Carbon Emission Quota Research Articles

Renewable Energy Investment under Carbon Emission Regulations

This paper considers a risk-neutral energy supplier who operates an electricity plant in an uncertain demand market. To characterize the impact of carbon emission quota and emergency supply cost of coal electricity, we first consider four different cases, (1) traditional energy without carbon emission restriction; (2) traditional energy with carbon emission quota; (3) mixed energy (both traditional and renewable energy) without carbon emission restriction, and (4) mixed energy with carbon emission quota, to find the optimal renewable energy investment level and coal inventory mechanism for an energy supplier. Then, through the analysis we derive the resulting equilibriums: coal inventory for electricity generation and the investment of renewable energy capacity. By comparing the performances under different scenarios, we find that (a) renewable energy establishment can mitigate the depression of carbon emission constraint, (b) the energy supplier can obtain positive benefits from optimal mixed energy strategy if the additional emergency cost of traditional energy is not too high, and (c) the optimal renewable energy capacity level is decreasing in the carbon emission quota. Our numerical simulations imply that the impact of additional emergency cost to the profit difference between mixed energy strategy and traditional energy strategy is mediated by carbon emission quota.

Analysis of the carbon emission reduction potential of China's key industries under the IPCC 2 °C and 1.5 °C limits

Carbon emission from human activities is one of the main factors inducing the on-going global warming. It is, therefore, essential to establish a shared responsibility in industry for carbon emissions reduction. In this study, we examined the allocation of carbon emission rights in China's six high-energy-consuming industries from the perspective of allocation efficiency. The initial carbon emission quota was iteratively optimized using the zero-sum gains data envelopment analysis (ZSG-DEA) model. Furthermore, a scenario-based method was used to predict the future of various industries under a 1.5 °C warming target. According to our analysis, the largest carbon emission quota was in the transport industry, at 19.61 Gt CO2 under a 2 °C target and 16.27 Gt CO2 under a 1.5 °C target. The electric power industry and the iron and steel industry show the greatest potential for emissions reduction, and significant effort is now needed to achieve the allocation efficiency target. A “high economic growth and low energy consumption” scenario was more conducive to the sustainable growth of industry. Emissions reduction should focus on the electric power industry and the transport industry. In addition, the use of energy-saving and emissions-reducing technologies in high-energy-consuming industries should be increased.

A Two-Stage Algorithm of Locational Marginal Price Calculation Subject to Carbon Emission Allowance

To analyze the effect of carbon emission quota allocation on the locational marginal price (LMP) of day-ahead electricity markets, this paper proposes a two-stage algorithm. For the first stage of the algorithm, a multi-objective optimization model is established to simultaneously minimize the total costs and carbon emission costs of power systems. Hence, an evenly distributed Pareto optimal solution can be solved effectively by means of the normalized normal constraint method. For the second stage, a tracing model is built with the goal of minimizing the total costs of power systems and satisfying the constraints generated based on the Pareto optimal solution obtained from the first stage. Furthermore, the influence of carbon emission quota allocation on the LMP of electricity markets is analyzed, and different schemes to allocate carbon emission quotas are evaluated on a real 1560-bus and 52-unit system.

A study on the CO2 marginal abatement cost of coal-fueled power plants: is the current price of China pilot carbon emission trading market rational?

This paper aims to analyze the trading mechanism of China pilot carbon emission trading market and figure out whether the current market price is rational and valid. By applying directional distance function and stochastic frontier analysis method, we estimated the CO2 marginal abatement cost of 92 coal-fueled generators belonging to 27 power plants located in Shanghai which is one of the pilot carbon emission trading market cities in China. The result indicates that the market price will greatly affect the trading activities within carbon emission trading market. We conclude that the current market price is not rational for coal-fueled power industry which is high-carbon and high CO2 MAC industry. When the exchange of nationwide carbon trading market formally start, policymakers should impose carbon tax or carbon emission quota to adjust the market price and stimulate the CO2 emission reduction willingness of coal-fueled power plants.

