MEUNIER Guy

Human development and climate change mitigation issues are linked and infrastructure - buildings and civil engineering structures - are essential to achieve these objectives together. They provide services that meet societal needs, but this provision is currently insufficient and intensive in terms of CO2 emissions in their use and construction. However, their dynamics are subject to technical, economic and institutional constraints. In this thesis, I investigate how the evolution of global infrastructure stocks can reconcile development needs with CO2 emission reductions. I focus on three points of tension: (i) carbon lock-in - the inertia on future emissions reduction - induced by short-term development, (ii) limited financing for investment, and (iii) the carbon space for sufficient development of basic infrastructure. This thesis makes a contribution by highlighting some of the conditions that need to be ensured for infrastructure not to limit the feasibility of climate-development reconciliation.First, I conduct a systematic review of the literature on infrastructure-induced carbon lock-in. I use a supervised machine learning approach to select relevant articles. I synthesize by sector and geography existing quantifications of carbon lock-in, indicators used to measure it, and statements mentioning policy implications for exiting it. I show that coal-fired power plants contribute significantly to global carbon lock-in and are at risk of stranded assets due to early retirement. [...] There is a need to ensure their long-term legitimacy and stability as well as coordination across infrastructure sectors. Carbon pricing should not be the only instrument used and should be complemented by regulation and financial support for the deployment of low-carbon capital.Next, I quantify transport infrastructure investment needs with respect to different levels of climate ambition. I build socio-economic scenarios with an integrated assessment model that explicitly represents the transportation sector. I develop a module to quantify the investment needs consistent with the mobility scenarios. I apply a global sensitivity analysis to identify the determinants of the investment needs. I show that investment needs are reduced with increasing climate ambition but represent significant amounts compared to historical levels and to needs in other sectors. Finally, I assess whether a high level of access to 5 essential services - electricity, water, housing, sanitation and transport - can be provided globally without compromising climate mitigation goals. I quantify the cement and steel requirements in each country based on historical trends. I then estimate the CO2 emissions associated with the manufacture of these materials by incorporating influencing factors such as production technologies, international trade patterns, and mitigation measures in these industries. I show that providing high access to sanitation and transportation can conflict with the low-carbon trajectories envisioned. These results suggest the need for limitations on the use of cement and steel and for additional emission reduction efforts in developed countries.

The thesis focuses on CO2 emissions from transport in France. It questions the alignment of public policies and current developments with the objective of achieving carbon neutrality in France by 2050. At this horizon, the national low-carbon strategy aims at an almost total exit from oil, by relying on 5 levers: moderation of transport demand, modal shift, better vehicle filling, energy efficiency, and energy decarbonization. The thesis studies (1) the evolution of these levers in the past, (2) their possible evolution by 2050, (3) the importance of mobility speed, and (4) the implications for public policies. It emerges that the acceleration of transport and the increase in demand that it has allowed have strongly pushed up emissions over the end of the 20th century. Since the turn of the millennium, these variables have been more stagnant, due to a combination of structural factors oriented towards saturation, and cyclical factors such as the rise in oil prices and the introduction of speed cameras. In the future, strong technological and sobriety evolutions will be essential to reach neutrality, requiring breaks with the current trajectories.

This is a comment on the paper by Irz et al. (2015) in this journal, on nutritional recommendations. Irz et al. (2015) propose to compute the cost of a nutritional constraint as the consumer loss of surplus, derived from their observed choices. Introducing behavioral biases into an extended version of their model, I show that their proposed methodology implicitly assumes that consumer dietary choices do not involve any health considerations. The cost per quality-adjusted life year that they compute should be corrected by the size of the bias of consumers to be compared with benchmark evaluations.

This thesis covers two topics: the design of pollution permits and waste management. The first chapter analyzes the implementation of pollution permits. The chapter focuses on the distributional impacts associated with the stringency of the free allocation based on current production when two sectors are covered by the permit market and the cap remains constant. A new type of profit increase in sectors that are not exposed to international competition has been theoretically demonstrated. The second chapter deals with the issue of differentiation in the allocation of permits in different regions, linked to the possibility of firms to relocate. The conditions under which welfare decreases with offshoring are determined. In this case, free distributions of permits can be used to prevent firms from offshoring. The third chapter compares the effectiveness of extended producer responsibility (EPR) programs with the effectiveness of an ex-ante tax. The tax allows more ex-ante flexibility with respect to market conditions, but EPR allows more ex-post adjustment to cost realizations. Thus, the relative effectiveness of EPR increases with cost uncertainty and market competitiveness.

