Sectoral crediting mechanisms such as sectoral no-lose targets have been proposed as a way to provide incentives for emission reductions in developing countries as part of an international climate agreement, and scale up carbon trading from the project-level Clean Development Mechanism to the sectoral level.

Countries would generate tradable emission credits (offsets) for reducing emissions in a sector below an agreed crediting baseline. However, large uncertainties in the regulator's predictions of the counterfactual business-as-usual baseline are likely to render sectoral no-lose targets an extremely unattractive mechanism in practice, at least for the transportation case study presented here. Given these uncertainties, the regulator faces a tradeoff between efficiency (setting generous crediting baselines to encourage more countries to opt in) and limiting transfer payments for non-additional offsets (which are generated if the crediting baseline is set above business-as-usual).

The first-best outcome is attainable through setting a generous crediting baseline. However, this comes at the cost of either increased environmental damage (if developed country targets are not adjusted to account for non-additional offsets), or transfers from developed to developing countries that are likely to be too high to be politically feasible (if developed country targets are made more stringent in recognition that many offsets are nonadditional). A more stringent crediting baseline still generates a large proportion of non-additional offsets, but renders sectoral no-lose targets virtually irrelevant as few countries opt in.

The majority of rural residents in China are dependent on traditional fuels, but the quality and quantity of existing data on the process of fuel switching in rural China are insufficient to have a clear picture of current conditions and a well-grounded outlook for the future.

Based on an analysis of a rural household survey data in Hubei province in 2004, we explore patterns of residential fuel use within the conceptual framework of
fuel switching using statistical approaches. Cross-sectional data show that the transition from biomass to modern commercial sources is still at an early stage, incomes may have to rise substantially in order for absolute biomass use to fall, and residential fuel use varies tremendously across geographic regions due to disparities in availability of different energy sources. Regression analysis using logit and tobit models suggest that income, fuel prices, demographic characteristics, and topography have significant effects on fuel switching.

Moreover, while switching is occurring, the commercial energy source which appears to be the principal substitute for biomass in rural households is coal. Given that burning coal in the household is a major contributor to general air pollution in China and to negative health outcomes due to indoor air pollution, further transition to modern and clean fuels such as biogas, LPG, natural gas and electricity is important. Further income growth induced by New Countryside Construction and improvement of modern and clean energy accessibility will play a critical role in the switching process.

Nigeria depends heavily on oil and gas, with hydrocarbon activities providing around 65 percent of total government revenue and 95 percent of export revenues.  While Nigeria supplies some LNG to world markets and is starting to export a small amount of gas to Ghana via pipeline, the great majority of the country's hydrocarbon earnings come from oil.  In 2008, Nigeria was the 5^th largest oil exporter and 10^th largest holder of proved oil reserves in the world according to the U.S. Energy Information Administration.  The country's national oil company NNPC (Nigerian National Petroleum Corporation) sits at the nexus between the many interests in Nigeria that seek a stake in the country's oil riches, the government, and the private companies that actually operate the vast majority of oil and gas projects.

Through its many divisions and subsidiaries, NNPC serves as an oil sector regulator, a buyer and seller of oil and petroleum products, a technical operator of hydrocarbon activities on a limited basis, and a service provider to the Nigerian oil sector.  With isolated exceptions, NNPC is not very effective at performing its various oil sector jobs.  It is neither a competent oil company nor an efficient regulator for the sector.   Managers of NNPC's constituent units, lacking the ability to reliably fund themselves, are robbed of business autonomy and the chance to develop capability.  There are few incentives for NNPC employees to be entrepreneurial for the company's benefit and many incentives for private action and corruption.  It is no accident that NNPC operations are disproportionately concentrated on oil marketing and downstream functions, which offer the best opportunities for private benefit.  The few parts of NNPC that actually add value, like engineering design subsidiary NETCO, tend to be removed from large financial flows and the patronage opportunities they bring. 

Although NNPC performs poorly as an instrument for maximizing long-term oil revenue for the state, it actually functions well as an instrument of patronage, which helps to explain its durability.  Each additional transaction generated by its profuse bureaucracy provides an opportunity for well-connected individuals to profit by being the gatekeepers whose approval must be secured, especially in contracting processes.  NNPC's role as distributor of licenses for export of crude oil and import of refined products also helps make it a locus for patronage activities.  Corruption, bureaucracy, and non-market pricing regimes for oil sales all reinforce each other in a dysfunctional equilibrium that has proved difficult to dislodge despite repeated efforts at oil sector reform.

