Carbon capture and storage and transboundary pollution: A differential game approach

We study the strategic behavior of two countries facing transboundary CO₂ pollution under a differential game setting. In our model, the reduction of CO₂ concentration occurs through the carbon capture and storage process, rather than through the adoption of cleaner technologies. Furthermore, we first provide the explicit short-run dynamics for this dynamic game with symmetric open-loop and a special Markovian Nash strategy. Then, we compare these strategies at the games’ steady states and along some balanced growth paths. Our results show that if the initial level of CO₂ is relatively high, state dependent emissions reductions can lead to higher overall environmental quality, hence, feedback strategy leads to less social waste.     

Local air pollutant emission reduction and ancillary carbon benefits of SO2 control policies: Application of AIM/CGE model to China

While a great deal of literature has been published in recent years on the ancillary benefits of greenhouse gas mitigation (e.g., reductions in local air pollution), less attention has been focused on the climate benefits of local air pollution strategies themselves. Local air pollution is, however, a more immediate issue now faced by developing countries. This study assesses the impacts on local air pollutant emission reduction and ancillary CO₂ emission reduction of SO₂ control policies in China, such as a sulphur tax, SO₂ total emissions control (TEC), and improvement of energy efficiency, based on the Asia-Pacific Integrated Model (AIM)/Computable General Equilibrium (CGE) country model. The simulation period is from 1997 to 2020. Major conclusions include the following: an SO₂ emission cap will help to control SO₂ emissions, but will result in a large GDP loss; the role of a SO₂ emission tax at the present level is very limited; and an ancillary carbon reduction benefit can be achieved through the introduction of SO₂ control policies in China.     

Productivity differences across OECD countries in the presence of environmental constraints

The purpose of this paper is to carry out a computational analysis of the tradeoffs between a good output and the CO₂ emissions or bad output that is often created as a by-product of the production process. The efficiency of this process is computed through a series of DEA formulations, related to the two outputs. One formulation considers the strategy of minimizing the pollution level produced for the generation of a given good-output level. Another seeks the maximum good-output production for a set bad-output level. A mixed strategy looks for simultaneous increases in the good output and decreases in CO₂ emissions. A fourth ignores altogether the presence of the bad output. The empirical analysis illustrates the feasibility of achieving productivity growth and pollution decreases. It also identifies country trends for the 1970–1990 period in the production of good and bad outputs of 14 OECD countries. These trends resemble quite closely the strategies described in the paper.     

The long-term impact of GHG reduction policies on global trade: A case study for the petrochemical industry

A systems engineering model has been developed for the global petrochemical industry, named FREAK (FoReign trade Effect Assessment Kit). FREAK has been developed for the analysis of the impact of CO₂ taxes on the international trade and the global production structure. A life cycle approach has been applied for 50 petrochemical products and a broad range of emission reduction strategies have been considered. The scope of the policies has been varied (which countries apply the tax) and the policy ambition has been varied (the tax level). The results show that the regional distribution of the petrochemical production will not change significantly in case global policies are introduced. However, the regional distribution will change significantly if only a limited number of industrialised countries introduce a tax. The regional impact of such a tax depends on the carbon accounting approach for intermediate petrochemical products trade. The impacts can even be positive for the industry within the policy region. The techno-economic potential for emission mitigation is significant, even from a global perspective. The physical production volume increases threefold between 1995 and 2025. In the base case (BC) without policies, emissions increase by 65% to 970 Mt CO₂ in 2025. Global greenhouse gas (GHG) policies could halve these emissions. A 20% reduction (approximately 200 Mt) can be achieved in case developing countries and oil exporting countries do not participate in emission reduction.     

Revenue recycling of a CO2 tax: Results from a general equilibrium model for Switzerland

This paper combines a recent proposal by the Swiss government for a CO₂ tax with a policy that uses the tax revenues to lower the pre-existing marginal labor income tax rates, and examines the efficiency and distribution effects of such a revenue recycling policy. The investigation, based on a large-scale general equilibrium model, contrary to other studies, indicates that an environmental tax reform involves negative gross cost, that is, increases welfare even when environmental benefits are not accounted for. The simulation results further show that the adverse distributional effects of a pure CO₂ tax are neutralized or even reversed when tax revenues finance cuts of existing taxes.We thank Tom Rutherford, Reto Schleiniger and two anonymous referees for helpful comments on an earlier draft of this paper. Financial support by the Federal Agency for Energy under the SOEFF program is gratefully acknowledged. The views expressed here are those of the authors and do not represent the opinions of the granting agency.     