We study pollution permit markets in which a fraction of permits are allocated to firms based on their output. Output-based allocations, which are receiving increasing attention in the design of carbon markets around the world (e.g., Europe, California, New Zealand), are shown to be optimal under demand and supply volatility despite the output distortions they may create. In a market that covers multiple sectors, the optimal design combines auctioned permits with output-based allocations that are specific to each sector and increasing in its volatility. When firms are better informed about the latter or must self select, the regulator resorts to some free (i.e., lump-sum) allocations to sort firms out. (C) 2017 Elsevier Inc. All rights reserved.

No summary available.

The correct affiliation for Anna Creti is: Universite Paris-Dauphine, PSL Research University, LEDa, CGEMP, 75016 Paris, France.

We consider a partial equilibrium model to study the optimal phasing out of polluting goods by green goods. The unit production cost of the green goods involves convexity and learning-by-doing. The total cost for the social planner includes the private cost of production and the social cost of carbon, assumed to be exogenous and growing at the social discount rate. Under these assumptions the optimization problem can be decomposed in two questions: (i) when to launch a given schedule. (ii) at which rate the transition should be completed that is, the design of a transition schedule as such. The first question can be solved using a simple indicator interpreted as the MAC of the whole schedule, possibly non optimal. The case of hydrogen vehicle (Fuel Cell Electric Vehicles) offers an illustration of our results. Using data from the German market we show that the 2015-2050 trajectory foreseen by the industry would be consistent with a carbon price at 52(sic)/t. The transition cost to achieve a 7.5 M car park in 2050 is estimated at 21.6 billion (sic) that is, to JEl 4% discount rate, 115 (sic) annually for each vehicle which would abate 2.18 tCO(2) per year.

Output-based allocations (OBAs) are typically used in emission trading systems (ETS) with a fixed cap to mitigate leakage in sectors at risk. Recent work has shown they may also be welfare enhancing in markets subject to supply and demand shocks by introducing some flexibility in the total cap, resulting in a carbon price closer to marginal damage. We extend previous work to simultaneously include both leakage and volatility. We study how OBA permits can be implemented under an overall cap that may change with the level of production in contrast with a design that deducts OBA permits from the overall permit allocation as is the current practice in the EU-ETS and California. We show that introducing OBA permits while keeping the overall cap fixed would only increase price fluctuations and induce severe welfare losses to non-OBA sectors.

This paper analyzes whether the presence of a second unregulated externality influences the choice between a price and a quantity instrument to address an externality. The author studies a situation in which two goods jointly generate an externality but only one of them is regulated. The two instruments differ because of the presence of uncertainty regarding the private value of the two goods. To ignore the unregulated good and apply Weitzman's classical result on the comparison of the slopes of marginal benefit and cost could be misleading because of the randomness of the unregulated good's quantity. Beside the relative slope of the marginal damage, the substitutability and the distribution of shocks play a role in the comparison. If there is a cocktail effect and the regulated and unregulated goods' quantities are negatively correlated, which occurs if they are substitutes, this reinforces the appeal of a price instrument. Furthermore, if the two goods are weak substitutes with correlated demands, the variance of the quantity of the unregulated good is larger under a quota than a tax, which further reinforces the appeal of the tax instrument.

We analyze the impact of the private label production channel on innovation. A retailer may either choose to integrate backward with a small firm (insourcing) or rely on a national brand manufacturer (outsourcing) to produce its private label. The trade-off between insourcing and outsourcing strategies is a choice between too much or too little innovation (i.e., quality investment) on the private label. When insourcing, an outside-option effect leads the retailer to overinvest to increase its buyer power. When outsourcing, a hold-up effect leads to underinvestment. In addition, selecting the national brand manufacturer may create economies of scale that spur innovation.

Demand uncertainty is thought to influence irreversible capacity decisions. Suppose that local demand can be sourced from domestic (rigid) production or from (flexible) imports. This paper shows that the optimal domestic capacity is either increasing or decreasing with demand uncertainty, depending on the relative level of the costs of domestic production and imports. We test this relationship with data from the U.S. cement industry, in which the difference in marginal cost between domestic production and imports varies across local U.S. markets because cement is costly to transport over land. Industry data for 1999 to 2010 are consistent with the predictions of the model. The introduction of two technologies to the production set-one rigid and one flexible-is crucial to understanding the relationship between capacity choice and uncertainty in this industry because there is no relationship between these two variables in aggregated U.S. data. Our analysis reveals that the relationship is negative in coastal districts, and significantly more positive in landlocked districts.