Privacy-preserving decentralized power system economic dispatch considering carbon capture power plants and carbon emission trading scheme via over-relaxed ADMM

This paper proposes a decentralized power system economic dispatch (DPSED) model considering carbon capture power plants (CCPPs) and carbon emission trading scheme (CETS) under a low-carbon economy. First, CETS is introduced and analyzed, and a time-varying carbon emission quota allocation method is proposed. The centralized power system economic dispatch model (CPSED) under a low-carbon economy is established with the objective function to minimize the total operation cost in which CCPPs are introduced that can capture CO2 to reduce carbon emission trading cost. Then, the centralized economic dispatch problem is reformulated into a decentralized model. It is composed of a set of sub-problems in individual areas that can preserve privacy and be solved independently. The alternating direction method of multipliers (ADMM) algorithm is employed to solve the decentralized optimization model, reducing the amount of exchanged information and preserving the privacy of information shared among participating areas. Moreover, the over-relaxed ADMM algorithm is further adopted to accelerate the convergence. Finally, case studies are performed on a 6-bus system and an IEEE 118-bus system to validate the effectiveness of the proposed model and algorithm. Numerical results demonstrate that CCPPs could reduce carbon emissions, help wind power utilization, and achieve economic operation.

Optimal Operation Strategies under a Carbon Cap-and-Trade Mechanism: A Capital-Constrained Supply Chain Incorporating Risk Aversion

Many small and medium enterprises (SMEs) with capital constraints often have no access or find it costly to obtain a loan from a bank; the retailer tends to borrow money from other enterprises in the supply chain by trade credit financing. We consider an emission-dependent supply chain with one emission-dependent manufacturer and one capital-constrained retailer in need of financing to explore the optimal operational and environmental strategies of a low-carbon supply chain under trade credit financing. We use a Stackelberg game model to depict the low-carbon supply chain. We analyse the optimal carbon-emission reduction effort, wholesale price, and order quantity in the equilibrium state. The impacts of key parameters, such as the retailer’s internal working capital, the manufacturer’s risk-aversion degree, and the carbon-trading price on the supply chain operation, are analysed. The results show that the retailer’s capital constraint causes the carbon-emission reduction effort, wholesale price, and order quantity to improve synchronously. The supply chain achieves a win-win outcome for both the manufacturer and the retailer when the capital-constrained retailer is funded via trade credit from the manufacturer. The in-depth development of financing is beneficial to the manufacturer but is a disadvantage for the retailer. When the initial carbon-emission quota is low, the manufacturer benefits from a relatively lower carbon-trading price. Otherwise, a higher carbon-trading price is better for the manufacturer. The “carbon-trading price trap” ensures that the retailer’s profit is minimal. We further investigate the scenario in which the manufacturer is risk averse and find that the retailer will purchase fewer products and that the manufacturer will gain less profit to decrease the carbon-emission reduction effort. The manufacturer’s risk aversion is unfavourable to both the economic and environmental outcomes of the whole supply chain. This research provides strategic support for a low-carbon supply chain to carry out operational decisions in the context of enterprise capital constraint. To examine the theoretical results, the data used in the existing literature are further used to simulate the corresponding conclusions. Our research enriches the existing supply chain finance literature and provides decision support for the supply chain core enterprise.

Carbon emission performance and quota allocation in the Bohai Rim Economic Circle

As the most developed economic zone in northern China, the establishment of regional carbon emission trading (CET) market in the Bohai Rim Economic Circle (BREC) is vital to achieve the Chinese government’s carbon emissions reduction target. This study estimates the carbon emissions in the BREC from 2005 to 2017. To evaluate the impact of energy consumption structure on carbon emission performance in this region, a directional distance function is constructed, and two scenarios are assumed. Then, a two-stage allocation model is established to allocate the carbon emission quotas in 2030. The results indicate the following: (1) Carbon emission intensity tends to decrease and there are large differences among provinces. (2) Energy consumption structure has a great effect on carbon emission performance, ignoring energy consumption structure will underestimate carbon emission performance. (3) Total accumulated carbon emission targets are 85.20 billion tons, 82.36 billion tons and 79.62 billion tons at the high, medium and low economic growth rates. These results provide a reference for the regional carbon emission quotas allocation and for accelerating the establishment of a national CET market.

