Interval two-stage stochastic programming model under uncertainty for planning emission rights trading in the Yellow River basin of China.

Abstract

As a critical way to realize the optimal allocation of water environment capacity resources in the basin, emission rights trading faces multiple uncertainties, making it extremely hard and challenging to formulate appropriate decisions and plans. Therefore, this study uses interval two-stage stochastic programming (ITSP) method to model the emission rights trading process with multiple uncertainties. It can promote the secondary optimal allocation of the emission rights between the demander and the supplier after the initial allocation. Externalities caused by environmental problems are internalized through the form of emission rights trading, thereby reducing the transaction costs and promoting the coordination and integrity of water pollution control among governments in a basin. Finally, the Yellow River basin is taken as an example for case analysis. The results show that the net revenue of emission rights system in the transaction status is better than that in the non-transaction status, and the average gap of net income reaches [171.031, 193.056] billion yuan. Under different reduction policies, the average water pollutant emission reduction in transaction status is [451.15, 628.34] thousand tons, which is generally less than [516.57, 670.05] thousand tons in non-transaction status. As policies get stricter and assimilative capacity of water bodies dwindles, reduction shrinks, leading to higher risks and economic loss from being unable to meet the discharge demand. When reduction policies are relatively loose and assimilative capacity is high, emission rights trading volume peaks. At this time, the trading volume of COD reached [29.05, 40.76] thousand tons, and that of NH3-N reached [3.74, 4.31] thousand tons. All these findings will offer insights for decision-makers on how to strike a balance between economic benefits and emission rights trading plans in the Yellow River basin.