Final report on marginal abatement cost curves for the evaluation of the market stability reserve
Computable general equilibrium (CGE) models are wide-spread tools for policy evaluation in the national and international context. They typically feature a detailed representation of productive industries and can track the impacts of price based policies or scarcity of production factors across the economy. Calibrated to benchmark equilibria given in form of social accounting matrices (SAMs), they represent both production and the consumer basket as nested constant elasticity of substitution (CES) functions. Positive elasticities of substitution in the production functions give industries (or representative households) the possibility to react to price changes by increasing demand of cheaper inputs and demanding less of the more expensive goods for the production of any unit of output (or utility). Production sectors adjust their activity levels such that they make zero economic profit, and representative consumers spend on consumption such that their income balances expenditures (which thus include saving). Market balance conditions for each commodity in the model set the prices such that demand and supply at those prices clear.
Procrastinating reform: The impact of the market stability reserve on the EU ETS
We study the impact of the market stability reserve (MSR) on price and emission paths of the EU ETS. From 2019 onwards, the MSR will adjust the number of allowances auctioned as a function of the size of the surplus, i.e. in times of a large surplus it shifts the issue date of allowances into the future. In a perfectly competitive allowance market the MSR only affects price and emission paths if the baseline equilibrium becomes unfeasible. If the MSR is binding, prices increase in the short run but drop in the medium run relative to the baseline. The MSR increases price variability if uncertainty over future allowance demand is resolved while there is a surplus. The long run cap is unaffected by both the MSR and overlapping climate policies. This contrasts the EU׳s objectives of improving the resilience of the EU ETS and increasing synergies with overlapping climate policies.
The contribution of charcoal production to rural livelihoods in a semi-arid area in Kenya
Forest incomes in the form of both timber and non-timber forest products are an important source of livelihood for many communities in Africa. A major forest resource is charcoal, which contributes to the livelihoods of millions across the region. While incomes from charcoal are used to meet a wide spectrum of needs within rural livelihoods, the role of charcoal production on livelihoods of small-scale producers is not well understood. Therefore, we provide an example on the importance of charcoal on livelihoods in an agropastoralist community in a semi-arid region in Kenya. Based on a household questionnaire targeting 150 charcoal and 150 non-charcoal makers, as well as focus group discussions, we assessed the determinants for participation in charcoal production and developed a household typology based on charcoal income dependence. We also determined the role of charcoal in income equalization and poverty reduction. Our study shows that charcoal contributes about 20% of the household income in the study area. Gender, land size and the number of food-scarce months are the key determinants of participation in charcoal production. Based on the poverty analysis, we conclude that even though charcoal income does not lift the producers out of poverty, it can mitigate the impacts of poverty by reducing the poverty gap and poverty severity. Based on our findings, we recommend a multipronged approach to address sustainable rural livelihoods including a more explicit acknowledgement of charcoal production as a source of rural income. We also recommend broadening of the local livelihood base and a more active management of the woodland to ensure the sustainability of the income.