A platform for research: civil engineering, architecture and urbanism
A platform for research: civil engineering, architecture and urbanism
Modeling the impact of uncertainty in emissions trading markets with bankable permits
Abstract The various forms of uncertainty that firms may face in bankable emission permit trading markets will affect firms’ decision making as well as their market performance. This research explores the effect of increased uncertainty over future input costs and output prices on the temporal distribution of emission. In a dynamic programming setting, the permit price is a convex function of stochastic prices of coal and electricity. Increased uncertainty about future market conditions increases the expected permit price and causes a risk neutral firm to reduce ex ante emissions in order to smooth out marginal abatement costs over time. Finally, safety valves, both low-side and high-side, are suggested to reduce the impact of uncertainty in bankable emission trading markets.
Modeling the impact of uncertainty in emissions trading markets with bankable permits
Abstract The various forms of uncertainty that firms may face in bankable emission permit trading markets will affect firms’ decision making as well as their market performance. This research explores the effect of increased uncertainty over future input costs and output prices on the temporal distribution of emission. In a dynamic programming setting, the permit price is a convex function of stochastic prices of coal and electricity. Increased uncertainty about future market conditions increases the expected permit price and causes a risk neutral firm to reduce ex ante emissions in order to smooth out marginal abatement costs over time. Finally, safety valves, both low-side and high-side, are suggested to reduce the impact of uncertainty in bankable emission trading markets.
Modeling the impact of uncertainty in emissions trading markets with bankable permits
Zhang, Yongliang (author) / Zhang, Bing (author) / Bi, Jun (author) / He, Pan (author)
Frontiers of Environmental Science & Engineering ; 7 ; 231-241
2012-07-04
11 pages
Article (Journal)
Electronic Resource
English
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