Measuring technical efficiency in the presence of pesticide spillovers and production uncertainty: The case of Dutch arable farms

Pesticides’ dynamic effects and production uncertainty play an important role in farmers’ production decisions. Pesticides have a current production impact through reducing crop damage in the current period and a future impact through impacting the farm biodiversity which alters the future production environment. This study presents the difference in inefficiency arising from models that ignore the dynamic effects of pesticides in production decisions and the impact of production uncertainty. A dynamic data envelopment analysis (DEA) model is applied to outputs, inputs, and undesirables of Dutch arable farms over the period 2003–2007. A bootstrap approach is used to explain farmers’ performance, providing empirical representations of the impact of stochastic elements on production. These empirical representations are used to adjust firms’ inefficiency scores to incorporate production uncertainty in efficiency evaluation. We find that efficiency increased dramatically when a production technology representation that considers both pesticides’ dynamic impacts, and production uncertainty is adopted.     

Real options analysis of investment in carbon capture and sequestration technology

Among a comprehensive scope of mitigation measures for climate change, CO₂ capture and sequestration (CCS) plays a potentially significant role in industrialised countries. In this paper, we develop an analytical real options model that values the choice between two emissions-reduction technologies available to a coal-fired power plant. Specifically, the plant owner may decide to invest in either full CCS (FCCS) or partial CCS (PCCS) retrofits given uncertain electricity, CO₂, and coal prices. We first assess the opportunity to upgrade to each technology independently by determining the option value of installing a CCS unit as a function of CO₂ and fuel prices. Next, we value the option of investing in either FCCS or PCCS technology. If the volatilities of the prices are low enough, then the investment region is dichotomous, which implies that for a given fuel price, retrofitting to the FCCS (PCCS) technology is optimal if the CO₂ price increases (decreases) sufficiently. The numerical examples provided in this paper using current market data suggest that neither retrofit is optimal immediately. Finally, we observe that the optimal stopping boundaries are highly sensitive to CO₂ price volatility.     

Harmonizing model with transfer tax on water pollution across regional boundaries in a China’s lake basin

This paper presents a bilevel programming framework for a harmonizing model with transfer tax (HMTT) on water pollution across regional boundaries of a lake basin in China, where the administrator is the upper-level decision maker and individual regions consisting of the lake basin are the lower-level decision makers (followers). Leader’s cost is the total pollution reduction cost, whereas each region selfishly minimizes its own cost including reduction cost and transfer cost, given the transfer tax rate imposed by the leader. The HMTT guarantees that the imposed environmental quality standard is met through the transfer tax. Based on the KKT conditions of an auxiliary problem, we obtain that the solution set of the HMTT is nonempty. An algorithm is proposed, with the convergence result, to compute the cost-minimized transfer tax rate along with the reduction quantities of individual regions. Theoretical analysis and a case study for China’s Taihu Lake Basin show that the HMTT is superior to the current model of proportional share of pollution reduction (MPSPR). The HMTT not only solves the problem of conflicts over water pollution across regional boundaries but also utilizes the resources of the lake basin more efficiently.     

Energy and CO2 emission performance in electricity generation: A non-radial directional distance function approach

This paper presents a non-radial directional distance function approach to modeling energy and CO₂emission performance in electricity generation from the production efficiency point of view. We first define and construct the environmental production technologies for the countries with and without CHP plants, respectively. The non-radial direction distance function approach is then proposed and several indexes are developed to measure energy and CO₂ emission performance of electricity generation. The directional distance functions established can be computed by solving a series of data envelopment analysis models. We then conduct an empirical study using the dataset for over one hundred countries. It is found that OECD countries have better carbon emission performance and integrated energy-carbon performance than non-OECD countries in electricity generation, while the difference in energy performance is not significant.     

A Multiphasic Model Describing the CO2 Injection Problem

According to the annual data, the portion of ejected carbon dioxide (CO₂) into the atmosphere is much higher in comparison to other greenhouse gases. Therefore, the development of various scenarios in order to reduce the CO₂ concentration in the atmosphere is nowadays a challenge and a relevant subject in research. The current investigation is dedicated to the modelling of a CO₂ injection into a water-saturated aquifer as the most capable reservoir, where its upward migration is blocked by a dense cap-rock layer. The major part of the study is focused on two specific processes taking place in the stored reservoir: the phase transfer phenomenon of the supercritical CO₂ which occurs under changeable surrounding conditions and the sequestration-driven deformation of the solid skeleton acting under the pressure of the pumped CO₂. For the numerical simulations within a continuum-mechanical framework, a multiphasic model based on the Theory of Porous Media is introduced. Moreover, the main principles of developing a constitutive equation for the mass production term for the mass balance equation are discussed here. (© 2010 Wiley-VCH Verlag GmbH & Co. KGaA, Weinheim)     

