Transcript Document

The Pricing of Carbon Emissions
from Business Perspective in
Northeast Asia
Presenter: Xianbing Liu
Senior Policy Researcher/Task Manager
Kansai Research Centre, IGES, Japan
Presentation Structure
❖ Background of the MBIs project
❖ Surveys and the samples under the project
❖ Major results from the project studies
❏ Determinants for energy saving practices
❏ Company’s MBIs awareness and subjective acceptability
❏ Carbon prices affordable for the companies;
❏ Choice experiment of carbon pricing policies
❖ Research policy implications
❖ Major outputs and efforts in impact generation
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Overall Framework of MBIs Project
Basic ideas: a) Advantages of MBIs; b) Importance of clear and stable policy signals; c) Successful MBIs
Practices in Europe; d) Laggard policy progress in Asia; e) Core competence of IGES; f) Research field of KRC
Literature review and expert hearing
C1: Overview of policies related to industrial energy efficiency and carbon
mitigation in the three target countries
Web accessible data
Questionnaire survey
C2: Current status of firm’s energy saving practices and analyses of the
Geographical focus: China, Japan
FY2010
determinants for identifying policy gaps and directions
and the Republic of Korea
Policy focus: Financial subsidy, carbon
Onsite hearings
taxes and GHG emissions trading scheme
C3: Analysis of the effectiveness of financial subsidies to firm’s efforts in
carbon mitigation, e.g., subsidies to energy saving investments.
Questionnaire survey
Questionnaire survey
C4: Firm’s awareness and acceptability
C5: Firm’s awareness and acceptability
to carbon emission related tax tools
to carbon emission trading scheme
Lessons learned
Lessons learned
FY2011
Overall objective:
Gap analysis
Gap analysis
C6: Development and evaluation of firm’s preferable policy
alternatives with individual tool or combined approaches
Onsite interviews and hearings
FY2012
To support the related policy
discussions from company’s
viewpoints in this region
Synthesis summary and integrative policy
recommendations
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Climate Policies in the Three Countries
Targets
Major
policies for
industrial
sector
Japan
China
Korea
 To reduce its 1990 emissions by
6% from 2008-2012
 To reduce emissions by 25%
from 1990 levels by 2020 (With
the premise)
 To reduce emissions by 80%
from 1990 levels by 2050
 Improving energy efficiency at
least by 30% by 2030
 To reduce national energy
intensity by 20% by 2010 and to
increase renewable energy in the
national mix to 15% by 2020
 To cut CO2 emissions per unit
of GDP by 40-45% by 2020
compared with 2005 levels
(Voluntary target)
 To reduce by 30% by 2020
compared with BAU levels
(Voluntary target)
To achieve 46% improvement of
energy efficiency by 2030
To increase renewable energy in
the national energy mix to 11% by
2030
 Keidanren Voluntary Action
Plan
 GHG Emissions Calculation,
Reporting and Disclosure System
 Feed-in-tariff for renewable
energies
 Subsidies from NEDO, METI
and MOEJ
 Energy-related taxes
 GHG ETS on trial
 Carbon tax policy
 Energy Efficiency Standards
 Top 10,000 Energy-consuming
Enterprises Program
 Subsidies and rewards for
energy-saving
 Differential electricity pricing
system
 Resource-related tax
 Pilot GHG ETS in 5 cities and
2 provinces
 Carbon tax policy in
discussions
 Target Management System
(TMS)
 Energy Use Reporting System
 Energy Audit Requirement
 Financial subsidies
 Preferable loans
 Tax reduction
 Energy-related tax
 GHG ETS since 2015
 Carbon tax policy in
discussions
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Surveys under MBIs Project and the Samples
Year
FY2010
FY2011
FY2012
Item
China
Korea
Japan
Objective
Measure company’s practices in energy saving and identify the determinants
Method
Questionnaire survey and econometric analysis
Target
companies
Based in Taicang city,
Jiangsu Province
