Implementing Domestic Tradeable Permits : Recent Developments and Future Challenges.

272 Pages·2002·2.024 MB·English

by  OECD

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Implementing Domestic Tradeable Permits
RECENT DEVELOPMENTS AND FUTURE CHALLENGES
Implementing
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Tradeable or transferable permits (TPs) are increasingly perceived as a cost-effective and flexible
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considered a policy tool whose applications were limited to only certain sectors, such as air pollution e
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management and fisheries. However, over the last few years, there have been significant t Permits
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developments in the use of domestic TPs, across a broader range of environmental issues.TPs now n
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face a double challenge: could they become a key instrument for curbing greenhouse gas emissions
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in light of the Kyoto Protocol? And could they be used in other areas of environmental management? o
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This book presents the proceedings of an OECD workshop on domestic TPs held in September 2001 s
AND FUTURE CHALLENGES
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in Paris. It provides an analysis on recent developments in the use of domestic TP in new areas i
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including climate change, renewable energy, transport, solid waste management, and water resources T
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management. It highlights issues regarding the use of TPs in policy mixes, reviews key elements of a
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ex post evaluations of earlier TP schemes, identifies key challenges in the design and use of TP
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systems, and attempts to link the past lessons to further research needs. a
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ISBN 92-64-19763-X
97 2002 12 1 P
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OECD Proceedings
Implementing Domestic
Tradeable Permits
RECENT DEVELOPMENTS
AND FUTURE CHALLENGES
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
OECD PROCEEDINGS
Implementing Domestic Tradeable
Permits:
Recent Developments and Future
Challenges
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
ORGANISATION FOR ECONOMIC CO-OPERATION
AND DEVELOPMENT
(copyright page)
2
FOREWORD
An Experts Workshop on Domestic Tradeable Permits: Lessons and Future Directions was
held on 6-7 September 2001 in Paris, as part of OECD work on the use of domestic tradeable permits
(TPs) for environmental policy. The workshop objectives were to examine new areas for domestic TP
applications currently being considered by OECD countries, and to better benefit from the lessons
learned from the past experiences in domestic TP schemes by reviewing ex post evaluation
methodologies.
This book contains the proceedings of the workshop, which were prepared by the workshop
contributors, and were subsequently revised to reflect feedback of workshop participants and
delegates of the OECD Working Party on National Environmental Policy. The Secretariat is grateful to
the individual authors, workshop participants, and for comments provided by Member countries. The
views expressed are those of individual authors. The book is published under the responsibility of the
Secretary-General of the OECD
3
ORGANISATION FOR ECONOMIC CO-OPERATION
AND DEVELOPMENT
Pursuant to Article 1 of the Convention signed in Paris on 14th December 1960, and which came into
force on 30th September 1961, the Organisation for Economic Co-operation and Development (OECD)
shall promote policies designed:
– to achieve the highest sustainable economic growth and employment and a rising standard of
living in Member countries, while maintaining financial stability, and thus to contribute to the
development of the world economy;
– to contribute to sound economic expansion in Member as well as non-member countries in the
process of economic development; and
– to contribute to the expansion of world trade on a multilateral, non-discriminatory basis in
accordance with international obligations.
The original Member countries of the OECD are Austria, Belgium, Canada, Denmark, France,
Germany, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain,
Sweden, Switzerland, Turkey, the United Kingdom and the United States. The following countries
became Members subsequently through accession at the dates indicated hereafter: Japan
(28thApril1964), Finland (28th January 1969), Australia (7th June 1971), New Zealand (29th May 1973),
Mexico (18th May 1994), the Czech Republic (21st December 1995), Hungary (7th May 1996), Poland
(22ndNovember 1996), Korea (12th December 1996) and the Slovak Republic (14th December 2000). The
Commission of the European Communities takes part in the work of the OECD (Article 13 of the OECD
Convention).
© OECD 2002
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75775 Paris Cedex 16, France.
