Policy analysis and evaluation
This component seeks to analyse and evaluate the effectiveness of policy responses to climate change at multiple levels - national, regional and international. So far, our major foci have been:
The EU Emissions Trading System (ETS)
While the EU created the world’s first carbon market in 2005, very little is known about how effective it has been, how individual firms behave in this market and how it affects their competitiveness and innovative behaviour. Our research in this area has been to analyse the permit allocation mechanism and the vulnerability of firms to climate policy. We are also studying the impact of the allocation mechanism on “clean” innovation. A further strand of work seeks to measure the impact of the EU Emissions Trading System on the level of emissions of firms included in the policy as well as their innovation, employment and economic performance. By collecting firm-level data in several European countries, including the UK and France, we can compare firms before and after the start of the market in 2005 as well as with similar firms that are not included in the policy. The results of this research will be crucial in assessing the efficiency of the EU ETS and in designing its future evolution.
The Grantham Institute has been working on International energy governance, through an FCO-funded collaboration with the Chinese Energy Research Institute. China’s role in international co-operation on energy policy does not remotely match China’s significance in world energy. This is a matter of concern in China and more widely. Getting China and other major developing nations around the table on energy policy is important for climate mitigation as well as for energy security. The purpose of this project is to help evaluate the options for achieving this. The project is gaining traction through a series of international discussions and events in Beijing, Washington, and London and through a Steering Committee co-chaired by Minister Zhang (Head of China’s National Energy Expert Advisory Committee), Lord Browne, and David Sandalow, recently Assistant Secretary at the US Department of Energy. Read more
The international climate negotiations
To limit climate risks, a substantial and sustained reduction in global energy-related carbon dioxide emissions remains the critical policy and practical challenge. In our paper, "Prospects for Paris 2015: do major emitters want the same climate?", we develop a novel, stylised model of climate change and economic growth to provide qualitative and quantitative insight into some key influences on the dynamics of international climate discussions arising from heterogeneity in national economic and technological endowments. This has implications for how governments should approach the mitigation aspects of the next climate agreement due to be agreed in Paris in 2015.