International Journal of Economy, Energy and Environment

| Peer-Reviewed |

Emission Market Design Based on Supply Function Equilibrium Model

Received: Sep. 25, 2015    Accepted: Oct. 20, 2015    Published: Aug. 28, 2016
Views:       Downloads:

Share This Article

Abstract

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.

DOI 10.11648/j.ijeee.20160101.11
Published in International Journal of Economy, Energy and Environment ( Volume 1, Issue 1, August 2016 )
Page(s) 1-7
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2024. Published by Science Publishing Group

Previous article
Keywords

Electricity Industry, Emission Market Design, Supply Function Equilibrium, Complexity System Modeling

References
[1] Leslie Nielson. (2008). The European emissions trading system—lessons for Australia. Research paper No.3: ISSN 1834-9854.
[2] Lene Nielsen, Tim Jeppesen. (2003). Tradable green certificates in selected European countries—overview and assessment. Energy Policy 31: pp 3-14.
[3] Sorrell, S. Sijm, J. (2003). Carbon trading in the policy mix. Oxford. Review of Economic Policy 19: pp 420-437.
[4] Tang Shongling, Ren Yulong. (2008). Coordinated regulation: electricity regulation system and theoretic innovation. Management World 7: pp 174-175.
[5] Rosendahl, K. (2004). Cost-effective environmental policy: implications of induced technological change. Journal of Environment Economy Manage 48: pp 1099-1121.
[6] Meyer NI, (2003). European schemes for promoting renewables in liberalized markets. Energy Policy 31: pp 665-676.
[7] 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.
[8] Klepper, G. and Peterson, S. (2006). Emissions trading, CDM, JI, and more: the climate strategy of the EU. Energy Journal 27: pp1-26.
[9] Sijm, J. Neuhoff, K. and Y. Chen. (2006). CO2 cost pass-through and windfall profits in the power. Climate Policy 6: pp 49-72.
[10] Montgomery, W. (1972). Markets in licenses and efficient pollution control programs. Journal of Economic Theory 5: pp 395-418.
[11] Mandell, S. (2008). Optimal mix of emissions taxes and cap-and-trade. Journal of Environment Economy Manage 56: pp131-140.
[12] Fredrik Pettersson. (2007). Carbon pricing and the diffusion of renewable power generation in Eastern Europe: a linear programming approach. Energy Policy 35:pp2412-2425.
[13] 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.
[14] 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.
[15] 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.
[16] Klemperer, D. and Meyer, M. (1989). Supply function equilibria in oligopoly under uncertainty. Econometrica 57: pp 1243-1277.
Cite This Article
  • APA Style

    Shijun Fu. (2016). Emission Market Design Based on Supply Function Equilibrium Model. International Journal of Economy, Energy and Environment, 1(1), 1-7. https://doi.org/10.11648/j.ijeee.20160101.11

    Copy | Download

    ACS Style

    Shijun Fu. Emission Market Design Based on Supply Function Equilibrium Model. Int. J. Econ. Energy Environ. 2016, 1(1), 1-7. doi: 10.11648/j.ijeee.20160101.11

    Copy | Download

    AMA Style

    Shijun Fu. Emission Market Design Based on Supply Function Equilibrium Model. Int J Econ Energy Environ. 2016;1(1):1-7. doi: 10.11648/j.ijeee.20160101.11

    Copy | Download

  • @article{10.11648/j.ijeee.20160101.11,
      author = {Shijun Fu},
      title = {Emission Market Design Based on Supply Function Equilibrium Model},
      journal = {International Journal of Economy, Energy and Environment},
      volume = {1},
      number = {1},
      pages = {1-7},
      doi = {10.11648/j.ijeee.20160101.11},
      url = {https://doi.org/10.11648/j.ijeee.20160101.11},
      eprint = {https://download.sciencepg.com/pdf/10.11648.j.ijeee.20160101.11},
      abstract = {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.},
     year = {2016}
    }
    

    Copy | Download

  • TY  - JOUR
    T1  - Emission Market Design Based on Supply Function Equilibrium Model
    AU  - Shijun Fu
    Y1  - 2016/08/28
    PY  - 2016
    N1  - https://doi.org/10.11648/j.ijeee.20160101.11
    DO  - 10.11648/j.ijeee.20160101.11
    T2  - International Journal of Economy, Energy and Environment
    JF  - International Journal of Economy, Energy and Environment
    JO  - International Journal of Economy, Energy and Environment
    SP  - 1
    EP  - 7
    PB  - Science Publishing Group
    SN  - 2575-5021
    UR  - https://doi.org/10.11648/j.ijeee.20160101.11
    AB  - 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.
    VL  - 1
    IS  - 1
    ER  - 

    Copy | Download

Author Information
  • Department of Logistic Engineering, Chongqing University of Arts and Sciences, Chongqing, China

  • Section