TABLE OF CONTENTS
Part I
Summary of Lessons Learned
Chapter 1. Lessons Learned
by Olivier Godard................................................................................................................................................11
1. Transferable permits at a turning point.................................................................................................11
2. What are TPs?...........................................................................................................................................12
3. Sectoral lessons from “old” and “new” programmes..........................................................................12
3.1 Experiences in air pollution control applied to industry and power generation................13
3.2 Experiences in water resources management..........................................................................15
3.3 Experiences in transport.............................................................................................................16
3.4 New Developments: renewable energy certificates................................................................16
3.5 New Developments: municipal solid waste management....................................................17
3.6 New Developments: greenhouse gas control..........................................................................18
4. Reflections on past experience................................................................................................................19
5. Challenges for TPs....................................................................................................................................23
Part II
Ex Post Evaluations of Earlier Domestic Tradeable Permit Schemes
Chapter 2. Ex Post Evaluations of Tradeable Permits Programmes
by Stephen Smith.................................................................................................................................................29
1. Introduction...............................................................................................................................................29
2. The value of evaluation...........................................................................................................................31
2.1. What do we already know?.......................................................................................................32
2.2. What might we learn from ex post evaluations?.....................................................................33
3. Criteria and priorities in evaluation.......................................................................................................33
3.1. Characterisation...........................................................................................................................34
3.2. Criteria..........................................................................................................................................35
4. Methods for ex post evaluation..............................................................................................................37
5. Evaluations in practice.............................................................................................................................40
5.1. Evaluation audit of RECLAIM..................................................................................................40
5.2. Tradeable permits and adjustment – the case of lead trading...............................................43
5.3. “Markets for Clean Air” – the Ellerman et al evaluation study
of the Acid Rain Program...........................................................................................................47
5.4. The NAPA evaluation report on performance of trading
systems for VOCs in four US states..........................................................................................53
5.5. Comparative discussion of the evaluations.............................................................................57
6. Conclusions and suggestions for further work....................................................................................60
6.1. Conclusions..................................................................................................................................60
6.2. Suggestions for further work on ex post evaluation of tradeable permits..........................61
References .................................................................................................................................................64
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Part III
New Areas for Application of Domestic Tradeable Permits
Chapter 3. Domestic GHG Emissions Trading Schemes: Recent Developments
and Current Status in Selected OECD Countries
by Kumi Kitamori.................................................................................................................................................69
1. Introduction...............................................................................................................................................69
2. Why Domestic GHG Emissions Trading?.............................................................................................70
2.1 Domestic emissions trading in response to international and regional
emission trading schemes...........................................................................................................70
2.2 Tradeable permits as a cost-effective policy instrument........................................................71
2.3 Characteristics of GHGs and their suitability for emission trading.....................................72
3. An overview of domestic GHG emissions trading schemes..............................................................73
3.1 The Proposed EU-wide Emissions Trading Scheme...............................................................75
3.2 Denmark.......................................................................................................................................78
3.3 The UK..........................................................................................................................................81
3.4 Norway.........................................................................................................................................84
3.5 Sweden..........................................................................................................................................86
3.6 Canada..........................................................................................................................................88
3.7 The Netherlands..........................................................................................................................90
3.8 France............................................................................................................................................90
3.9 Meeting the GHG reduction target without domestic emissions trading...........................91
4. Combining domestic GHG emission trading with other policy instruments..................................93
4.1. Taxes and TPs: theoretical assessments....................................................................................93
4.2. Voluntary approaches and TPs..................................................................................................96
4.3. A word of caution on TPs in policy mixes...............................................................................97
4.4. Introducing domestic GHG emissions trading: interface with taxes and
VAs in practice.............................................................................................................................97
5. Preliminary conclusions and areas for further work...........................................................................99
References .................................................................................................................................................101
Chapter 4. Renewable energy certificates: trading instruments for the
promotion of renewable energy
by Richard Baron and Ysé Serret........................................................................................................................105
Executive Summary.............................................................................................................................................105
1. Introduction: Why tradeable renewable energy certificates...............................................................106
2. What are tredeable renewable energy certificates................................................................................108
2.1 The objective(s) of TREC systems......................................................................................108
2.2 Defining the trading system.......................................................................................................109
2.3 TREC, the environment and other renewable energy policy goals......................................109
2.4 Related, but different instruments: green pricing mechanisms............................................110
3. A survey of TREC systems......................................................................................................................111
