Publication:
Prospects for Markets for Internationally Transferred Mitigation Outcomes under the Paris Agreement

Loading...
Thumbnail Image
Files in English
English PDF (546.25 KB)
716 downloads
English Text (136.77 KB)
37 downloads
Date
2022-05
ISSN
Published
2022-05
Author(s)
Abstract
The Paris Agreement provides for parties to use internationally transferred mitigation outcomes in implementing their Nationally Determined Contributions. This paper analyzes forward trading of these outcomes in the presence of two forms of uncertainty: (1) uncertainty about the fulfillment of Nationally Determined Contribution targets, and (2) uncertainty about the existence and functioning of the forward, options, and future spot markets markets for internationally transferred mitigation outcomes. When parties can sell and buy internationally transferred mitigation outcomes forward, access to call options for late purchases leads to correspondingly larger forward sales, or less current mitigation. Access to put options for late internationally transferred mitigation outcome sales does not affect forward trading outcomes but increases late sales for net sellers. Access to options markets is welfare enhancing for all parties, and call options help parties stay in compliance with their Nationally Determined Contributions at the Paris Agreement end point, 2030. The existence of internationally transferred mitigation outcome markets may be in peril, however, as banking beyond 2030 is not allowed. The availability and functioning of internationally transferred mitigation outcome markets can be enabled or improved by increased climate finance provided by donors. With no options markets, host countries will still sell internationally transferred mitigation outcomes forward, albeit less so, and rely on access to more expensive “backstop” mitigation for ex-post compliance with their Nationally Determined Contributions. Closed-form solutions are derived for trading and its welfare impacts in all the option contract alternatives, given that parties’ uncertainties about fulfilling their commitments are uniformly distributed. The welfare impact of the availability of put and call option contracts is then strongly increasing in uncertainty, and in ex-post and forward outcome prices.
Link to Data Set
Citation
Strand, Jon. 2022. Prospects for Markets for Internationally Transferred Mitigation Outcomes under the Paris Agreement. Policy Research Working Papers;10045. © World Bank, Washington, DC. http://hdl.handle.net/10986/37457 License: CC BY 3.0 IGO.
Report Series
Report Series
Other publications in this report series
  • Publication
    Profiling Green Jobs and Workers in South Africa
    (Washington, DC: World Bank, 2024-05-21) Mosomi, Jacqueline; Cunningham, Wendy
    To adequately prepare the labor force for the green economy, policy makers and workers require a detailed understanding of the nature of green jobs. This study profiles green jobs in the South African labor market. It uses labor force survey data and applies an occupational task-based approach to identify current green occupations and associated jobs, count them, and profile their workers and wages. The findings show that 5.5 to 32 percent of South Africa’s jobs can be labeled as “green,” where the former estimate uses a strict definition and the latter uses a broad definition. The share of strictly green jobs has not changed over the past eight years. While 65 percent of strictly green occupations can be classified as high (skill) occupations, only 55 percent of workers are in these occupations, reflecting numerous employment opportunities in mid-level and elementary green occupations. Strictly green occupations tend to be male-dominated and held by prime-age (25–44) workers with post-secondary school. However, the profile of those in the greenest of the green occupations shows that they are older (age 45–65) workers and Black Africans with lower than completed high school education. Policies to prepare South Africans to engage in the green economy include developing a strategy to teach new and existing workers to use green technologies; targeting green occupations in youth development programs; making a concerted effort to support women in science, technology, engineering, and mathematics; helping low-skilled green workers to organize and improve their work conditions; and continuing to collect and analyze data for better tracking South Africa’s progress in becoming a green labor force.
  • Publication
    Place-Based Preferential Policies and Firm Performance
    (Washington, DC: World Bank, 2024-05-21) Galal, Rami
    Economic zone programs are generally pursued to improve firms' performance within discrete areas by removing the constraints firms face. Whether or not they succeed in doing so is an empirical question. This paper capitalizes on a unique survey of firms within and outside zones in South Asia to assess the effects of zone programs on firms’ performance in exports, investment, employment, and productivity. Adopting a propensity score matching approach and district-level fixed effects, the paper explores four questions: whether zones support firm performance; whether the type of zone makes a difference, which kinds of public support services matter more, and whether firms inside zones grow faster. The results show that (i) being inside a zone positively affects foreign direct investment and employment, (ii) the effects across zone types are mixed, (iii) infrastructure and trade facilitation play a greater role in firm performance than fiscal incentives and governance facilities, and (iv) firms inside zones grow faster.
  • Publication
    Economic Consequences of Cabotage Restrictions
    (Washington, DC: World Bank, 2024-05-21) Hillberry, Russell; Jimenez, Manuel I.
    This paper studies the consequences of a U.S. cabotage law for Puerto Rico (PR). Data on ship arrivals in PR show that the fleet of U.S. vessels that call there lacks capacity for carrying non-containerized freight. Empirical estimation using trade data shows that PR’s imports of sea-shipped final products are biased against U.S. mainland sources. This bias is strongest for heavy products and products not typically shipped in containers. Among upstream products, a strong bias against imports of sea-shipped products applies to all sources. Estimated tariff-equivalent costs among final products imply static annual welfare losses of 1.1 percent of household consumption ($203 per person). The same tariff-equivalent cost estimates imply that the law raises the cost of investment in PR by 3.0 percent. The observed bias against sea-shipped inputs in PR’s imports may result from long-run industry location decisions that have been influenced by the law's presence.
  • Publication
    Did the 2022 global energy crisis accelerate the diffusion of low-carbon technologies?
    (Washington, DC: World Bank, 2024-05-20) Bastos, Paulo; Greenspon, Jacob; Stapleton, Katherine; Taglioni, Daria
    This paper develops measures of the diffusion of a comprehensive range of low-carbon technologies in 35 countries from 2019 to 2022 using text analysis of job postings and earnings calls transcripts. It documents a rapid acceleration in the diffusion of low-carbon technologies in 2022, driven by technologies related to renewable energy, vehicles, thermal performance, and electrical generation and storage. Rapid growth occurred in three quarters of the countries studied and 228 of 300 subnational regions, although was fastest in Europe. Hiring for roles related to low-carbon technologies in these 35 countries doubled between 2019 and the end of 2022, for example. It studies the role of the global energy crisis in triggering this accelerated technology diffusion, focusing on 16 mainly advanced economies. It finds that establishments in countries that had a higher pre-crisis dependence on imports of natural gas, and were thus more exposed to the price shock, differentially increased hiring for low-carbon technology related roles from March 2022 onwards. Within more exposed countries, establishments with a higher pre-crisis energy intensity also saw a differential increase in hiring relative to less energy intensive ones.
  • Publication
    Heat and Law Enforcement
    (Washington, DC: World Bank, 2024-05-17) Behrer, A. Patrick; Bolotnyy, Valentin
    Using administrative criminal records from Texas, this paper shows how high temperatures affect the decision making of police officers, prosecutors, and judges. It finds that police reduce the number of arrests made per reported crime on the hottest days and that arrests made on these days are more likely to be dismissed in court. For prosecutors, high temperature on the day they announce criminal charges does not appear to affect the nature and severity of the charges. However, judges dismiss fewer cases, issue longer prison sentences, and levy higher fines when ruling on hot days. The results suggest that the psychological and cognitive consequences of exposure to high temperatures have meaningful consequences for criminal defendants as they interact with the criminal justice system.
Journal
Journal Volume
Journal Issue
Associated URLs
Associated content
Citations