Dynamic analysis of agricultural carbon emissions efficiency in Chinese provinces along the Belt and Road.

To better understand the agricultural resources and environmental problems of the provinces along The Belt and Road in China, it is critical to investigate their agricultural carbon emission efficiency and evolutionary trends. Based on the panel data of 18 key provinces and cities between 2006 and 2015, this paper evaluated the agricultural carbon emission efficiency with the data envelopment analysis–Malmquist model and further explored their dynamic evolutionary trends. There were several main findings. First, the efficiency levels of agricultural carbon emissions showed significant regional differentiation among the areas, with that along the 21st-Century Maritime Silk Road being much higher than that along the Silk Road Economic Belt. Second, technical efficiency was the key factor that restricted the improvement of the comprehensive efficiency of agricultural carbon. Third, most provinces invested in too many redundant and unreasonably allocated resources, showing a trend of diminishing returns to scale. Last, According to dynamic evolution analysis, the total productivity still demonstrated a diminishing trend. This paper provides some suggestions for effectively improve the efficiency of agricultural carbon emissions in China, such as optimize the agricultural industrial structure, increasing the investment of carbon emission reduction technology, and implementing a carbon emission quota clearing system. This paper contributes to the improvement of the environment in China.

Carbon Tax and Trading Price on Power Plant with Carbon Capture and Storage under Incentive Regulation Theory

This paper investigates how the government can develop subsidies or tax policies to incent power plants to effectively carry out carbon capture to reduce carbon emissions. According to the government’s incentive model for carbon capture power plants, the regulation mechanism is developed when government controls carbon emission. When regional or national carbon emission quota is tense, significant effect can be obtained when regulators make regulations to take off low efficiency power plants. In addition, it is verified that the regulators should not blindly pursue a reduction in carbon emissions regardless of the cost. Therefore, regulators need to pay more attention to control the costs of carbon capture equipment and technology. Finally, by parametric and numerical analyses, the conditions of the power plant to maximize corporate surplus are further studied.

Research on Confirmation and Measurement of Carbon Emissions Trading

By analyzing the background of carbon emission trading accounting, this paper focuses on the confirmation, measurement and information disclosure of carbon emission rights under the “capacity control and trading mechanism” and “baseline and credit trading mechanism”. To sum up, the fair value is used. The quota for free issuance by the government is also based on the market price of the carbon emissions exchange on the day of the issue. At present, China has recognized carbon emission quota accounting as “intangible assets”.

Estimation Method of Carbon Emissions in the Embodied Phase of Low Carbon Building

The carbon emission at the embodied phase is a complex combination, extending the life cycle of the building, defining the process of the embodied phase scientifically and finding out the direct and indirect carbon emission sources in the embodied phase. Building materials have the characteristics of “low carbon surface, hidden high carbon.” Emission factor calculation method is used to establish carbon emission model for building materials. Considering the effect of design optimization on the carbon emissions of the whole life cycle of the building, a low carbon level system is set up to optimize the target of low carbon design. In the construction phase, the carbon emission sources, emission boundary, and calculation model are determined according to the subdivisional engineering division method. Through a series of process decomposition, the total amount of carbon emissions at the embodied phase can be obtained, and the carbon emission quota list at the embodied phase can be compiled to provide technical support for the carbon trading mechanism of the building.

How quota allocation affects the unified ETS of China: a simulation with dynamic CGE model.

