global warming
Tackling Global Warming: Market Instruments or Regulatory SolutionsTel: + 44 (0) 1865 251142, Fax: + 44 (0) 1865 204606Global warming is now officially recognised. Never mind the science, the world will behave as if it is fact-unless forced to recognise more pressing short-term problems, such as global recession. This is probably no bad thing and at least is in line with the principle of precaution. Having signed up to the scenarios at Kyoto, the political process must now prescribe the prophylactic procedures pertinent to performance.It is here that the debate separates out into the visionaries and pragmatists. The first certainly want to reduce the carbon-dioxide-concentrations (CO2), but in a way that is politically correct. This can range from sustainability to cost-effectiveness-depending on which side of the spectrum you are standing. To attain their objectives will require new measures-ethical, economic or ecological-which are nearly all untried or unproven. The pragmatists, who have seen it all before, believe that only command-and-control can cut it.
During the last oil crisis, there were signs that people had started to think seriously about energy efficiency. Experience of being caught between two regulators can be attested to, by the water industry, as not the most efficient way of achieving environmental goals. Further tightening might require a switch from CCGT to renewables or nuclear. Moreover, the kind of tax needed to have a major impact on generation would imply very high prices to customers, having significant distributional implications. In terms of economic efficiency, a permit scheme should have broadly the same advantages as taxes in creating decentralised, marginal incentives. However, this leaves open the difficult question of how to allocate the BAT burden equitably throughout, and within, the different sectors. This would, however, be even less predictable in its effect, and more likely to be passed directly on to the consumer. Under the existing IPC, provision is made for the Secretaries of State of the Environment, Scotland and Wales to instruct the regulators by means of directions, which can include European or British standards. This effect would occur, irrespective of the mechanism for the wholesale electricity market. However, there are still operators who, from choice or necessity, systematically seek to bypass expensive regulation. It should be noted that, given the age of some of the stations, existing sulphur-dioxide (SO2) emission limits and possible pricing policies by coal-fired generators, considerable replacement of coal with CCGT stations between now and 2010 may be expected, even with a coal deal and without a carbon tax. However, if only long-term trends are important, then I think market instruments could be less complicated, costly and challenging. These instruments, as will be argued much more eloquently by my economist colleagues, use market forces to optimise the costs and maximise the effects. Market instruments are bluntThere are also doubts about the market instruments, namely the lack of precision and lack of certainty as to the level needed to meet the targets, and the lack of any clear signal to the consumer as to how the reduction can be most effectively delivered for 'UK plc'.
Common topics in this essay:
Source OXERA,
Task Force,
Introduction Global,
Obligation NFFO,
Market Instruments,
L/tC Tax,
Secretaries Secretaries,
Business Environment,
Control IPPC,
Technology BAT,
carbon tax,
market instruments,
energy tax,
market instruments regulation,
· tax,
instruments regulation,
industrial energy,
coal stations,
table 1,
energy efficiency,
specific targets,
+ 44 0,
tradeable permits tradeable,
permits tradeable permits,
44 0 1865,
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