Featured Research

from universities, journals, and other organizations

Energy study commissioned by California Air Resources Board recommends three reforms to protect cap-and-trade

Date:
July 7, 2014
Source:
University of California, Berkeley Haas School of Business
Summary:
California’s landmark cap-and-trade system for regulating greenhouse gases could be vulnerable to price spikes and market manipulation, according to a study. But the state’s air-quality regulators can prevent that outcome with three straightforward reforms, the study says.

California's landmark cap-and-trade system for regulating greenhouse gases could be vulnerable to price spikes and market manipulation, according to a study released today by scholars affiliated with the Energy Institute at Haas. But the state's air-quality regulators can prevent that outcome with three straightforward reforms, the study says.

Related Articles


Specifically, the California Air Resources Board should consider (1) strengthening the new market's price collar -- the so-called allowance price containment reserve -- (2) allowing permits to be converted from one compliance period to another and (3) providing more public information on emissions and emissions-allowance holdings.

"With a couple of straightforward adjustments, California's course for addressing climate change with a market mechanism would be a model for other states and countries," says Prof. Severin Borenstein, the study's principal investigator and research associate, Energy Institute at Haas, UC Berkeley's Haas School of Business.

In addition to Prof. Borenstein, the study's authors are Prof. James Bushnell at UC Davis, Prof. Frank A. Wolak at Stanford University and Matthew Zaragoza-Watkins, a doctoral candidate at UC Berkeley. Profs. Borenstein, Bushnell and Wolak are members of the Market Simulation Group that advised the Air Resources Board.

There is a small, but significant, risk that manipulation could occur if large emitting entities were to buy and hoard excess permits in hopes of inflating the price and then selling, the new report says.

To minimize risks price spikes and manipulation, the Air Resources Board must ensure that it has a large enough reserve of permits for release whenever the price hits the ceiling, the report says. It should also allow emitters to pay a fee to be able to transfer permits intended for use in later compliance periods to earlier ones.

These measures would add up to "an unambiguous policy that credibly limits the maximum allowance price," the report says. Such a policy "is important to market stability and a strong deterrent to attempts at market manipulation."

The Energy Institute at Haas, a part of UC Berkeley's Haas School of Business, unites research and curricular programs on energy business, policy, and technology commercialization. It aims to bridge the gap between the frontiers of economic and scientific energy research and the marketplace.

The abstract to the article is available at: http://ei.haas.berkeley.edu/abstract_wp251.html


Story Source:

The above story is based on materials provided by University of California, Berkeley Haas School of Business. Note: Materials may be edited for content and length.


Cite This Page:

University of California, Berkeley Haas School of Business. "Energy study commissioned by California Air Resources Board recommends three reforms to protect cap-and-trade." ScienceDaily. ScienceDaily, 7 July 2014. <www.sciencedaily.com/releases/2014/07/140707212541.htm>.
University of California, Berkeley Haas School of Business. (2014, July 7). Energy study commissioned by California Air Resources Board recommends three reforms to protect cap-and-trade. ScienceDaily. Retrieved March 4, 2015 from www.sciencedaily.com/releases/2014/07/140707212541.htm
University of California, Berkeley Haas School of Business. "Energy study commissioned by California Air Resources Board recommends three reforms to protect cap-and-trade." ScienceDaily. www.sciencedaily.com/releases/2014/07/140707212541.htm (accessed March 4, 2015).

Share This


More From ScienceDaily



More Earth & Climate News

Wednesday, March 4, 2015

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Raw: Tourists Visit Rare Grey Whales in Mexico

Raw: Tourists Visit Rare Grey Whales in Mexico

AP (Mar. 4, 2015) Once nearly extinct, grey whales now migrate in their thousands to Mexico&apos;s Vizcaino reserve in Baja California, in search of warmer waters to mate and give birth. Tourists flock to the reserve to see the whales, measuring up to 49 feet long. (March 4) Video provided by AP
Powered by NewsLook.com
Raw: Injured Miners Treated After Blast

Raw: Injured Miners Treated After Blast

AP (Mar. 4, 2015) An explosion ripped through a coal mine before dawn Wednesday in war-torn eastern Ukraine, killing at least one miner, officials said. Graphic video of injured miners being treated in a Donetsk hospital. (March 4) Video provided by AP
Powered by NewsLook.com
Australian Museum Shares Terrifying Goblin Shark With the World

Australian Museum Shares Terrifying Goblin Shark With the World

Buzz60 (Mar. 4, 2015) The Australian Museum has taken in its fourth-ever goblin shark, a rare fish with an electricity-sensing snout and &apos;alien-like&apos; jaw. Mike Janela (@mikejanela) takes a look. Video provided by Buzz60
Powered by NewsLook.com
Mount Everest Has a Poop Problem

Mount Everest Has a Poop Problem

Buzz60 (Mar. 4, 2015) With no bathrooms to use, climbers of Mount Everest have been leaving human waste on the mountain for years, and it&apos;s becoming a health issue. Mike Janela (@mikejanela) has more. Video provided by Buzz60
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:

Breaking News:

Strange & Offbeat Stories


Plants & Animals

Earth & Climate

Fossils & Ruins

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile: iPhone Android Web
Follow: Facebook Twitter Google+
Subscribe: RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins