Allowance Allocation Research Articles

A two-stage stochastic programming approach for reserving and allocating of emission trading permits under uncertainties

ABSTRACT The Emissions Trading Scheme (ETS) is a market-based approach aiming at reducing greenhouse gas (GHG) emissions. It involves the allocation of emission allowances to entities that are permitted to emit certain levels of GHG, as well as the re-sale and re-allocation of these allowances among entities. Considering the uncertainty of urban traffic congestion, the problem of reserving and allocating Emission Trading Permits (ETP) under stochastic demand is investigated. The ETP reserve of each link is determined before congestion, the optimal allocation scheme of ETP is determined after congestion. A two-stage stochastic programming model is formulated to minimize the sum of the reserve cost of ETP before congestion and the expected total loss of ETP after congestion. First, the effectiveness of the stochastic programming model is verified by comparing with the traditional method. Second, the total cost increases with the increase of initial reserve cost and shortage cost, and decreases with the increase of selling price and the capacity of links by sensitivity analysis. The unit reserve cost has a negative effect on the reserve quantity, while shortage cost, selling price, and link capacity have a positive effect on the reserve quantity. At last, the validity of the stochastic programming solution can be verified by numerical analysis of the Nguyen-Dupuis network. The stochastic programming solution proposed in this study shows an 89% reduction in ETP reserve compared to the optimal initial capacity solution. When level E occurs, the total cost is correspondingly reduced by 11%.

Experimental Investigation on Microstructure Alteration and Surface Morphology While Grinding 20Cr2Ni4A Gears with Different Grinding Allowance Allocation.

Transmission gear is a key component of vehicles and its surface integrity affects the safety of the transmission system as well as the entire mechanical system. The design and optimization of allowances in form grinding are important for improving dimensional accuracy and machining efficiency during the manufacturing of heavy-duty gears. This work aims to investigate the effects of grinding allowance allocation on surface morphology, grinding temperature, microstructure, surface roughness, and microhardness fluctuation during the form grinding of 20Cr2Ni4A gears. Results indicated that grinding temperature was primarily influenced by rough grinding involving significant grinding depths exceeding 0.02 mm. The ground surface exhibited slight work hardening, while thermal softening led to a reduction in microhardness of around 40 HV. Ground surface roughness Ra varied from 0.930 μm to 1.636 μm, with an allowance allocation of the last two passes exerting the most significant influence. Analysis of surface and subsurface microstructures indicated that a removal thickness of 0.02 mm during fine grinding was insufficient to eliminate the roughness obtained from rough grinding. Evident ridges, gullies, and surface defects such as material extraction, adhesion, and plastic deformation were also observed. The proposed grinding strategy was validated in practical manufacturing with good surface quality and geometrical accuracy.

Rolling horizon optimisation strategy and initial carbon allowance allocation model to reduce carbon emissions in the power industry: Case of China

Rolling horizon optimisation strategy and initial carbon allowance allocation model to reduce carbon emissions in the power industry: Case of China

Carbon allowance auction design of China's ETS: A comprehensive hierarchical system based on blockchain

This study proposes a blockchain-based optimization framework for carbon allowance allocation auctions. First, the study assesses the status quo of carbon trading, pinpointing barriers, future development trends, and identifying carbon quota auction standards and methods pertinent to the Chinese context. Second, based on China's carbon market needs and the technical characteristics of blockchain, this study reconfigures the functions and responsibilities of each participant and creates a framework for a carbon allowance auction system to optimize the carbon trading process. Third, an algorithm for the carbon allowance auction system is constructed, and the corresponding smart contract is created and simulated. The results illustrate that our proposed system framework facilitates universal carbon allowance auctions, efficiently addresses potential disputes during the auction process, enhances market transparency and credibility, and offers comprehensive privacy protection with flexible information disclosure options for corporations. Blockchain's role in fostering paid distribution and incentivizing participation in the carbon market is further recognized. A blockchain-based carbon trading system safeguards transaction security and efficiency, maintains precise transaction records, and provides automated settlement. Ultimately, this paper presents policy suggestions for the development of a national carbon market in China.

The impact of electricity-carbon market coupling on system marginal clearing price and power supply cost.

In this study, we assessed the impacts of the benchmark designs of emissions allowance allocation in China's national carbon emissions trading system with plant-level data and further estimated the marginal clearing price and power supply cost in Guangdong power market under electricity-carbon market coupling with unit commitment and economic dispatch model. We find that the existing allowances benchmark would result in a considerable surplus of allowances at about 222 Mt. But the benchmarking and exemplary levels on the heat rate of power supply would motivate thermal power units to reduce CO2 emissions. Under a tight balance of supply and demand in Guangdong, peaking thermal power plants will become the marginal clearing units and higher clearing prices will add to the revenue of lower cost inframarginal renewable energy power units. However, the combined impact of electricity-carbon market coupling would cause the marginal clearing price fluctuates obviously from 0 to 1159 CNY/MWh. Compared to the baseline scenario with free CO2 allowances allocation, the efficiency of thermal power utilization would decrease by 23%-59% and the net revenue per MWh power supply of coal-fired power units would decrease by 275%-325% under the stress scenario. Our study suggests that setting a more stringent allowances allocation benchmark for carbon price discovery is necessary. As electricity-carbon market coupling changes the role of coal-fired power plants to provide flexibility service and decrease their revenues, it calls for further market designs on proper reimbursement of flexible resources, under which the electricity market can effectively achieve the synergy among accommodating new energy, ensuring resource adequacy, and delivering cost efficiency. In addition, the synergy can be enhanced by formulating a tax program, which can promote renewable energy investment.

The Impact of Carbon Allowance Allocation Rules on Remanufacturing Decisions in a Closed-Loop Supply Chain

Remanufacturing has been widely adopted in the industrial sector due to carbon emission constraints and economic benefits. This paper discusses a closed-loop supply chain composed of an original equipment manufacturer (OEM), an authorized remanufacturer (AR), that is licensed by the OEM to carry out remanufacturing activities in the presence of strategic consumers under carbon cap-and-trade regulations. We establish a Stackelberg game model to identify the optimal manufacturing/remanufacturing decisions made by chain members, and compare the impacts of two different carbon allowance allocation rules on the optimal production decisions and profits, and on the environment. The results showed that optimal decisions in a closed-loop supply chain are affected by the carbon price, carbon allowance allocation, and consumer preferences for remanufactured products. In addition, for high-emission enterprises, the grandfathering rule performs better than the benchmarking rule, yielding higher profits and less environmental impact. The government should take into account the actual economic and production technological developments, implement the benchmarking rule for low-emission enterprises, and apply the grandfathering rule to high-emission enterprises.

A novel allocation method of regional carbon allowance in building sector: Perspective from coupling equity and efficiency

Equitable and effective allocation of provincial carbon allowances is the key to achieving carbon peaking and carbon neutrality targets and addressing the prominent issue of resource and environmental constraints, while reasonable coupling of equity and efficiency is its prerequisite. The study first assessed the effectiveness of the mainstream allocation methods when applied to the building sector. Then, Monte Carlo simulation is used to properly couple the principles of equity and efficiency in the process of carbon allowance allocation in the building sector, and on this basis, a novel Allocation method of Regional Carbon Allowance in Building sector (ARCAB) is constructed to provide an inter-provincial allocation scheme of building carbon emission allowances in 2030 for China. The results show that the mainstream allocation methods are not applicable to the building sector, and their allocation results often appear the phenomenon of “low-hanging fruit” or “high-hanging fruit”. In addition, the coupling degree of equity-efficiency is 12% in China's 2030 allocation scheme, indicating that provincial governments should formulate more stringent carbon reduction policies to achieve this goal. The proposed ARCAB and our findings can assist decision-makers to formulate reasonable carbon allowances and differentiated emission-reduction strategies and will be of national and global significance.