362 business sites of 244 companies
Samples
collected
125, with 80% from chemical, textile &
dyeing and machinery sectors
66 business sites, 60% from power,
petro-chemical and paper sectors
Objective
Measure company’s MBIs awareness, acceptability and carbon price affordability
Method
Questionnaire survey, econometric analysis and WTP modeling estimations
Target
companies
Three energy-intensive sectors: Iron & steel, cement and chemical industries
Samples
collected
170, more than 70% belonging to the
three focused sectors
Objective
Measure the company’s preference to design alternatives of carbon pricing tools
Method
Policy choice experiment and modeling analysis
The same as the studies of
FY2010 and 2011 in China
and Korea
Target
companies
Companies in western Shanxi Province
and eastern Jiangsu Province
Focused on the three sectors as in
FY2011
465 large energy-using
companies in Hyogo
Samples
collected
201, almost half from each province
150, more than 60% from the three
sectors
230, half from food, chemical,
steel and electronic sectors
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62, all from the three sectors and
93.5% is TMS target companies
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Determinants for Industrial Energy Saving
Energy saving practice level (15 activities)
Determinant factors
China (N=125)
Korea (N=66)
Japan (N=230)
Pressure from the government
External
pressures
Pressure from industrial association
(+)***
Pressure from business competitor
(+)**
Awareness of energy management problems
(+)**
(+)***
(+)*
(+)*
(+)**
(+)***
(+)*
(+)**
(+)*
(+)***
Willingness to improve energy efficiency
Internal factors
Top management support
Internal training specific for energy saving
(+)**
Current energy price level
Control
Company size
Industrial sector belongings
Note: ***, ** and * respectively means significant at 1%, 5% and 10% level; (+) means the positive relationship.
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MBDC Card for Estimating Cost Affordability
Question: The energy prices would be increased due to the introduction and
implementation of market-based climate polices, such as imposing energy taxes or
carbon taxes in the sector of energy production and transition. Accordingly, the
industrial company’s energy consumption cost would be increased. We would like
to understand the viewpoint of your company to the energy cost increases due to
the climate policy interventions. Please circle one letter to each increase ratio to
indicate the affordability degree of your company.
Energy
cost
increase
ratio (%)
15
increase
options in
Energy
costs
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Your company’s choice
Very low;
Moderate;
Not high;
Easily
Very high;
High;
Barely
Acceptable
acceptable
Strong
Five
levels of
acceptance
Rejection
acceptable
rejection
0.1
A
○
B
C
D
E
0.3
A
○
B
C
D
E
0.5
A
B
○
C
D
E
0.7
A
B
○
C
D
E
1.0
A
B
○
C
D
E
3.0
A
B
C
○
D
E
D
E
5.0
A
B
C
○
7.0
A
B
C
○
D
E
10.0
A
B
C
○
D
E
15.0
A
B
C
D
○
E
20.0
A
B
C
D
○
E
30.0
A
B
C
D
○
E
50.0
A
B
C
D
E
○
70.0
A
B
C
D
E
○
100.0
A
B
C
D
E
○
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Affordability Responses of Samples in China (N=111)
Energy Cost
Increase Ratio
(%)
Strong
Rejection
(%)
Rejection
(%)
Barely
Acceptable
(%)
Acceptable
(%)
Easily
Acceptable
(%)
Total
(%)
0.1
0.0
0.0
1.8
33.3
64.9
100.0
0.3
0.0
0.0
5.4
45.1
49.6
100.0
0.5
0.0
0.9
14.4
50.5
34.2
100.0
0.7
0.0
4.5
17.1
50.5
27.9
100.0
1.0
1.8
8.1
37.8
35.1
17.1
100.0
3.0
6.3
14.4
43.2
27.9
8.1
100.0
5.0
7.2
18.9
46.9
21.6
5.4
100.0
7.0
11.7
29.7
42.3
12.6
3.6
100.0
10.0
19.8
42.3
29.7
6.3
1.8
100.0
15.0
31.5
41.4
24.3
2.7
0.0
100.0
20.0
46.0
41.4
10.8
1.8
0.0
100.0
30.0
55.9
37.8
5.4
0.9
0.0
100.0
50.0
75.7
21.6
2.7
0.0
0.0
100.0
70.0
84.7
15.3
0.0
0.0
0.0
100.0
100.0
87.4
12.6
0.0
0.0
0.0
100.0
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0
50% of the
samples
corresponds to
the ratios of 2.8%
and 9.3% on the
two curves.
