (CNRS & X)

Maison des sciences économiques, salle 6e étage
9 February 2006 - 20 April 2006

Website for readings:

http://eurequa.univ-paris1.fr/Seminaires-GT-Eurequa/seminairePEN/sem-Pen.htm

1. Introductory meeting 9 February

Goals of the seminar, methods, materials; requirements
An overview of topics

2. Emissions trading in the context of environmental regulation 16 February

Motivating Question: How is a tradable permit different?

Distinction between emissions trading and other types of policy instruments (taxation, command-and-control, voluntary agreements)
Distinction between different forms of emissions trading and how they relate to conventional prescriptive environmental regulation,
How cap-and-trade is fundamentally different in its approach,
What are the prerequisites for cap-and-trade regulation.

Required readings: Ellerman (2005) text; Godard (2001), chaps. 1 & 2 text texte

Recommended readings: Van Steenberghe (1999) texte; Working Party on Economic and Environmental Policy Integration (2001) text

Lecture Material: Godard Ellerman DelboscValin

3. Market design: spatial and temporal limits 23 February

Motivating Question: Can an environmental market be constructed under heterogeneous environmental conditions and constraints?

To develop the correspondence between market design and the nature of the environmental problem.
To develop the difficulties in determining exact limits and the rationality of effective approximations.

Required readings: Godard (1999) text ; Leiby and Rubin (2001) text

Recommended readings: Montgomery (1972) text ; Van Steenberghe (2002) text

Lecture Material: Ellerman David-Vaudey

4. Design: Voluntary features, safety valves, and indexed caps 2 March

Motivating Question: Why dilute the effect of a quantity constraint?

To introduce design features other than the spatial and temporal limits of the market.
To explain their effects and the trade-offs involved in including them

Required readings: Jacoby and Ellerman (2004) text ; Montero (1999) text

Recommended readings: Kolstad (2005) text ; Sue Wing et al. (2005) text

Lecture Material: Ellerman ToledoAndersone

5. Tradable Permits, Induced Technological Change and Innovation 9 March

Motivating Questions: Do tradable permits induce greater technological change?

To consider the arguments and evidence that emissions trading has any greater or less effect on technological change than other instruments.

Required readings: Driesen (2003) text; Parry (2001) text

Recommended readings: Newell, Jaffe, and Stavins (1999) text

6. Allocation: options and issues 16 March

Motivating Question: How should tradable permits be allocated?

To explain mechanisms (grandfathering and auctioning), recycling effects; and distributional effects.
To consider alternative criteria and rules

Required readings: Dinan and Rogers (2002) text; Raymond (2003) chaps. 2 & 6 text

Recommended readings: Hanoteau (2004) text

Lecture Material: Soaita

7. Effects of Trading and Allocation 23 mars

Motivating Question: Does emissions trading have effects that should temper enthusiasm for this instrument?

Imperfect competition (raising rival's costs…) and market power, transaction costs, price uncertainty and instability,
Why cap-and-trade is nevertheless inherently more effective environmentally than conventional prescriptive regulation.

Required readings: Godard (2003) texte; Ellerman (2003) text

Recommended readings: Babiker et al (2004) text

Lecture Material: GerbeaudBoucard

8. Kyoto and the EU ETS 30 March

Motivating Question: What is the significance and impact of the EU ETS?

To consider emissions trading in the context of climate policy with a particular focus on the EU ETS.
To apprehend the consequences of policy-making procedures and institutional design

Guest: Peter Zapfel, DG Environment; European Commission presentation

Required readings: Zapfel (2005) text; Godard (2005) texte

Recommended readings:Betz; Eichhammer, & Schleich (2004) text

Lecture Material: RaffinVera-Navas

9. The US SO2 or Acid Rain Program 6 April

Motivating Question: What made this program a success?

To introduce the main features of this canonical case study.

Required readings: Ellerman (2003) text; Stavins (1998) text

Recommended readings: Burtraw & Palmer (2004) text; US EPA (2005) text

Lecture material: Ellerman Chevalier

10. Other cases: OTC, RECLAIM, Chicago VOC 13 April

Motivating Question: How were these programs different in design and results?

To introduce the student to other examples that are less well known and not necessarily as successful.

Required readings: Aulisi et al. (2005) text; Harrison (2004) text

Recommended readings: Kosobud et al. text; Ellerman et al. (2003) text

Lecture material: Ellerman

11. Social and ethical aspects of emissions trading 20 April

Motivating Question: Is emissions trading socially acceptable?

Required readings: Sandel (1998) text; Godard, pp 75-80(2001) text; Gosseries et Van Steenberghe pp 8-12(2004) texte; Godard (2000) texte

Lecture Material: Ellerman

To conclude and wrap-up with a far-ranging discussion of the social and ethical aspects of emissions trading.

________________________