CO2 Emission Allocation for Urban Public Buildings Considering Efficiency and Equity: An Application at the Provincial Level in China

China is currently recognized as the leading global energy consumer and CO2 emitter. A significant amount of carbon emissions can be attributed to urban public buildings. Establishing an equitable and efficient carbon emission allocation mechanism is a crucial step to meeting the ambitious targets in China’s 2030 carbon peak plan. In this study, we estimate the total amount of CO2 emissions from urban public buildings by 2030 and propose a preliminary scheme of carbon quota assignment for each province. By means of applying the zero-sum gains data envelopment analysis (ZSG-DEA) model, the carbon emission quotas allocation of urban public buildings in China’s 30 provinces is proposed, and the corresponding pressure to reduce provincial carbon emissions is analyzed. The results indicate that Qinghai has the lowest carbon emission rate (0.01%) for urban public buildings, while Guangdong has the highest (9.06%). Among the provinces, Jiangsu, Jiangxi, and Tianjin face the least pressure in reducing carbon emissions from urban public buildings. On the other hand, Hebei, Beijing, and Anhui are under great pressure to decrease carbon emissions. Notably, Hebei is predicted to have the highest emission reduction requirement of 95.66 million tons. In terms of pressures on carbon emissions reduction for urban public buildings, Jiangsu, Jiangxi, and Tianjin exhibit the least pressure. Hebei, Beijing, and Anhui are facing intense pressure to decrease carbon emissions. These findings offer policymakers valuable insights into developing a fair and efficient carbon allowance allocation strategy, while also contributing to China’s efforts to mitigate carbon emissions and combat climate change.

Returning to Normalcy: an Evidence-Based Overview of Strategies for Creating a Psychologically Safer Workplace in Ghanaian Health Industry

The study focused on returning to normalcy: an evidence-based overview of strategies for creating a psychologically safer workplace in Ghanaian health industry. The study used a Qualitative Research Approach, specifically, a phenomenological research approach, and an exploratory research design to explore and comprehend individuals' lived experiences, views, and strategies for creating a safe psychological workplace. The study used the non-probability sampling method, which involved purposive sampling method to select participants for the study. The study found that most health professionals communicate politely with patients. There were mixed reactions regarding the overall sense of safety and well-being within the Ghanaian health industry. On one hand, most of the Ghanaian health institutions has put in place excellent support systems, and there is a culture of camaraderie among colleagues that generates a reassuring work atmosphere. On the other hand, there is a lack of financial resources in the health industry, which has adverse effect on staff well-being, producing an environment of frustration and tension. Due to budget restrictions, the health industry frequently translates to insufficient worker levels, outmoded equipment, and poor support systems. According to the results of the poll, most policies regarding staff allowances favour senior leaders and senior staff over junior employees. As a result, an organization's policy on allowances allocation favour senior leaders and management over junior employees. The study acknowledged that creating a psychologically safe workplace is a complex and ongoing process that involves various stages. These stages are interconnected and require ongoing commitment and effort from leadership and employees. The study found eight (8) key stages to consider when creating a psychologically safe workplace. These stages covered Assessment and Diagnosis, Leadership Commitment and Training, Communication and Transparency, Inclusive Decision-Making, Feedback and Recognition, Training and Skill Development, Continuous Monitoring and Adaptation, and Support for Mental Health and Well-being.

Carbon allowance allocation based on comprehensive performance of carbon emissions: Case of typical industries in Zhengzhou.

Studying the comprehensive performance of industrial carbon emission has profound significance for improving carbon allowance allocation scheme and achieving the carbon neutrality target. The paper selects 181 enterprises in Zhengzhou as the case, a comprehensive carbon emission performance indicator system and a carbon allowance allocation model were established, and compared with other allocation schemes (historical/baseline method). The results showed that the overall differences in the comprehensive performance evaluation indicator of carbon emissions in typical industries in Zhengzhou were obvious, and there was a correlation with the characteristics of industrial production activities. The overall emission reduction of Zhengzhou was 244.33×103t, and the emission reduction ratio was 7.94% by simulating carbon allowance allocation under the comprehensive performance. The carbon allowance allocation method based on the comprehensive performance has the strongest restraint on the "high emission, low performance" industry, which is more equitable and more conducive to carbon emission reduction. In the future, it will be recommended to give full play to the leading role of the government, implement industrial carbon allowance allocation based on the comprehensive performance evaluation of carbon emissions, to achieve multi-objectives of resource conservation, environmental pollution abatement, and carbon reduction.

Carbon emission allowance allocation based on a bi-level multi-objective model in maritime shipping

To mitigate carbon emissions from maritime shipping, this study investigates the strategies and performance of allocating carbon emission allowances (CEAs) with the cap-and-trade mechanism among shipping companies. Using a bi-level model solved by the multi-objective particle swarm optimization algorithm based on Pareto solution set, the interactions between decisions of the government and shipping companies are well characterized. The results of the benchmark scenario indicate that all shipping companies’ optimal carbon emissions decrease annually during the planning period, and a larger company usually exhibits a better emission reduction performance. However, economic benefits of shipping companies and the society display an annually declining trend due to additional carbon emission reduction costs. The sensitivity analysis demonstrates that the decreasing carbon prices lead to more emissions, while the optimal total carbon emissions decrease as carbon reduction costs increase. These findings create implications for multiple stakeholders to formulate their own carbon emissions mitigation strategies under the cap-and-trade mechanism.

Management Program Implementation of Performance Monitoring and Control Systems Benefits as Quality Control and Teacher Competence in Banyuwangi District

Teachers who get certification are entitled to a professional allowance. The government hopes that with this allowance, teachers can improve their welfare and performance. But unexpectedly, after receiving the professional allowance, teachers are not compensated with good quality and competence. Related to this, the Banyuwangi Regency government made improvements through the Education Office Branch. A Management System for Monitoring and Control of Performance and Allowances (SRITANJUNG) management program was launched to control teacher quality and competency. This study aims to build an implementation model for the Sritanjung Program as a quality control and appropriate teacher competency. Factors that support or inhibit will be sought and try to find a solution. This study uses a descriptive qualitative method by collecting data in the field through interviews and questionnaires to all parties involved. The results showed that 1) the implementation of the program as a quality control and teacher competence in the process there are problems with legality, attitude and character of supervisors and principals, target targets/teachers, and tools. While the supporting factors for program implementation as control are: (a) the existence of implementer intentions and agreements, (b) the existence of a legal umbrella, (c) application support, and (d) the availability of implementor resources that are ready. While the inhibiting factors are (a) policy; assignment legality for school supervisors and principals, (b) tools; teacher's computer equipment, frequent errors, incomplete features, and internet signal, (c) systems and processes; lack of clear information about the program, and (d) from human resources; not all teachers are familiar with applications, honesty of information from teachers, weak mastery of information technology and computers, allocation of allowances and busyness of teachers. Meanwhile, the program implementation model for quality control and teacher competence that has been built and is appropriate is the Co-Han Model, which is presumably the initial solution. The Co-Han model is a combination of the old program implementation model and some elements of the COCO control model. This new model involves elements of attitude and characteristics of implementers and targets. Involving the elements of attitude and character in the form of goals, commitment, and abilities is considered very important. With a good attitude and character, it is hoped that the program can be implemented properly too, so that the goals will be easily achieved. The combination of management as a system, as well as commitment and ability as a character will greatly influence program objectives. This is considered a very effective, necessary and new combination in a program implementation as control.

EU in search of a Carbon Border Adjustment Mechanism

To meet the targets of the EU’s Fit for 55 package, the European Commission proposed in July 2021 to implement a Carbon Border Adjustment Mechanism (CBAM) to replace free allocation of Emission Trading System (ETS) allowances for the most trade-exposed emitting industries. CBAM aims to prevent carbon leakage and restore a level playing field in high-emitting industries. Its design, as voted by the European Council in March 2022, by the Parliament in June, and ultimately amended by a provisional agreement between the Council and the European Parliament in December 2022, raises several issues. This paper aims to quantify the economic and environmental impacts of different choices regarding this design. Simulations are based on a dynamic general equilibrium model representing imperfect competition, input–output relations, greenhouse gas emissions, the endogenous price of emission quotas and the presence of free allocation of allowances. We show that CBAM is effective in reducing carbon leakage. But its design increases the price of carbon in the European Emissions Trading Scheme. Competitiveness losses in export markets are expected for downstream sectors that are not covered by the CBAM, as well as for European exporters of high-emitting industries, even in the presence of rebates.

Coase and Cap-and-Trade: Evidence on the Independence Property from the European Carbon Market

I examine the Coasean independence property in a large multinational cap-and-trade scheme for greenhouse gas emissions, the EU Emissions Trading System. I analyze whether emissions of power producers are independent from allowance allocations by leveraging a change in allocation policy for a difference-in-difference strategy. The evidence suggests that the independence property holds overall and for larger emitters and that firms respond to the loss in allocation by increasing allowance purchases. Suggestive evidence for small emitters indicates that trading costs or behavioral bias distorts their emission decisions. However, their small emission share leaves the independence property intact at the sector level. (JEL L94, L98, Q48, Q51, Q54, Q58)

Carbon allowance approach for capital-constrained supply chain under carbon emission allowance repurchase strategy

PurposeThe purpose of this study is to investigate which of the two carbon allowance allocation methods (CAAMs), i.e. grandfathered system carbon allowance allocation (GCAA) and baseline system carbon allowance allocation (BCAA), is more beneficial to capital-constrained supply chains under the carbon emission allowance repurchase strategy (CEARS).Design/methodology/approachAdopting CEARS to ease the capital-constrained supply chains, this study develops two-period game models with manufacturers as leaders and retailers as followers from the perspective of profit and social welfare maximization under two CAAMs (GCAA and BCAA), where the first period produces normal products, and the second period produces low-carbon products.FindingsFirst, higher carbon-saving can better use CEARS and achieve a higher supply chain profit under the two CAAMs. However, the higher the end-of-period carbon price is, the lower the social welfare is. Second, when carbon-saving is small, GCAA achieves both economic and environmental benefits; BCAA reduces carbon emissions at the expense of economic benefit. Third, the supply chain members gain higher profits and social welfare under GCAA, so the government and supply chain members are more inclined to choose GCAA.Originality/valueBy analyzing the profits and total carbon emissions of capital-constrained supply chains under GCAA and BCAA, this study provides theoretical references for retailers and capital-constrained manufacturers. In addition, by comparing the difference in social welfare under GCAA and BCAA, it provides a basis for the government to choose a reasonable CAAM.

Carbon allowance allocation rules under emission intensity regulation: Grandfathering versus benchmarking

This paper compares the impacts of grandfathering and benchmarking rules on firms' operating decisions, consumer surplus, and social welfare with different emission intensity limits. The findings suggest that with tight emission intensity limits, grandfathering rules are more effective in controlling carbon emissions and enhancing social welfare. Benchmarking rule with relaxed emission intensity can incentivize firms to increase output, lower product prices, and increase consumer surplus. Under relaxed intensity regulation, grandfathering rule can encourage more potential entrants to participate in the product market, and benchmarking rule can motivate firms to take more outputs, resulting higher consumer surplus and more carbon emissions.

The joint impact of the carbon market on carbon emissions, energy mix, and copollutants

From a comprehensive standpoint, this paper investigates whether and to what extent the carbon market functions in the context of the developing world. Taking advantage of a unique seven-year-plant-level panel dataset (2010–2016) on Chinese power plants, we use a matched difference-in-differences strategy to identify the joint impact of China’s carbon emissions trading (CET) pilot policy on carbon emissions reduction (objective), energy mix improvement (mechanism), and air copollutant reduction (cobenefits). We find that China’s CET pilot policy effectively lowered carbon emissions by approximately 38.61%. Further analysis shows that plants reduce carbon emissions primarily by reducing coal consumption (approximately 30.79%). Most importantly, China’s CET pilot policy induces substantial air copollutant abatement benefits by reducing sulfur dioxide and nitrogen oxides by approximately 52.19% and 48.62%, respectively. State-owned plants are more affected by China’s CET pilot policy, and the policy effects show disproportionate environmental inequality. Furthermore, the effects are not affected by the rate-based allowance allocation structure that is adopted by China’s national carbon market.

Contribution of carbon pricing to meeting a mid-century net zero target

ABSTRACT A mid-century net zero target creates a challenge for reducing the emissions of emissions-intensive, trade-exposed sectors with high cost mitigation options. These sectors include aluminium, cement, chemicals, iron and steel, lime, pulp and paper and petroleum refining. Available studies agree that decarbonization of these sectors is possible by mid-century if more ambitious policies are implemented soon. Existing carbon pricing policies have had limited impact on the emissions of these sectors because their marginal abatement costs almost always exceed the tax rate or allowance price. But emissions trading systems with free allowance allocations to emissions-intensive, trade-exposed sectors have minimized the adverse economic impacts and associated leakage. Internationally coordinated policies are unlikely, so implementing more ambitious policies creates a risk of leakage. This paper presents policy packages a country can implement to accelerate emission reduction by these sectors with minimal risk of leakage. To comply with international trade law the policy packages differ for producers whose goods compete with imports in the domestic market and producers whose goods are exported. Carbon pricing is a critical component of each package due its ability to minimize the risk of adverse economic impacts on domestic industry, support innovation and generate revenue. The revenue can be used to assist groups adversely impacted by the domestic price and production changes due to carbon pricing and to build public support for the policies. Key policy insights A country with a mid-century net zero GHG emission target likely will need to implement more ambitious mitigation policies soon for emission-intensive sectors such as aluminium, cement, chemicals, iron and steel, lime, pulp and paper and petroleum refining. More ambitious mitigation policies are likely to vary by country and be implemented at different times, creating a risk of leakage due to industrial production shifts to other jurisdictions. More ambitious mitigation policy packages, compatible with international trade law, that a country can implement to reduce emissions from these sectors with minimal risk of leakage are available but differ for producers whose goods compete with imports in the domestic market and those whose goods are exported. Carbon pricing is a critical component of each package due its ability to minimize the risk of adverse economic impacts on domestic producers, support innovation and generate revenue.

Emphasizing egalitarianism in the allocation of China's provincial carbon emission allowances

China plans to allocate the provincial carbon emission allowances (CEA), but the CEA scheme has not been determined. Uncertain decisionmaker preferences lead to the uncertainty of the CEA scheme, hindering provinces from setting climate targets. Thus, we investigate different CEA schemes under various preferences from the fairness—efficiency perspective. We developed a CEA scheme set (consisting of 176851 CEA schemes) based on four criteria: egalitarianism, capacity, responsibility, and efficiency. By constructing a desirability evaluation index, we find the most desirable CEA schemes corresponding to various preferences from the CEA scheme set. The results show that egalitarianism can co-improve fairness and efficiency on top of the existing CEA scheme. Relying mainly on egalitarianism supplemented by efficiency is a desirable allocation mode for any decisionmaker. Regardless of the preferences, these situations generally exist: 1) Guangdong and Shandong will get the highest CEA; 2) Municipalities directly under the central government and less developed provinces will get the lowest CEA; 3) North, Northwest, and Northeast China will bear high emission reduction pressures before 2030. These findings will provide essential guidance for decisionmakers in formulating CEA schemes and provinces in formulating emission reduction policies.

Greenhouse gas emission indicators, energy consumption efficiency, and optimal carbon emission allowance allocation of the EU countries in 2030

The 2030 Climate Target Plan of the European Union (EU) has set a goal of reducing carbon emissions by 55%, but while carbon emissions have attracted the attention of scholars, past research has two shortcomings. Studies have focused on carbon emission allocation that occurred in the past, but seldom forecasted carbon emission allocation in the future. Moreover, most research has focused on carbon dioxide emissions with other greenhouse gases receiving less attention. To fill this gap in the literature, this research has two contributions. First, it uses the entropy method to design greenhouse gas emission indicators and to evaluate the weight of each greenhouse gas in carbon emissions. Second, this study applies data envelopment analysis to predict the optimal carbon emission allocation for the EU in 2030. This paper presents the following results. (1) Energy consumption efficiency and carbon emission efficiency for Denmark, Greece, Ireland, Luxembourg, Malta, Sweden, and United Kingdom are the best. (2) Non-renewable energy consumption efficiency in most countries needs to be improved.