20
40
60
Percentage of the samples
80
100
Affordability of All the Samples in China (N=111)
0
20
40
60
Energy cost increase ratio (%)
80
100
Observed data of easily acceptable & acceptable
Observed data of barely acceptable and over
Regression curve of easily acceptable & acceptable
Regression curve of barely acceptable and over
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Carbon Prices Affordable for the Companies
Country
China (N=170; Unit: Yuan/t-CO2)
Korea (N=62; Unit: KRW/t-CO2)
Iron & steel
(N=34)
Cement
(N=17)
Chemical
(N=27)
Iron & steel
(N=11)
Cement
(N=5)
Chemical
(N=20)
MEANAFFORD
8.8%
7.7%
9.9%
2.5%
2.8%
2.6%
Affordable carbon price
42.7
38.6
83.7
3,770
2,600
3,950
Sector
Country
Japan (N=230; Unit: JPY/t-CO2)
Food processing
(N=29)
Chemical
(N=26)
Iron & steel
(N=11)
Electronics
(N=12)
MEANAFFORD
2.0%
3.1%
1.5%
2.6%
Affordable carbon price
683
1,062
426
801
Sector
a) Similar acceptable ratios in energy cost increases due to pricing of carbon for
companies of Japan and Korea, which are much lower than Chinese companies;
b) Similar range of carbon prices affordable for companies in Japan and China (5-13 $/t-CO2);
c) Carbon prices affordable for Korean companies are 2.3-3.5 $/t-CO2;
d) The business affordability is much lower than the price level needed for realizing
Copenhagen pledges of the three countries.
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Company’s Awareness and Acceptability of MBIs
Policy awareness
Policy Type
Policy item
Subsidies for energy saving projects
Economic
incentives
Policy acceptability
China
Korea
Japan
China
Korea
Japan
3.75
3.21
2.82
4.19
3.18
3.60
3.03
1.80
3.43
3.36
3.27
2.83
3.82
3.79
3.31
3.71
3.54
3.66
Soft loan for energy saving investments
3.56
Tax credits for energy saving projects
4.21
MBIs
Subsidies and grants for energy efficient products
Carbon
pricing tools
Command-and-control
regulations (CCRs)
Voluntary approaches
(VAs)
Carbon tax policy
2.87
2.93
2.74
3.36
2.02
2.63
GHG emissions trading scheme
2.86
3.31
2.51
3.61
2.09
2.65
3.63
3.66
Energy saving target and responsibility system
3.66
Energy use and GHG emissions reporting system
Certification of energy efficient products
3.85
Voluntary energy saving agreements
3.85
3.63
2.73
3.41
3.10
Note: The data is the mean of scores. For policy awareness: ‘1’ = ‘completely unknown’; ‘3’ = ‘moderate understanding’; ‘5’ = ‘very clear’. For policy acceptability: ‘1’ =
‘completely unacceptable’; ‘3’ = ‘moderate acceptance’; ‘5’ = ‘fully acceptable’.
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Payback Time for Energy Saving Investment
Percentage of the samples (%)
Payback time (Years)
<0.5
0.5-1
1-2
2-3
3-5
5-10
>10
In total
China (N=127)
5.5
12.6
30.7
30.7
13.4
4.7
2.4
100.0
Korea (N=62)
3.2
12.9
48.4
Japan (N=220)
0.5
2.3
7.3
33.9
22.3
1.6
41.4
24.5
100.0
1.8
100.0
a) 1-3 years of payback time expected by Chinese and Korean companies;
b) The payback time expected by Hyogo companies is longer at 3-5 years;
c) High expectation to the profitability of energy saving investments reveals the effectiveness
of carbon pricing policies;
d) Providing subsidies shorten the payback time and remove barrier of upfront cost, and
is therefore useful at the earlier stage of LCT applications.
