Transcript MBIs (market-based Instruments)

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
1. Account for hidden costs-”true cost
pricing”
2. Stimulus to producers and consumers
(price-signal)-behavior change
3. Can raise revenue to target issues
4. Ecological efficiency-maximize
production/throughput
What?
1. Emissions-powerplants, industry, cars,
aircraft, houses, offices, agriculture
2. Increasing waste generation
3. Resource depletion
4. Renewable resource use
5. Land use
Types of MBIs
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Tradable permits-emissions or wildlife
Environmental taxes
Environmental charges
Environmental subsidies and incentives
Liability and compensation schemes
1. Cap-distribute-trade
• Europe EUETS system-2005, 2008-2012
Kyoto 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-trade
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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-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
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Germany 4% of total, US .9% of total
Carbon
Fuels
Vehicle sales
Vehicle registration
Other GHG emissions
2. Fuel Taxes-VT
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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
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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 = $2.48/gallon
55% increase in 1999:
89% recycled to reduce payroll taxes
9%- Environment Projects:
2% admin
– Renewable Energies
– Less CO2 in buildings
– Tax break bio-fuels
3. Environmental Charges
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London Congestion charge
5£ then in July 2005 8£
Traffic congestion -30%
Taffic volume - 15%
Public transit improved
Better air quality
4. Subsidies & incentives-EU
• “Cohesion Funds” = Environment projects helping to
achieve the objectives of the EC treaty
• priority to drinking-water supply, treatment of wastewater and
disposal of solid waste. Reforestation, erosion control and
nature conservation measures are also eligible.
• b) Transport infrastructure projects establishing or developing
transport infrastructure as identified in the Trans-European
Transport Network (TEN) guidelines.
4. Subsidies & incentives-EU
• “Feed-in Tariffs” /kWh for PV
Europe = .63-78c
Ontario = .42c
Wash/CA = .52-.54c
Also have feed-in tariffs for wind, hydro,
biogas
VT feed-in tariffs= 0, net metering only
First Year Renewable Tariffs in US$/kWh
All Conversions from the Euro.
Wind
PV
Hydro
Biogas
Austria
0.1081 0.6589
0.2428
Brazil
0.0791
0.0559
0.0698
California
0.5000
Czech Republic
0.1235 0.6635
France
0.1175 0.7878 0.0786
0.1289
Germany 2008
0.1149 0.6385 0.1055
0.1551
Italy
0.7878
Minnesota C-BED
0.0480
Ontario
0.1103 0.4195 0.1103
0.1103
Portugal
0.1132 0.0000 0.1175
South Korea
0.8114
Spain (2007 RD)
0.1049 0.6308
0.1872
Turkey
0.0716
Washington State
0.5400
Note: See specific sheets for qualifications.
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
• Insurance, re-insurance
• Oil spill funds-bonds
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