Joint implementation in the framework convention on climate change and the second sulphur protocol; An empirical and institutional analysis

This thesis studies joint implementation in the Framework Convention on Climate Change and the Second Sulphur Protocol. Joint implementation may allow countries or firms to undertake emission reduction abroad where it is less expensive, in lieu of more expensive emission reduction at home, potentially bringing large cost savings. Chapter 2 defines and describes a workable joint implementation system, from the current legal definition of joint implementation, current practice and current discussions of joint implementation. Joint implementation is further defined by comparison with other trading mechanisms. This section compares allowance trading with emission reduction credit trading. It argues that allowance trading and emission inventory analysis go together, whilst emission reduction credit trading goes hand in hand with project by project analysis. Chapter 2 investigates how FCCC and SSP trading may evolve and sets out political objections to joint implementation. Chapter 3 analyses data on twenty AIJ (activities implemented jointly) projects, fifteen from the United States Initiative on Joint Implementation pilot phase. The present value (1997) cost of carbon emission reduction in $/tC for each of these projects is calculated. Carbon emission reduction achieved in the future is discounted. Carbon damage ratios are introduced to take into account the varying level of damage caused over time by a set amount of carbon in the atmosphere. Regression analysis is conducted to explain variations in cost by location and by emission reduction method. Chapter 3's emission reduction costs are higher than in many other studies; and they suggest a different hierarchy of project carbon emission reduction costs. Adjustments to the data to reflect costs that would prevail in a true carbon market are suggested. Chapter 4 asks how representative chapter 3's sanple of projects is of the larger population of emission reduction projects in the world. Chapter 3's results appear high compared to other studies' results in part because these other studies are measuring different things. Costs from Venezuela are presented which support chapter 3's costs carbon hierarchy. Political and social costs of emission reduction projects and policies are also considered. Chapter 5 turns to joint implementation in the context of a non uniformly dispersed pollutant, sulphur dioxide, where the problem is one of third party effects. Chapter 5 uses an integrated assessment model to investigate two issues. Recalculating exchange rates is assumed to be expensive. At the same time, the more frequent recalculation of exchange rates brings greater damage reduction per DM spent on emission reduction. Chapter 5 calculates the optimal number of times for European carbon exchange rates to be recalculated, given the above trade off. Chapter 5 also reveals that different countries will have different views about the number of times that exchange rates are recalculated. Chapter 5 also looks at emission reduction agreements and emission trading when Eastern European states are involved and when they are not involved. The benefits of multilateral trading compared to bilateral are expounded. Chapter 6 investigates the Atkinson and Tietenberg (1991) sequential trading phenomena that early sub-optimal trades reduce the net gains from a series of trades. The impact of early sub-optimal trades is investigated by modelling different entry and pairing combinations, in scenarios involving initially two buyers and two sellers, and then three buyers and three sellers. Sequential trading will negatively affect carbon trading given the lack of information on carbon emission reduction costs. Sequential trading could be avoided in the sulphur context if a multilateral trading event was arranged to run in tandem with the initial setting of national emission reduction targets