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Attributes and Levels of Carbon Tax and GHG ETS
A: Carbon Tax Policy
B: GHG ETS
Levels
Levels
Attributes
Attributes
China (Yuan/t-CO2)
Korea (KRW/t-CO2)
Tax rate
1) 10; 2) 30; 3) 50;
4) 100
1) 1,000; 2) 2,000;
3) 3,000; 4) 5,000
Tax relief
measures
1) No relief;
2) Preferential treatment to energy-intensive companies;
3) Preferential treatment to companies actively reducing
emissions to a certain level
Use of tax
revenues
1) General budget; 2) Specific fund for energy saving and
climate change；3) To reduce company’s other taxes
Starting
time
1) During the 13th FYP
(2016-2020); 2) During
and after the 14th FYP
1) Since 2015;
2) Since 2021
China
Cap setting
1) Based on the company’s historical emissions;
2) Based on the sector’s advanced emission levels;
3) Differentiated measures for the existing and new
established companies
Allowance
allocation
1) All for free; 2) 5% auction, the rest for free;
3) 10% auction, the rest for free;
4) 30% auction, the rest for free
Penalty
Compliance
period
Criteria
for carbon
leakage
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Korea
ACMSA 2013
1) A fine the same of market price of carbon
emissions; 2) 3 times of market price; 3) 5 times of
market price
1) 1 year; 2) 3 years
1) Carbon intensity;
2) Trade intensity
13
Design for Choice Modeling
An example format of choice experiment
Attribute
Tick a box
Option
A
Option
B
Change in attribute level
from A to B (+: Better; -: Worse)
A1
B1
+
A2
B2
-
A3
B3
+
A4
(Price)
B4
(Price)
+
☐
☐
An example of contingent ranking
Attribute
Option A
Option B
Option C
A1
B1
C1
A2
B2
C2
A3
B3
C3
A4 (Price)
B4 (Price)
C4 (Price)
Ranking of options: 1:
; 2:
; 3:
.
An example of pair-wise comparisons
Applied for this research
An example of contingent rating
Attribute
Option A: A1; A2; A3; A4
Tick one level showing your preference:
1--2--3--4--5--6--7--8--9--10
Very low preference
Very high preference
Attribute
Option A
Option B
Change in attribute level
from A to B (+: Better; -: Worse)
A1
B1
+
A2
B2
-
A3
B3
+
A4
(Price)
B4
(Price)
+
Tick one level:
1--2--3--4--5--6--7--8--9--10
Strongly prefer A
Strongly prefer B
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Experiment Design and Choice Set Examples
Policy attribute
Option A01
Option B01
Tax rate (Yuan/t-CO2)
50
10
Preferential treatment to energyintensive companies
Specific fund for energy saving
and climate change
Tax relief measure
No relief measure
Use of tax revenues
General budget
Starting time
During and after the 14th FYP
During and after the 14th FYP
Please tick the one you prefer
□
□
◆ Design method is the
same as carbon tax policy;
◆ An example set of GHG
ETS in Korea.
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◆
◆
◆
◆
◆
Design Expert 8.0 was used;
D-optimal design applied;
12 Choice sets constructed;
Two versions, 6 sets for each;
An example set of carbon
tax policy in China.