3.1 Further information on surveyed TREC systems....................................................................117
3.2 A variety of implementation options for a similar goal.........................................................123
3.3 In summary: a step into the unknown?....................................................................................126
4. From domestic to international TREC systems....................................................................................127
4.1 Arguments in favour of linking domestic TREC systems......................................................129
4.2 Barriers to international trades..................................................................................................129
4.3 Summary......................................................................................................................................130
5. Interactions between TREC and GHG emission trading....................................................................131
5.1 How would the two markets interact?.....................................................................................131
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5.2 Can renewable energy certificates be traded for GHG emission permits?..........................132
5.3 Summary: interactions and compatibility................................................................................135
6. Further research........................................................................................................................................135
Glossary .................................................................................................................................................137
References .................................................................................................................................................138
Chapter 5. The Use of Transferable Permits in the Transport Sector
by Charles Raux .................................................................................................................................................141
Executive Summary.............................................................................................................................................141
1. Introduction...............................................................................................................................................141
2. The transportation sector context...........................................................................................................142
2.1 The global environment and the greenhouse effect................................................................143
2.2 The local environment and its impact on daily life.................................................................144
2.3 Selecting a control strategy and instruments...........................................................................146
2.4 Pros and cons of using transferable permits in the transport sector....................................147
2.5 The potential for transferable permit programs in the transportation sector.....................148
3. The case studies........................................................................................................................................150
3.1 The Lead Phase-down Program (USA)....................................................................................150
3.2 The Ecopoint program in Austria..............................................................................................155
3.3 The ZEV program in California.................................................................................................161
3.4 Exploring new approaches in France........................................................................................170
4. Conclusions and lessons..........................................................................................................................178
References .................................................................................................................................................183
Chapter 6. New Areas for Application of Tradeable Permits – Solid Waste Management
by Roger Salmons.................................................................................................................................................187
1. The waste management system..............................................................................................................187
1.1 System definition.........................................................................................................................187
1.2 Environmental impacts of waste disposal................................................................................189
1.3 Waste management failures and policy responses.................................................................191
2. Designing tradeable permit schemes.....................................................................................................193
3. Waste management applications of permit trading.............................................................................195
3.1. Packaging Waste Recovery Notes.............................................................................................199
3.2. Landfill permits for biodegradable municipal waste.............................................................211
4. Conclusions...............................................................................................................................................218
References .................................................................................................................................................220
ANNEX 1: Breakdown of Municipal Waste for Selected OECD Countries.................................................223
ANNEX 2: Market Power and Design of Tradeable Permit Systems............................................................224
Chapter 7. Tradeable Permits in Water Resource Protection and
Management: A Review of Experience and Lessons Learned
by Andreas Kraemer, Eduard Interwies and Eleftheria Kampa....................................................................227
1. Introduction...............................................................................................................................................227
2. Policy background....................................................................................................................................228
2.1 United States................................................................................................................................228
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2.2 Australia.......................................................................................................................................230
2.3 Mexico...........................................................................................................................................231
2.4 Spain..............................................................................................................................................232
3. Case studies...............................................................................................................................................233
3.1. Tradeable water abstraction rights............................................................................................233
3.2. Lessons learned on water trading (abstraction)......................................................................243
3.3. Tradeable water pollution rights...............................................................................................245
3.4. Lessons learned on effluent trading (pollution control).........................................................253
4. Potential further applications of water-based tradeable permits.......................................................253
5. Resistance to water trading.....................................................................................................................255
6. Conclusions and outlook.........................................................................................................................257
References .................................................................................................................................................259
ANNEX 1: Cases in Trade of Water Abstraction Rights.................................................................................264
ANNEX 2: Cases in Trade of Water Pollution Rights......................................................................................265
Part IV
Future Directions
Chapter 8. Conclusions: Outstanding Issues and Areas for Further Work
by Olivier Godard................................................................................................................................................269
1. Ex post evaluations…………………………………………………………………………………….…270
2. Combination of policy tools…………………………………………………………………………..…272
3. Integration of domestic TP schemes with other regional and international schemes………..……273
4. “Clarification papers” on specific topics…………………………………………………………….…274
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