Journal of Energy Engineering

Public‐policy analysts advocate a tradable emission permits scheme to regulate and reduce greenhouse gas emissions. Their argument is based primarily on the theoretical advantages of a market‐based scheme compared to a conventional command‐and‐control scheme: greater efficiency and increased incentives to develop new control technologies. Experience with an existing tradable market scheme for conventional industrial air pollutants, however, illustrates the practical difficulties that can arise. In addition to potentially formidable obstacles posed by the need for effective monitoring and enforcement, other problems are institutional: the legislature may be slow to give clear authority for market‐based regulations, and regulators used to more conventional regulatory schemes may be hostile to the market. As a result, the market‐based program may be burdened with severe regulatory restrictions. Industrial firms, which often distrust regulators' intentions and the ability of the market to produce emission credits in the future, withhold credits from the market. A half‐hearted approach to market‐based regulation virtually guarantees market failure.

There is growing overlap between environmental matters, driven by quantitative needs and whenever causes and effects are in issue, and matters that confront health‐risk management. Risk assessors have generated methods that can be usefully adopted by those concerned with environmental decision making. The discussions currently taking place at the Intergovernmental Negotiating Committee for a Framework Convention on Climate Change, in Geneva, Switzerland, and in other environmental forums involve costly outcomes, about which scientific knowledge is uncertain and information is imperfect. It is appropriate to review the methods used in those discussions and to attempt to provide reasoned means to deal with uncertainty through a common frame of reference. This paper characterizes types of uncertainty, discusses approaches to deal with them, and provides statistical and mathematical examples from human‐health‐risk assessment on how to deal with them. The main conclusion is that the methods from applied risk assessment provide some of the means to deal coherently with decision making under uncertainty. Nevertheless, each method has advantages and disadvantages. Heuristics such as scenarios are therefore still useful, provided that their use is combined with modern techniques available to deal with not only probabilistic thinking, but also with situations in which probabilistic methods fail for technical and practical reasons.

Transport fuel alternatives to gasoline and diesel offer the possibility of reducing sectoral emissions of greenhouse gases. Fiscal instruments can be designed to encourage the penetration of alternative transport fuels. Diesel fuel, as a conventional transport fuel, is a case of consumer choice in fuels or of fuel‐switching away from gasoline. The reasons for this switch, particularly the impact of fuel taxation, are examined. It is concluded that the fiscal instruments to promote the penetration of alternative transport fuels for the reduction of greenhouse‐gas emissions can be successful under certain conditions. However, governments must take account of the risk of excessive fiscal revenue losses.

Energy‐demand modeling for the needs of energy management relies on two major approaches: (1) The econometric approach; and (2) the engineering, or technoeconomic, approach. The former emphasizes the explanation based on economic behavior and the estimation of the model by statistical methods; the latter is based on a detailed description of energy uses, stressing the importance of the energy efficiency of equipment and the quantification by means of technical and judgmental data. Despite the clear importance of these two approaches for the improvement in reliability and scope of energy‐demand models, research aiming at a synthesis has been rare and timid, if not from a theoretical point of view at least as far as empirical applications are concerned. In this paper we present an econometric model built according to an engineering logic that takes into account the main technical and behavioral mechanisms influencing energy demand. Applied to the modeling of motor‐fuel demand in Switzerland, using time series, this model allowed us to evaluate the effectiveness of the carbon tax proposed by the Swiss Federal Council in reducing car ${\mathrm{CO}}_2$ emissions.

It is almost axiomatic that an effective international agreement to limit emissions of ${\mathrm{CO}}_2$ (or other greenhouse gases) will not be undertaken unless the agreement is considered fair by participants. In this paper, our aim is to elucidate some basic concepts regarding equity and burden‐sharing in ${\mathrm{CO}}_2$ limitation agreements. We first examine the consequences of different a priori sharing rules, which have some claim to credibility as so‐called focal points for greenhouse gas negotiations. We find the case for a focal point solution to be limited, because plausible alternatives for focal points lead to widely divergent cost allocations. We offer a synthesis of focal point equity theory and strategic bargaining theory in a principal‐agent framework for international negotiations. We also examine the question of linking ${\mathrm{CO}}_2$ agreement to other international policy issues.

Risk assessment of technological hazards usually requires expert judgment for the quantification of uncertain parameters. One method of incorporating these judgments into the analysis is to encode them as probabilities or probability distributions. This paper discusses a formal procedure for developing these probability distributions. The steps in the procedure include selection of experts, selection and definition of issues, preparation for probability elicitation, probability elicitation methods, postelicitation processing of judgments, and documentation. The procedure is illustrated with examples from technological risk assessment, including reactor safety and nuclear‐waste disposal studies.