Emission Market Design Based on Supply Function Equilibrium Model
International Journal of Economy, Energy and Environment
Volume 1, Issue 1, August 2016, Pages: 1-7
Received: Sep. 25, 2015;
Accepted: Oct. 20, 2015;
Published: Aug. 28, 2016
Views 4511 Downloads 323
Shijun Fu, Department of Logistic Engineering, Chongqing University of Arts and Sciences, Chongqing, China
Follow on us
This paper designs an emission market for electricity industry based on supply function equilibrium model. It refers to major features of the existing emission market. And it is improved in (i) electricity-environment coordinated regulation, (ii) adopting the first price-quantity sealed auction for allowances allocation, (iii) penalty covering generator’s all emissions, and (iv) pricing allowances through both market bidding process and regulatory process coordinately. We depict generator’s decision as a stochastic parameter linear programming model, which provides us its bidding curve. According to market equilibrium, each generator gets its allowances at a market clearing price. We find that, (i) the new market can not only effectively motivate generator to mitigate emission individually, but also can save allowances through market process; (ii) it can be an effective instrument to pricing emission. Finally, we present a numerical simulation for its validity, and results are well fitted to the theoretical conclusions.
Electricity Industry, Emission Market Design, Supply Function Equilibrium, Complexity System Modeling
To cite this article
Emission Market Design Based on Supply Function Equilibrium Model, International Journal of Economy, Energy and Environment.
Vol. 1, No. 1,
2016, pp. 1-7.
Copyright © 2016 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/
) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Leslie Nielson. (2008). The European emissions trading system—lessons for Australia. Research paper No.3: ISSN 1834-9854.
Lene Nielsen, Tim Jeppesen. (2003). Tradable green certificates in selected European countries—overview and assessment. Energy Policy 31: pp 3-14.
Sorrell, S. Sijm, J. (2003). Carbon trading in the policy mix. Oxford. Review of Economic Policy 19: pp 420-437.
Tang Shongling, Ren Yulong. (2008). Coordinated regulation: electricity regulation system and theoretic innovation. Management World 7: pp 174-175.
Rosendahl, K. (2004). Cost-effective environmental policy: implications of induced technological change. Journal of Environment Economy Manage 48: pp 1099-1121.
Meyer NI, (2003). European schemes for promoting renewables in liberalized markets. Energy Policy 31: pp 665-676.
Emilie Alerola, Julien Chevallier, and Benoit Cheze. (2009). Emissions compliances and carbon prices under the EU ETS: a specific analysis of industrial sectors. J. Policy Modeling 31: pp 446-462.
Klepper, G. and Peterson, S. (2006). Emissions trading, CDM, JI, and more: the climate strategy of the EU. Energy Journal 27: pp1-26.
Sijm, J. Neuhoff, K. and Y. Chen. (2006). CO2 cost pass-through and windfall profits in the power. Climate Policy 6: pp 49-72.
Montgomery, W. (1972). Markets in licenses and efficient pollution control programs. Journal of Economic Theory 5: pp 395-418.
Mandell, S. (2008). Optimal mix of emissions taxes and cap-and-trade. Journal of Environment Economy Manage 56: pp131-140.
Fredrik Pettersson. (2007). Carbon pricing and the diffusion of renewable power generation in Eastern Europe: a linear programming approach. Energy Policy 35:pp2412-2425.
Michael Gillenwater and Clare Breidennich. (2009). Internalizing carbon costs in electricity markets: using certificates in a load-based emissions trading scheme. Energy Policy 37: pp 290-299.
Ivana Kockar, Conejo, AJ and McDonald, JR. (2009). Influence of the emissions trading scheme on generation scheduling. Electrical Power and Energy Systems 31: pp 465-473.
Sijm, J. Bakker, S. Chen, Y. and Harmsen, H. (2005). CO2 price dynamics: the implications of EU emissions trading for the price of electricity. ECN Report. ECN-C-05-081.
Klemperer, D. and Meyer, M. (1989). Supply function equilibria in oligopoly under uncertainty. Econometrica 57: pp 1243-1277.