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Stacking of abatement credits for cost-effective achievement of climate and water targets

Ing-Marie Gren and Frederic Ang

Ecological Economics, 2019, vol. 164, issue C, -

Abstract: In a stacking system abatement measures with simultaneous effects on climate and water targets, such as wetland construction and cultivation of energy crops, are credited for the abatement of multiple pollutants. In this study we calculated and compared the abatement costs of achieving multiple environmental targets with and without stacking under different policy regimes (emissions trading, charge, standards). To this end, a static mixed integer programming model was constructed. Theoretical analysis showed that, irrespective of policy regime, the cost of achieving predetermined emission targets is always lower when stacking is allowed. Another result was the excess abatement of pollutant under a no stacking system. Application to the Baltic Sea region showed that cost savings from stacking of pollutant abatement vary between policy regimes, being smallest for price regulation and highest for emission standards. However, the gains from stacking were unevenly distributed among the nine countries surrounding the Baltic Sea under all policy regimes, with Poland making the largest gain and Estonia, Russia and Latvia facing losses. Excess abatement without stacking in relation to the target was highest for nitrogen under all policy regimes, comprising up to 52% of the target abatement.

Keywords: Interacting pollutants; Stacking; Cost-effectiveness; Mixed integer programming; Baltic Sea region (search for similar items in EconPapers)
JEL-codes: D99 O13 Q52 Q53 Q54 (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:eee:ecolec:v:164:y:2019:i:c:28