The safety valve and climate policy

By H. Jacoby, A. Ellerman. 2004

323 citations recorded by the source corpus.

Abstract The “safety valve” is a possible addition to a cap-and-trade system of emissions regulation whereby the authority offers to sell permits in unlimited amount at a pre-set price. In this way the cost of meeting the cap can be limited. It was proposed in the US as a way to control perceived high costs of the Kyoto Protocol, and possibly as a way to shift the focus of policy from the quantity targets of the Protocol to emissions price. In international discussions, the idea emerged as a proposal for a compliance penalty. The usefulness of the safety valve depends on the conditions under which it might be introduced. For a time it might tame an overly stringent emissions target. It also can help control the price volatility during the introduction of gradually tightening one, although permit banking can ultimately serve the same function. It is unlikely to serve as a long-term feature of a cap-and-trade system, however, because of the complexity of coordinating price and quantity instruments and because it will interfere with the development of systems of international emissions trade.

Subfields: Economics and Econometrics, Global and Planetary Change, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/c67384c1c80f319c77c918a62db05f5a9afbe717

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Citations in the corpus

Carbon Taxes vs. Cap and Trade: A Critical Review (2013, unknown): “25 For a detailed discussion, see Pizer (2002), Jacoby and Ellerman (2004), Burtraw and Palmer (2006), and Wood and Jotzo (2011).”
The Kyoto Protocol: A Review and Perspectives (2003, background): “The price cap may form part of a hybrid policy mix combining some cap-and trade setting with a safety-valve (see, for example, Alday et al., 2001; Jacoby and Ellerman, 2003).”
Carbon Footprint and the Management of Supply Chains: Insights From Simple Models (2013, background): “Numerous variations on these two types of instruments have been studied; see, for example, [16]–[18].”
Addressing Climate Change with a Comprehensive U.S. Cap-and-Trade System (2008, unknown): “The pre-determined fee places a ceiling on allowance prices and hence on abatement costs, because no firms would undertake emission reductions more costly than the trigger price (Jacoby and Ellerman, 2002).”
Using a Policy Mix for Pollution Control { A Review of Economic Literature (2012, unknown): “Jacoby and Ellerman (2004) emphasize that national safety valves may impair the operation and efficiency of an international permit trading scheme.”
COMBINING MULTIPLE CLIMATE POLICY INSTRUMENTS: HOW NOT TO DO IT (2010, unknown): “3 Recently, a number of authors including Jacoby and Ellerman (2004), Fell et al (2008), Murray et al (2009) and Philibert (2009) have argued that a hybrid system such as a safety valve, in which a carbon tax acts as an effective price ceiling on a cap-and-trade system, may yield superior welfare…”
Assessment of U.S. Cap-and-Trade Proposals (2007, unknown): “4 For an analysis of these systems and their relation to banking and borrowing see Jacoby and Ellerman (2004).”
Integrated Risk and Uncertainty Assessment of Climate Change Response Policies (2014, background): “30 A large body of cognitive psychology and behavioural decision research has distinguished between 31 two modes of thinking that go back to William James (1878) and Heidegger (1962) and have recently 32 been described by Kahnemann (2003; 2011) as System 1 and System 2: 33 System 1 operates automati”
Designing an effective climate-policy mix: accounting for instrument synergy (2021, background): “Specific additional elements add further benefits, such as limiting volatility of the carbon price through a minimum price or price floor, and avoiding unsurmountable costs for emitters through a maximum price or “safety valve” (Jacoby and Ellerman, 2004; Philibert, 2009).”