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MBIs (Market-Based Instruments) for CO2. Gary Flomenhoft, Fellow Gund Institute January 31, 2008. MBIs-govt or market?. No company will voluntarily add costs to its operation. Only government can do it to the market as a whole. Why. Account for hidden costs-”true cost pricing”

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mbis market based instruments for co2

MBIs (Market-Based Instruments) for CO2

Gary Flomenhoft,

Fellow Gund Institute

January 31, 2008

mbis govt or market
MBIs-govt or market?
  • No company will voluntarily add costs to its operation. Only government can do it to the market as a whole.
slide3
Why
  • Account for hidden costs-”true cost pricing”
  • Stimulus to producers and consumers (price-signal)-behavior change
  • Can raise revenue to target issues
  • Ecological efficiency-maximize production/throughput
slide4
What?
  • Emissions-powerplants, industry, cars, aircraft, houses, offices, agriculture
  • Increasing waste generation
  • Resource depletion
  • Renewable resource use
  • Land use
types of mbis
Types of MBIs
  • Tradable permits-emissions or wildlife
  • Environmental taxes
  • Environmental charges
  • Environmental subsidies and incentives
  • Liability and compensation schemes
1 cap distribute trade
1. Cap-distribute-trade
  • Europe EUETS system-2005, 2008-2012Kyoto goals= 6-21% below base yr (1990)
  • 11,000 installations: powerplants and industrial heat sector
  • 2.15 billion tonnes = 50% of EU CO2
  • 95+% Allowances given away, 5%vol auction
  • Other gasses 20% of GHG (no transport)
  • Jan 25, 2008 price-E21.03=$31.01/tonne
1 cap distribute trade1
1. Cap-distribute-trade
  • New England RGGI system-2009
  • Goal 2009-2015 cap then -10% 2015-2018
  • 807 Powerplants only (+218 PA)
  • 184 million tons = 184/700 =26.3% of CO2
  • 100% Allowances auctioned
  • 25% of revenue to benefit consumers (except VT 100% to consumers)
1 cap distribute trade2
1. Cap-distribute-trade
  • Vermont RGGI system-June, 2008 auction
  • 1 Powerplant only-Berlin (2 other wood chips)
  • 1.2 million tons = 2% of CO2
  • 100% Allowances auctioned
  • 100% of revenue to benefit consumers
2 environmental taxes co2
2. Environmental Taxes-CO2
  • Germany 4% of total, US .9% of total
  • Carbon
  • Fuels
  • Vehicle sales
  • Vehicle registration
  • Other GHG emissions
2 fuel taxes vt
2. Fuel Taxes-VT
  • Carbon-0
  • "Fuel Gross Receipts Tax” = .5% on retail sales of fuel
  • "Electric Energy Tax” = 3.5% of appraised value
  • "Utilities Gross Receipts Tax” = .3-.5% gross revenue
  • Estimated Revenue from Sales Tax on Commercial Energy use = 5%
  • Diesel Tax = $.26 commercial, $.17 cars
  • gasoline tax = $.19 + .01 tank fee = $.20
  • Vehicle sales = 6% of purchase price
  • Vehicle registration = based on type, size, weight, and purpose of vehicle = $54M
2 fuel taxes germany 90 of ecotaxes
2. Fuel Taxes-Germany: 90% of ecotaxes
  • road toll = 14c/km
  • Electricity = 2.1c/kWh
  • Natural gas = .06c/kWh
  • Fuel oil = 6.2c/l = 23.46c/gallon
  • Diesel = 47.2c/l = $1.79/gallon
  • Gasoline = 65.6c/l = $2.48/gallon
  • 55% increase in 1999:
  • 89% recycled to reduce payroll taxes
  • 9%- Environment Projects: 2% admin
    • Renewable Energies
    • Less CO2 in buildings
    • Tax break bio-fuels
3 environmental charges
3. Environmental Charges
  • London Congestion charge
  • 5£ then in July 2005 8£
  • Traffic congestion -30%
  • Taffic volume - 15%
  • Public transit improved
  • Better air quality
4 subsidies incentives eu
4. Subsidies & incentives-EU
  • “Cohesion Funds” = Environment projects helping to achieve the objectives of the EC treaty
  • priority to drinking-water supply, treatment of wastewater and disposal of solid waste. Reforestation, erosion control and nature conservation measures are also eligible.
  • b) Transport infrastructure projects establishing or developing transport infrastructure as identified in the Trans-European Transport Network (TEN) guidelines.
4 subsidies incentives eu1
4. Subsidies & incentives-EU
  • “Feed-in Tariffs” /kWh for PV

Europe = .63-78c

Ontario = .42c

Wash/CA = .52-.54c

Also have feed-in tariffs for wind, hydro, biogas

VT feed-in tariffs= 0, net metering only

4 subsidies incentives eu2
4. Subsidies & incentives-EU

1991 “Feed-in Tariffs” Results:

Germany has 52% of PV in world w/ same sun as Anchorage, AK

35,000 employed. 2715 MW installed

US has 360 MW installed or 13% of Germany

Germany 82M, US 300M people

Germany:

150,000 employees in RE

107,000 FF & nuclear

liability and compensation
Liability and compensation
  • Insurance, re-insurance
  • Oil spill funds-bonds
bottom line
Bottom Line
  • US emissions 1990-2005 +16.3%
  • GDP+55%
  • NE 1990-2000 emission + 10.5%
  • EU-15 1990-2005 emissions -2%, EU25 -11%
  • GDP+35% on target for -8% emissions by 2012
  • Germany -22% emissions by 2012
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