Policy Session at WCERE 2014 in Istanbul on current challenges for emission trading systems

July 08, 2014

Dallas Burtraw

Jing Cao

Frank Jotzo

Xavier Labandeira

Panel: Andreas Löschel, Xavier Labandeira, Dallas Burtraw, Frank Jotzo, Jing Cao (f.l.t.r)

The ENTRACTE project convened a successful policy session at the Fifth World Congress of Environmental and Resource Economists in Istanbul. The policy session brought together leading scholars from Australia, the United States, the European Union, and China who discussed lessons learned and upcoming challenges in their respective jurisdiction concerning the design, as well as the political embedding of emissions trading schemes.

On Monday, June 30, ENTRACTE coordinator Andreas Löschel welcomed interested researchers and panellists and gave an overview about the aim of ENTRACTE, its first findings, and its forthcoming tasks.

Dallas Burtraw, Associate Director of the Center for Climate and Electricity Policy at Resources for the Future, identified four mayor topics of relevance during his presentation: allocation, prices, linking, and governance. Auctioning as the preferred allocation method becomes increasingly accepted and makes the allocation less of an issue, while for the three remaining domains of ETS market design it is still a long way to go. According to Dallas emission markets are artificial markets that have been set up by governments. Therefore, governmental interventions in those markets are less problematic as in other markets and price floors are an important instrument to ensure the functioning of these markets.

As next speaker, Jing Cao, Associate Professor at the Department of Economics, School of Economics and Management at Tsinghua University, gave an in-depth overview on China’s pilot emission trading schemes and its differences in design.  It was very interesting to see how these design elements, such as the included type of market participants, affect differences in trade volumes and price volatility.

Xavier Labandeira, Professor of Economics at the University of Vigo and the Climate Policy Research Unit as well as member of the ENTRACTE policy advisory board then talked on the state of discussion in Europe and the advancement of the EU ETS after 2020. It became clear that the interaction with other policy instruments and targets, also on member state level, is crucial when aiming to understand the functionality of the EU ETS.

Frank Jotzo, also member of the ENTRACTE policy advisory board and Associate Professor at the Australian National University in Canberra discussed the current state of climate policy in Australia. Jotzo emphasised that politics matters for design choices, but design choices have a reverse effect and matter for politics as well.

The individual experiences then got synthesised during the final round table discussion and the following question and comment round from the audience. This policy session showed that different lessons have been learned in different jurisdictions. Exchange on these lessons is therefore the key for a successful climate policy.