Lecture

Market-Based Instruments: Emission Reduction Strategies

Graph Chat

Chat with Graph Search

Ask any question about EPFL courses, lectures, exercises, research, news, etc. or try the example questions below.

DISCLAIMER: The Graph Chatbot is not programmed to provide explicit or categorical answers to your questions. Rather, it transforms your questions into API requests that are distributed across the various IT services officially administered by EPFL. Its purpose is solely to collect and recommend relevant references to content that you can explore to help you answer your questions.

In course

ENV-471: Environmental economics

Introduction to economic analysis applied to environmental issues: all the necessary basic concepts, including cost-benefit analysis, for environmental policy making and its instruments (examples: climate, waste, mobility). Introduction to financial calcul ...

Description

This lecture discusses the role of market-based instruments in achieving optimal emission reductions. The instructor explains how these instruments allow emitters to choose their abatement strategies while ensuring that the overall reduction in emissions is achieved at the lowest cost. The lecture covers the concept of marginal abatement costs and the importance of equalizing these costs across different sources of emissions. The instructor illustrates how a uniform price on emissions can lead to efficient allocation of abatement efforts, emphasizing that emitters will adjust their strategies based on the price signal. Additionally, the lecture addresses potential discrepancies in cost perceptions between emitters and social planners, highlighting issues such as the landlord-tenant paradox and the importance of considering co-benefits. The instructor concludes by discussing the necessity of complementary measures alongside market instruments to ensure effective emission reductions, particularly in real-world scenarios where subjective and objective costs may differ.

Instructor

Philippe Thalmann

Philippe Thalmann was born in Lausanne in 1963. He graduated in Economics from the University of Lausanne in 1984, where he earned a postgraduate diploma in Economics in 1986. Mr. Thalmann entered the doctoral program in Economics of Harvard University (Cambridge, U.S.A.) in 1986, which he completed with a Ph.D. in 1990. His dissertation is entitled: "Essays in the Economics of Government Revenues and Spending". Returning to Switzerland, he was hired as an assistant professor first at the University of Geneva (teachings in Public Economics), then at the University of Lausanne (teachings in Econometrics and Introductory Economics). Since 1994, Mr. Thalmann is associate professor of Economics as the Swiss Federal Institute of Technology at Lausanne.

Official source

Ontological neighbourhood

Economics

Microeconomics: Economic systems, Labor economics

Macroeconomics: Markets

Environmental science

Climate: Climate change mitigation

Mathematics

Analysis: Measure theory

Related concepts (32)

Price ceiling

A price ceiling is a government- or group-imposed price control, or limit, on how high a price is charged for a product, commodity, or service. Governments use price ceilings to protect consumers from conditions that could make commodities prohibitively expensive. Such conditions can occur during periods of high inflation, in the event of an investment bubble, or in the event of monopoly ownership of a product, all of which can cause problems if imposed for a long period without controlled rationing, leading to shortages.

Price controls

Price controls are restrictions set in place and enforced by governments, on the prices that can be charged for goods and services in a market. The intent behind implementing such controls can stem from the desire to maintain affordability of goods even during shortages, and to slow inflation, or, alternatively, to ensure a minimum income for providers of certain goods or to try to achieve a living wage. There are two primary forms of price control: a price ceiling, the maximum price that can be charged; and a price floor, the minimum price that can be charged.

Price floor

A price floor is a government- or group-imposed price control or limit on how low a price can be charged for a product, good, commodity, or service. A price floor must be higher than the equilibrium price in order to be effective. The equilibrium price, commonly called the "market price", is the price where economic forces such as supply and demand are balanced and in the absence of external influences the (equilibrium) values of economic variables will not change, often described as the point at which quantity demanded and quantity supplied are equal (in a perfectly competitive market).

Emissions trading

Emissions trading is a market-based approach to controlling pollution by providing economic incentives for reducing the emissions of pollutants. The concept is also known as cap and trade (CAT) or emissions trading scheme (ETS). Carbon emission trading for and other greenhouse gases has been introduced in China, the European Union and other countries as a key tool for climate change mitigation. Other schemes include sulfur dioxide and other pollutants.

Cost curve

In economics, a cost curve is a graph of the costs of production as a function of total quantity produced. In a free market economy, productively efficient firms optimize their production process by minimizing cost consistent with each possible level of production, and the result is a cost curve. Profit-maximizing firms use cost curves to decide output quantities. There are various types of cost curves, all related to each other, including total and average cost curves; marginal ("for each additional unit") cost curves, which are equal to the differential of the total cost curves; and variable cost curves.

Related lectures (64)

Reducing Emissions: Cost Analysis and Maximizing Profit

Explores cost analysis to reduce emissions and maximize profit through optimal measures.

Marginal Abatement Costs: Pricing Emissions and Incentives

Covers marginal abatement costs, pricing emissions, and the role of taxes and subsidies in emission reduction strategies.

Global Warming: Emissions and Mitigation Strategies

Discusses global warming, its emissions sources, and necessary mitigation strategies.

Decoupling Economic Growth from Carbon Emissions

Addresses the need for significant CO2 intensity reduction to achieve climate targets while examining the interplay between economic growth and carbon emissions.

Abatement Options: Phasing Out Fossil Energy