In 2009 the global coal market witnessed one of the most dramatic realignments it has ever seen - China, long a net exporter of coal, suddenly imported a record-smashing 126 Mt tons (103 Mt net). This inversion of China's role in global coal markets meant that Chinese imports accounted for nearly 15% of all globally traded coal, and China became the focal point of global demand as traditional import markets like Europe and Japan stagnated in the wake of the financial crisis.  The middle kingdom's appetite for imported coal seems insatiable, and the "China Factor" appears to have ushered in a new paradigm for the global coal market.

But China doesn't "need" the coal.  The world's largest coal producer cranked out 2.96 Bt of production in 2009, backed up by 114.5 Bt of reserves.  While the world's other fastest growing importer, India, is plagued by a growing gap between coal supply and power demand that it is unable to fill domestically, this is not the case in China.  The spike in Chinese demand for imported coal is therefore a more complex (and less easily predictable) phenomenon that requires careful examination if the world is to understand what impact China might have on global energy markets in the coming decade.

In this paper Richard Morse and Gang He devise a model that explains Chinese coal import patterns and that can allow the coal market to understand, and to some degree predict, China's coal import behavior.  They argue that the unique structure of the Chinese coal market creates a series of key arbitrage relationships between Chinese domestic coal markets and international coal markets that determine Chinese import patterns.

The implications of this argument are significant for the development of the global coal trade in the coming decade.  The arbitrage relationships that Morse and He describe directly link the domestic price of coal in China to the global price of coal. Developments in China's domestic coal market will be a dominant factor determining global coal prices and trade flows (and by implication power prices in many regions).  This makes understanding the domestic Chinese coal market, which operates according to a unique economic and political logic, crucial for any participant in the global markets.

Is it possible to combine modern tropical agriculture with environmental conservation? Brazilian agriculture offers encouraging examples that achieve high production together with adequate environmental protection. However, these effective practices may soon lose ground to the conventional custom of resource overexploitation and environmental degradation.

A revision to the Forest Act, the main Brazilian environmental legislation on private land, has just been submitted to Congress, and there is a strong chance that it will be approved. The proposed revision raises serious concerns in the Brazilian scientific community, which was largely ignored during its elaboration. The new rules will benefit sectors that depend on expanding frontiers by clear-cutting forests and savannas and will reduce mandatory restoration of native vegetation illegally cleared since 1965. If approved, CO2 emissions may increase substantially, instead of being reduced as was recently pledged in Copenhagen. Simple species-area relationship analyses also project the extinction of more than 100,000 species, a massive loss that will invalidate any commitment to biodiversity conservation. Proponents of the new law, with well-known ties to specific agribusiness groups, claim an alleged shortage of land for agricultural expansion, and accuse the current legislation of being overprotective of the environment in response to foreign interests fronted by green nongovernmental organizations. However, recent studies show that, without further conversion of natural vegetation, crop production can be increased by converting suitable pastures to agriculture and intensifying livestock production on the remaining pasture. Brazil has a high potential for achieving sustainable development and thereby conserving its unique biological heritage. Although opposed by the Ministry of the Environment and most scientists, the combination of traditional politicians, opportunistic economic groups, and powerful landowners may be hard to resist. The situation is delicate and serious. Under the new Forest Act, Brazil risks suffering its worst environmental setback in half a century, with critical and irreversible consequences beyond its borders.

Over the past two decades, Indonesia's coal industry has transformed itself from being an unknown, minor player in Asia's coal markets to the world's largest exporter of steam coal. In what is likely the most detailed analysis of the Indonesian coal industry ever released, Dr. Bart Lucarelli tells the story of how Indonesia created this world-scale industry over two decades despite challenges created by widespread government corruption, a weak legal system, the Asian Financial Crisis of 1997, and the fall of the Soeharto government in 1998.

The paper argues that key physical and technical factors, along with regulatory and political factors, have acted as the primary drivers of the industry's phenomenal growth over the past two decades and will be the most important factors for consideration over the next two decades.  It also discusses current estimates of Indonesia's coal resources and reserves, the role played by location and geological factors in the development of its coal resources, the future impacts of the passage of Indonesia's Mining Law of 2009 and its related implementing regulations, and how these issues might affect the coal industry's structure and performance before 2020.