A Cap-and-Trade Commitment Policy with Allowance Banking

Kuusela, Olli-Pekka; Lintunen, Jussi

doi:10.1007/s10640-019-00395-y

Cited by 11 publications

(5 citation statements)

References 50 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…In our specific case of carbon market, there exists an extensive literature which analyzes the carbon emissions reduction problem under its many different aspects. The optimality of banking permits from one period to the next has been studied in Rubin (1996) [33], Schennach (2000) [34], Chaton et al (2015) [4], Lintunen and Kuusela (2018) [25] and Kuusela and Lintunen (2020) [23]. Mechanism designs are proposed in Carmona et al (2010) [7] in a discrete time model to reduce electricity producers windfall profits.…”

Section: Introductionmentioning

confidence: 99%

Optimal dynamic regulation of carbon emissions market: A variational approach

Aïd¹,

Biagini²

2021

Preprint

View full text Add to dashboard Cite

We consider the problem of reducing the carbon emissions of a set of firms over a finite horizon. A regulator dynamically allocates emission allowances to each firm. Firms face idiosyncratic as well as common economic shocks on emissions, and have linear quadratic abatement costs. Firms can trade allowances so to minimise total expected costs, from abatement and trading plus a quadratic terminal penalty. Using variational methods, we exhibit in closed-form the market equilibrium in function of regulator's dynamic allocation. We then solve the Stackelberg game between the regulator and the firms. Again, we obtain a closed-form expression of the dynamic allocation policies that allow a desired expected emission reduction. Optimal policies are not unique but share common properties. Surprisingly, all optimal policies induce a constant abatement effort and a constant price of allowances. Dynamic allocations outperform static ones because of adjustment costs and uncertainty, in particular given the presence of common shocks. Our results are robust to some extensions, like risk aversion of firms or different penalty functions.

show abstract

Section: Introductionmentioning

confidence: 99%

Optimal dynamic regulation of carbon emissions market: A variational approach

Aïd¹,

Biagini²

2021

Preprint

View full text Add to dashboard Cite

show abstract

“…Most researchers use wastewater treatment rate, the number of current effective carbon mitigation regulations and rules of the year, environmental penalty quantity (Kuusela and Lintunen 2020 ), or the ratio of the amount of pollutant discharge fees collected by each region to the number of discharged households as proxy variables to measure carbon mitigation regulation. Some scholars adopt similar but weighted variables to form a composite index as an alternative variable of carbon mitigation regulation.…”

Section: Methodsmentioning

confidence: 99%

Do different types of carbon mitigation regulations have heterogeneous effects on innovation quality?

Yang

2023

Environ Sci Pollut Res

View full text Add to dashboard Cite

Carbon peak and carbon neutralization as a global mission cannot be completed without systematically designed carbon mitigation regulations. In order to achieve the carbon emission reduction as formulated in the Paris Agreement and fulfill the promises made at the United Nations General Assembly, the Chinese government has promulgated various types of regulations to curb carbon emission with the hope of realizing the Porter effect. Selecting low-carbon pilot cities and carbon emission trading schema as the research objects, this study employs a differences-in-differences (DID) model to investigate the effects of carbon mitigation regulations on innovation quality and its heterogeneity. The empirical results reveal that market-based carbon mitigation regulations can significantly achieve the Porter effect and improve innovation quality. Furthermore, the government financial situation and the technical efficiency change have important moderating and mediating effects respectively. It is recommended that a full play of the market be given in China for the Porter effect. The main scientific value of this paper is distinguished the heterogenous effect of different types of environmental regulations, which can enhance the pertinence of environmental regulation.

show abstract

“…ETS is known as an efficient cost-saving policy to promote emission abatement while uncertain risks in abatement costs and technology investment due to stochastic fluctuation in carbon price affects the long-term production planning of firms (Mandell 2008;Zakeri et al 2015;Xian et al 2020). ETS without banking and borrowing (NETS), like the policy in EU ETS of phase I, may result in welfare losses (Kuusela and Lintunen 2020). As to the ETS with banking (BETS), such as the policies in EU ETS of phases II and III as well as China pilot carbon markets, Slechten (2013) indicates that firms under carbon market with intertemporal banking may reduce technology investments in early period and adopt suboptimal mitigation strategies.…”

Section: Intertemporal Carbon Emission Tradingmentioning

confidence: 99%

Product rollover strategy and emission reduction with intertemporal carbon emission regulation versus consumer supervision

Huang

2021

Environ Sci Pollut Res

View full text Add to dashboard Cite

As global warming has severely threatened the ecosystem and sustainable development of human beings, carbon trading scheme is introduced to mitigate global warming and consumer environmental awareness (CEA) is gradually enhanced. Government regulation and consumer supervision have required firms to seek efficient strategies of product rollover and emission abatement in order to sustain and increase market share. This paper constructs a two-period analytical model in the context of intertemporal carbon emission regulation to investigate how carbon emission regulations and CEA affect the optimal strategies of product rollover, emission abatement, and social welfare. The results reveal that without consumer supervision, the firm prefers to adopt dual product rollover strategy and the optimal product rollover strategy depends on costs and benefits when product recycling is considered. When CEA is high, welfare and emission abatement regulated by hybrid policy is lower than those regulated by carbon trading scheme. When CEA is low, emission abatement under hybrid policy is superior to those regulated by carbon trading scheme. These findings help provide implications for improving carbon emission management efficiency and prompting sustainable development.

show abstract

A Cap-and-Trade Commitment Policy with Allowance Banking

Cited by 11 publications

References 50 publications

Optimal dynamic regulation of carbon emissions market: A variational approach

Optimal dynamic regulation of carbon emissions market: A variational approach

Do different types of carbon mitigation regulations have heterogeneous effects on innovation quality?

Product rollover strategy and emission reduction with intertemporal carbon emission regulation versus consumer supervision

Contact Info

Product

Resources

About