Policy attribute
Option A01
Option B01
Cap setting
Based on the company’s historical
emissions
Based on the historical emissions for the
existing companies, and the sector advanced
emission levels for the new entrants
Allowance allocation
3% auction, the rest for free
All for free
Penalty
A fine of 3 times of the market price
A fine of 5 times of the market price
Criteria for carbon
leakage industry
Carbon intensity
Trade intensity
Please tick the one
you prefer
□
□
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Attributes Determining Company’s Policy Choices
The choice of carbon tax policy
Attribute
The choice of GHG ETS
China
Korea
(-)***
(-)***
Relief to energy-intensive
companies (RELIEF-B)
(+)***
(+)***
Hybrid of grandfathering and
benchmarking (CAP-C)
Relief to energy efficient
companies (RELIEF-C)
(+)***
(+)**
Auction ratio for allowance allocation
(ALLOCATION)
(-)***
Specific fund for climate
change (REVENUE-B)
(+)**
(+)**
A penalty of 3 times of credit market
price (PENALTY-B)
(-)***
Tax rate (TAXRATE)
Use to reduce company’s
other taxes (REVENUE-C)
Korea
(+,-)***
Benchmarking for cap setting (CAP-B)
(+,-)***
A penalty of 5 times of credit market
price (PENALTY-C)
(-)***
Starting time (TIME)
Obs.
Attribute
1,041
Use carbon intensity as leakage risk
criteria (LEAKAGE)
900
(+)***
900
Note: ***, ** and * individually means significant at 1%, 5% and 10% level; (+) and (-) means the positive and negative relationship, respectively.
Analysis models applied:
MNL: Multinomial Logit
RPL: Random Parameter Logit
LC: Latent Class Model
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WTP Values of Non-price Policy Attributes
The choice of carbon tax policy
Attribute
The choice of GHG ETS
China (Yuan/t-CO2)
Korea (KRW/t-CO2)
-65.9
-1,804
RELIEF-C
-65.4a
-1,607
REVENUE-B
-23.2
REVENUE-C
RELIEF-B
TIME
Attribute
CAP-B
Korea (%)
16.2
CAP-C
12.9
-678
PENALTY-B
13.3
-18.6 a
125
PENALTY-C
6.8
6.4 a
1,665
LEAKAGE
-14.7
Note: Tax rate is used as the denominator for carbon tax and the auction rate for allowance allocation is the denominator for GHG ETS;
a The estimated WTP is not statistically significant.
Example explanations:
◆ Setting relief measure for energy-intensive sector (RELIEF-B) is the same as a decrease of 65.9
Yuan/t-CO2 of tax rate in influencing the company’s policy choice;
◆ Similarly, using the tax revenue earmarked for climate change (REVENUE-B) rather than as
general budget (REVENUE-A) equals to a decrease of 23.2 Yuan/t-CO2 in tax rate.
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Policy Implications of the MBIs Project

Overall, this project studied the application of MBIs, especially carbon pricing
tools, for enhancing energy saving and carbon mitigation from the business
perspective;

The identification of factors influencing company’s energy saving practices
clarifies the direction for future policy efforts;

Estimations of carbon price level affordable for the companies confirm the
difficulty for closing the policy gap, and provide meaningful referendums for the
development of carbon pricing policies;

The policy experiment confirms the principles for the design of carbon pricing
policies, including carbon tax and GHG ETS, and indicates the options preferable
for the industry;

The practical way is to combine a carbon tax with wide coverage but low tax rates
with domestic GHG ETS focusing large emitters. The revenues from carbon
pricing shall address R&D and earlier applications of LCT.
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Outcomes and Impact Generation
Organizations in China:
Networking
1
-Universities: Tsinghua, Tongji
- Research Institutes: ERI/NDRC,
RIFS/MOF
- National Government: MOEP
- Local governments, etc.
1+(1)
1+(1)
(1)
4+(2)
Policy brief
KRC/IGES
Book Chapters (2)
Speedy
Outputs Generation
National policy
makers & regional
policy platform
Organizations in Korea:
Invited presentations:
Present at conferences:
e.g., EAERE, GCET,
JSEEPS, KAPF, etc.
21 December, 2013
1) Symposium of UNDP
2) Sao Paulo Univ., etc.
ACMSA 2013
Networking
- Research Institutes: KEI, KECO,
KEEI, GGGI
- Government: MOE, MOKE
- Universities
- etc.
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Thank you for your attention!
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