|M.Sc Student||Tiraspolski Andrei|
|Subject||Incorporating Economic Incentives in Reducing Greenhouse|
Gas Emissions under the Kyoto Protocol: The
Case of Israel
|Department||Department of Industrial Engineering and Management||Supervisor||Professor Mordechai Shechter|
In view of future commitment of Israel to reduction of GHG emissions under Kyoto Protocol, the country should adopt the carbon abatement measures. A wide range of possible domestic policies could be employed to address climate change. This paper concentrates on the analysis of market-incentive price and quantity mechanisms in the context of the particularities of Israel carbon emission patterns. The review of major efficiency and equity issues associated with the choice between tax and quota policies is followed by the analysis of implementation feasibility of these policies to Israel reality. The paper examines the effectiveness of national carbon tax scheme applies to different emission sectors and some distributive and competitiveness effects arising from this application. The argument about modest-level regressivity of tax in residential sector is confirmed by partial analysis of distributional incidence of modeled carbon tax of NIS 70 per ton of carbon dioxide. Observing the market structure of electricity and industrial sectors concludes about the ineffectiveness of tax if applied to energy production sector and indicates about the uneven cost burden on different industrial branches. In order to prevent the damage to the competitiveness of energy- and export-intensive Israel industries some mitigation measures are proposed, such as tax exemptions, refunds or tax revenue recycling. Further discussion of tradable permit abatement scheme explores the relative effectiveness of downstream and upstream approach to permit allocation, the advantages and disadvantages of allocation methods, the temporal flexibility, the choice of baseline and other design and implementation issues. The main aim pursued is to prove that the particularities of Israel emission patterns dictate the carbon abatement to be managed using the unique portfolio of available market instruments. This portfolio should encompass among the others the following qualities: distribution of overall carbon reduction target among the sources in the most effective way; distribution of cost burden across the sources in a way that lessen opposition to the policy goal; effective interface with Kyoto flexibility mechanisms. The attempt is made to derive this portfolio and it is shown that it should combine both price and quantity mechanisms depending on the factors revealed in the paper.