Sharing carbon permits in industrial symbiosis: A game theory-based optimisation model

Abstract

The emerging effects of climate change caused by the rise of carbon dioxide (CO2) and equivalent greenhouse gas (GHG) emissions to the atmosphere have prompted policymakers to revise current emission reduction schemes. One of the schemes is a carbon permit scheme which places a restriction on the CO2 or equivalent GHG emissions to the atmosphere. However, limited literature explores the effectiveness of sharing carbon permits in an IS system to optimise and reduce waste emissions in a system. Therefore, this research presents an optimisation-based framework for plants in an industrial symbiosis (IS) system with a carbon permit scheme. The critical success factor for an IS system is the collaboration and synergistic possibilities between participating plants within geographical proximity. This paper takes a different approach from the typical physical resource sharing in IS. This research considers carbon permits as a shared resource between the plant operators. The sharing of carbon permits creates a cooperative environment between the plant operators in the IS system. Through this system, cooperative game theory (CGT) was used to determine the fair allocation of profit to each participating plant operator based on their marginal contribution in the IS system. A case study has been implemented for three process plants: palm oil mill (POM), palm oil-based biorefinery (POB) and combine heat power (CHP) plant that are operated under a carbon permit scheme. Results from the base case study illustrates that each plant operator receives an average of 12% higher profit when sharing their carbon permits relative to working individually under the carbon permit scheme. A further analysis has been conducted to investigate the framework′s economic feasibility at different emission cuts. With differing emission cuts, the results indicated plant operators obtained an increase in their profit margin by 25% when working in a coalition relative to working independently.