We analyze the effects of an environmental policy on the diffusion of a clean technology. Compared to previous articles we consider that the polluting firms are competitors on the output market and we analyze the effects of the policy on the share of adopting firms in the economy. We show that this share is not monotonic with the stringency of the environmental policy. We also compare the effects of an emission tax and tradable pollution permits and we show that, depending again on the stringency of the policy, either the tax or the permits yields a higher degree of technology adoption.

This paper analyzes the choice of a technology portfolio by risk-averse firms. Two technologies with random marginal costs are available to produce a homogeneous good. If the risks that are associated with the technologies are correlated, then the firms might invest in a technology with a negative expected return or, conversely, might not invest in a technology with a positive expected return. If the technology with the lower expected cost is riskier than the other technology, then this "low-cost" technology will be eliminated from the firm's portfolio if the risks are highly correlated. With imperfect competition, the portfolios of firms are different, and the difference in risk tolerance can explain the full specialization of the industry: The less risk-averse firms use the low-cost technology, and the more risk-averse firms use the less risky, higher-cost technology.

Competitiveness and carbon leakage are major concerns for the design of CO2 emissions permits markets. In the absence of a global carbon tax and of border carbon adjustments, output-based allocation is a third-best solution and is actually implemented (Australia, California, New Zealand). The EU has followed a different route. free allowances are allocated to existing or new capacities in proportion to a benchmark, independent of actual production. This paper compares these two schemes in a formal setting and shows that the optimal one is in fact a combination of both schemes, or output-based allocation alone if uncertainty is limited. A key assumption of our analysis is that the short-term import pressure depends both on the existing capacities and the level of demand, which is typical in capital intensive and internationally traded sectors. A calibration of the model is used to discuss the EU scheme for the cement sector in the third phase of the EU-ETS (2013–2020). This allows for a quantification of various policies in terms of welfare, investment, production, company profits, public revenues and leakage.

For carbon-intensive, internationally-traded industrial goods, a unilateral increase in the domestic CO2 price may result in the reduction of the domestic production but an increase of imports. In such sectors as electricity, cement and steel, the trade flows result more from short-term regional disequilibria between supply and demand than from international competition. This paper formalizes this empirical observation and characterizes its impact on carbon leakage. Domestic firms invest in domestic plants under uncertain domestic demand conditions. then, as uncertainty unfolds, they may supply the domestic market from their domestic plants or from imports. We prove that there would be no leakage in the short term (without capacity adjustment) but that there would be in the long term (with capacity adjustment). Furthermore the larger the uncertainty, the larger the leakage. We also characterize the impact of uncertainty on the (short and long term) pass-through rates of the carbon price. In the concluding section we discuss the implications of these results for the evaluation of climate policies.

The political dilemma presented by the deployment of large-size low-carbon technologies (LCTs) is analysed using a simple dynamic model to investigate the relation between irreversible investments and learning-by-doing within a context of exogeneous uncertainty about the carbon price. It is shown that in some cases when information about the future carbon price is expected, the irreversibility effect holds and fewer LCT plants should be developed. In other cases, this result is reversed, and acquiring information can justify the early deployment of LCT. In particular, marginal reasoning is limited when learning-by-doing, and more generally endogenous technical change, is considered. When acquiring information is expected, the optimal policy can move from a corner optimum with no LCT deployment to an interior optimum with a strictly positive development.

This article analyzes the effect of risk and risk-aversion on the long-term equilibrium technology mix in an electricity market. It develops a model where firms can invest in baseload plants with a fixed variable cost and peak plants with a random variable cost, and demand for electricity varies over time but is perfectly predictable. At equilibrium the electricity price is partly determined by the random variable cost and the returns from the two kinds of plants are negatively correlated. When the variable cost of the peak technology is high the return of peak plants is low but the return to baseload plants is high. Risk-averse firms reduce the capacity of the riskiest technology and develop the capacity of the other, compared to risk-neutral firms. In the particular case where a risk-neutral firm invests heavily in baseload technology and only sparely in peak capacity, a risk-averse firm would invest less in baseload, increase peak capacity, and increase total installed capacity.

The liberalization of the electricity sector is a major reform of a key sector of modern economies that began at the end of the 20th century. The establishment of electricity markets and the development of competition raise important practical and theoretical questions about the efficiency of this mode of organization. While in most European countries large investments in generation capacity are needed, the thesis analyzes the investment incentives of generators in situations of imperfect competition. The thesis consists of four chapters grouped in two parts. The first chapter analyzes the problem of choosing a technology mix to satisfy a variable demand by asymmetric firms. The second chapter focuses on the interaction between economies of scale and competition. The third chapter analyzes the intervention of a public firm that invests to compensate for the investment failures of private firms. Finally, the last chapter focuses on emissions trading markets and the links they create between initially isolated markets.