On June 1, Youth League general branch of Finance Institute held a special lecture in Shahe Eastern the 7th institute floor 217.The topic of this special lecture was carbon pricing strategies, while the speaker of the lecture was David Parker.
Mark Thurber awarded bachelor of Science in Engineering, Department of Mechanical and Aerospace Engineering, Princeton University in 1992, then master of Science, Department of Mechanical Engineering, Stanford University in 1994, Later Doctor of Philosophy, Department of Mechanical Engineering, Stanford University in 1999.From 2007 to present he hold the post of Associate Director and Research Scholar in the program on Energy and Sustainable Development, Stanford University. His personal research areas are effective design of energy and environmental markets, energy and environmental governance in developing countries, policy leverage points for scaling and sustaining energy, health, and environmental interventions among low-income populations. In this talk, Mark Thurber gave the students a detail instruction of carbon pricing strategies, policy challenges when implementing cap and trade, policy recommendations and so on.
First of all, Mark Thurber gave a brief introduction of the two carbon pricing strategies, carbon tax and cap and trade .Now, regions like British Columbia, Australia, Norway, Alberta adopt carbon tax, while ETS, Northeastern US, California and Quebec adopt cap and trade. He pointed that, the nature of carbon tax is setting price, and let emissions fluctuate, while cap and trade is on the contrary. Conventional wisdom think the difference between the two strategies is price certainty or quantity certainty. But, because of limited political credibility of policy, offset and so on, cap and trade may not result in predictable emissions reductions in reality.
Then, Mark Thurber explained some challenges in carbon markets in detail, such as offsets, price sensitivity to demand, information release, market power. A capped region can choose to reduce emissions, or buy allowances, or buy offsets. Offsets means capped region pay uncapped region for emissions reduction project. In the explanation, he use the counterfactual curve and inflate baseline to give the qualitative analysis of some key problems in the process of offsets. When it comes to the leakage, he pointed some capped regions move their factories to uncapped regions. In the situation, all the regions reach the standard , but there is no reduction in global emissions. There are some propose border taxes to deal with this problem, but challenging to implement in practice.
Later, Mark Thurber used vivid case analysis and rich chart data to explain reshuffling, price sensitivity to demand, information release, permit allocation, market power and so on for students in qualitative and quantitative.
Finally, for the problems existing in cap and trade, Mark Thurber mentioned that: the most important is to implement floor and ceiling prices for carbon such as making it more like a carbon tax. Or allow banking and borrowing of allowances across periods and avoid having “last period” or limit size of allowance holdings (“position limits”) and possibly disclose holdings and trades. Of course the best of all is to use a carbon tax instead if politically feasible.
The speech not only laid a solid foundation to students’ basic knowledge, but also increased their recognition of the hot topic(carbon pricing strategies). Discussing with famous professor in the world will broaden the horizon of students. enlighten their thought.