A graph efficiency multiproduct model of corn/livestock farming: Accounting for nitrate pollution

This paper estimates a non-parametric production frontier for a population of 117 corn/livestock farms in the Corn Belt region in 1987, employing a hyperbolic graph efficiency approach. There are 7 outputs, 39 variable inputs, 4 fixed inputs, and one bad input (residual nitrogen). Three graph efficiency models are estimated. A profit maximization model is specified to estimate a production frontier constrained only by the fixed factors. Two other models involving tax constraints are also estimated. One involves a tax directly on nitrogen and the other involves a tax directly on residual nitrogen, making the disposal of residual nitrogen costly. The nitrogen tax constraint is more effective in reducing residual nitrogen loadings and causes a larger reduction in income than the residual tax constraint.     

Strategic response to pollution taxes in supply chain networks: Dynamic,spatial, and organizational dimensions

This paper presents a model of the strategic behavior of firms operating in a spatial supply chain network. The manufacturing and retailing firms engage in an oligopolistic, noncooperative game by sharing customer demand such that a firm’s decisions impact the product prices, which in turn result in changes in all other firms’ decisions. Each firm’s payoff is to maximize its own profit and we show that, in response to such changes in prices and to exogenous environmental taxes, the manufacturing firms may strategically alter a variety of choices such as ’make-buy’ decisions with respect to intermediate inputs, spatial distribution of production, product shipment patterns and inventory management, environmental tax payment vs recycling decisions, and timing of all such choices to sustainably manage the profit and the environmental regulations. An important implication is that effects of a tax depends on the oligopolistic game structure. With respect to methods, we show that this dynamic game can be represented as a set of differential variational inequalities (DVIs) that motivate a computationally efficient nonlinear complementarity (NCP) approach that enables the full exploitation of above-mentioned salient features. We also provide a numerical example that confirms the utility of our proposed framework and shows substantial strategic reaction can be expected to a tax on pollution stocks.     

Continuous-time, stage-structured, multiple-species model with applications to amphibians

Since the 1980s, biologists have noticed a major decline in amphibian population. The reason this is so alarming is because amphibians have been seen as a “Canary in the mine” when it comes to the world’s environmental changes. With global warming and CO₂ emissions all over the news, we have become more aware of how we are impacting our world. If the decline of amphibians is a precursor to what is happening with the environment, then we need to find a good model to give us estimates on what is going to happen in the future. Here we used a predator-prey-competition model to help investigate how three amphibians might interact when confined to the same area.     

Supporting hydrogen based transportation: case studies with Global MARKAL Model

Steadily growing prices of oil and emissions coming from conventional vehicles, might force a switch to an alternative and less polluting fuel in the coming future. In this article we analyze the potential influence of selected factors for successful market penetration of hydrogen fuel cell vehicles in hydrogen based private transportation economy. Using a world scale, full energy system, bottom-up, optimization model (Global MARKAL Model—GMM) we address the possibility of supporting the fuel cell vehicle technology to become competitive in the markets. In a series of optimizations we evaluate the potential influence of governmental supports and the internalization of externalities related to CO₂ and local pollution emissions originating from the transportation sector, as well as preferential crediting options and demonstration projects promoting fuel cell vehicles. The results suggest that the crucial element is the price of fuel cells and their further potential to reduce costs. This reduction of costs may be triggered by governmental support such as direct subsidies to fuel cells, preferential crediting options for the buildup of hydrogen infrastructure as well as penalization of emitters of CO₂ and/or local pollutants.     

Probabilistic modeling and global sensitivity analysis for CO2 storage in geological formations: a spectral approach

This work focuses on the simulation of CO₂ storage in deep underground formations under uncertainty and seeks to understand the impact of uncertainties in reservoir properties on CO₂ leakage. To simulate the process, a non-isothermal two-phase two-component flow system with equilibrium phase exchange is used. Since model evaluations are computationally intensive, instead of traditional Monte Carlo methods, we rely on polynomial chaos (PC) expansions for representation of the stochastic model response. A non-intrusive approach is used to determine the PC coefficients. We establish the accuracy of the PC representations within a reasonable error threshold through systematic convergence studies. In addition to characterizing the distributions of model observables, we compute probabilities of excess CO₂ leakage. Moreover, we consider the injection rate as a design parameter and compute an optimum injection rate that ensures that the risk of excess pressure buildup at the leaky well remains below acceptable levels. We also provide a comprehensive analysis of sensitivities of CO₂ leakage, where we compute the contributions of the random parameters, and their interactions, to the variance by computing first, second, and total order Sobol’ indices.     

A two-fluid storage model with Lévy inputs and alternating outputs

In this paper we consider a storage model with two types of inputs and outputs that are subject to seasonal switching. Inputs are assumed to occur in a fluid fashion whereas outputs occur at a unit rate so long as the corresponding storage is non-empty. The distribution properties of the storage levels {Z ₁(t),Z ₂(t)} are derived at finite time as well as in stationary regime. We first investigate this process embedded at the successive switching points. This process is Markovian with independent components. In continuous time the components {Z ₁(t),Z ₂(t)} are also independent for each finite t, but are dependent in stationary regime.      

A multiple criteria decision making approach to manure management systems in the Netherlands

The intensification of livestock operations in the last few decades has resulted in an increased social concern over the environmental impacts of livestock operations and thus making appropriate manure management decisions increasingly important. A socially acceptable manure management system that simultaneously achieves the pressing environmental objectives while balancing the socio-economic welfare of farmers and society at large is needed. Manure management decisions involve a number of decision makers with different and conflicting views of what is acceptable in the context of sustainable development. This paper developed a decision-making tool based on a multiple criteria decision making (MCDM) approach to address the manure management problems in the Netherlands. This paper has demonstrated the application of compromise programming and goal programming to evaluate key trade-offs between socio-economic benefits and environmental sustainability of manure management systems while taking decision makers’ conflicting views of the different criteria into account. The proposed methodology is a useful tool in assisting decision makers and policy makers in designing policies that enhance the introduction of economically, socially and environmentally sustainable manure management systems.     

A relax-and-fix-based algorithm for the vehicle-reservation assignment problem in a car rental company

Empty repositions are a major problem for car rental companies that deal with special types of vehicles whose number of units is small. In order to meet reservation requirements concerning time and location, companies are forced to transfer cars between rental stations, bearing significant costs and increasing the environmental impact of their activity due to the fuel consumption and CO₂${\text{CO}}_2$ emission. In this paper, this problem is tackled under a vehicle-reservation assignment framework as a network-flow model in which the profit is maximized. The reservations are allocated considering the initial and future availability of each car, interdependencies between rental groups, and different reservation priorities. To solve this model, a relax-and-fix heuristic procedure is proposed, including a constraint based on local branching that enables and controls modifications between iterations. Using real instances, the value of this approach is established and an improvement of 33% was achieved when compared to the company’s current practices.     

Radiation balance of the lower stratosphere

A study of the radiation balance of the atmosphere involves the determination of the absorption and emission of radiant energy due to the different constituents of the atmosphere. In the stratosphere below 50 km., these are mainly ozone, CO₂ and water vapour. The major part of the absorbed energy is from solar radiation, the actual absorption at different levels being determined by the absorption coefficients of these gases and their vertical distributions. In this paper, a detailed survey is made of all the available data and of the recent methods developed for using such data, and after proper selection, curves are prepared giving the solar energy absorbed by different quantities of O₃, CO₂ and H₂O. These are used to calculate the absorption of solar energy per unit volume and per unit mass in different 2 km. layers for certain vertical distributions of the constituents. It is seen that the mass density of absorption due to ozone above 50 km. becomes much larger than that due to CO₂ and H₂O while in the region below 30 km., they become comparable. Water vapour becomes more and more effective as we approach the earth.     

Capturing climate’s effect on pollution abatement with an improved solution to the omitted variables problem

Climate greatly affects the SO₂ concentration abatement efforts of Mae Moh power plant which burns high sulfur content lignite in Northern Thailand. In summer months, hot air rising draws Mae Moh’s SO₂ emissions out of the Mae Moh valley. In contrast, temperature inversions in winter months prevent hot air in the valley from rising, resulting in the trapping and concentrating of SO₂ emissions in the valley. The climatic conditions that affect Mae Moh’s abatement efforts are so complex that adequately modeling them has been elusive. In this paper we use a new analytical technique, BD-RTPLS, which produces reduce form estimates while minimizing the influence of omitted variables, like climate. Using BD-RTPLS and monthly data, we tell Mae Moh how much electricity needs to be sacrificed from which generating units to most efficiently reduce SO₂ concentrations in any given month.