The national unified carbon trading market has been officially launched at the end of 2017. The carbon emission quotas should be primary concern, which can be allocated in the form of free and paid ways. However, few literatures studied the economic and environmental impacts of quotas allocation. Thus, this paper constructs 7 scenarios and employs a dynamic, recursive computable general equilibrium (CGE) model to simulate carbon trading market, to probe the relationship between quota allocation and carbon price, and the economic and environmental impact of carbon trading scheme (ETS). Empirical results indicate (1) carbon price has an upward trend with time, which reflects a corresponding increase in emission reduction pressure. Specifically, carbon price increases from 12.44-90.57 CNY/t in 2017 to 65.20-523.44 CNY/t in 2030. In addition, whether under carbon intensity criterion (CIC) or carbon emission criterion (CEC), there is a positive relationship between carbon price and free allocation ratio due to the change of the relationship between supply and demand of quota. With a given free allocation ratio, the price formed with CIC grows faster than that with CEC. (2) Compared with the benchmark scenario, the GDP of China decreases in all scenarios. However, a high level of free allocation ratio combined with CIC may prevent GDP dropping too fast. (3) As for industrial output, covered industries in ETS undertake the largest output losses with an average decline by 4.03-13.60%. Similar to GDP variation, a high free allocation ratio combined with CIC is helpful for sustainable development of industry. (4) Carbon trading has a remarkable effect on emission reductions both in covered and uncovered industries of ETS. Free allocation will reduce market efficiency, which implies it should be cut down gradually at the later stages.

Optimizing decision-making of regional cold chain logistics system in view of low-carbon economy

With the increasing demand for low-carbon cold chain logistics, corresponding subsidy policy and carbon emissions trading policy are needed to guide cold chain logistics enterprises in energy-saving and emission reduction transformation of cold storage. However, current research mainly focuses on energy-saving and emission reduction through improving the energy efficiency of equipment or optimizing the operation and management of cold chain logistics enterprises, rarely considering the government policy. This paper constructs a decision-making model of cold chain logistics system by using the method of bilevel programming. The upper level is the government's goal, pursuing the total cost minimization of the whole cold chain logistics system. The lower level is the goal of the cold chain logistics enterprise, pursuing the cost minimization of the enterprise. Chaotic particle swarm optimization (CPSO) was developed to improve this model, and this method was applied to the decision-making of cold chain logistics system in Wuhan City, Hubei Province, China. The study reveals: (1) The joint use of carbon emission reduction subsidies and carbon emission quota optimization measures is more effective in promoting energy-saving and emission reduction of enterprises than using them separately; (2) The carbon emission quota set by the government should not be too high or too low; (3) The government subsidy limits for carbon emission reduction have a significant impact on the carbon emission reduction of enterprises; (4) The subsidy rate per unit carbon emission reduction can adjust the total carbon emissions and total carbon emission reduction of enterprises. This study provides a scientific basis and inspires the government and enterprise in decision-making to improve the energy-saving and emission reduction of the whole society.

Harmonious allocation of carbon emission permits based on dynamic multiattribute decision-making method

Fair and reasonable allocation of carbon emission permits between regions is the premise of effective operation of carbon emission trading scheme. Thus, based on the harmonious management theory, we propose a two-stage allocation model of “preliminary allocation-harmonious diagnosis and evolution” to analyze the harmonious allocation of carbon emission permits. Specifically, we integrate four principles of fairness, efficiency, sustainability, and government macrocontrol to construct an allocation index system and use the dynamic multiattribute decision-making method to obtain a preallocation scheme. Also, by establishing a directional diagnosis criterion and degree diagnosis criterion, harmonious diagnosis and evolutionary adjustment of preallocation scheme were carried out to obtain a harmonious allocation scheme with high acceptability. The allocation results of North China in 2020 indicate the following: (1) As the preallocation scheme may be difficult to be accepted by various regions, harmonious diagnosis and adjustment play an important role in the allocation of carbon emission permits. By simulating the negotiation process of each region, we obtained the allocation with high acceptability. (2) According to the allocation result, Hebei obtained the highest proportion of carbon emission quota, while Beijing and Tianjin obtained a lower proportion of carbon emission quota. (3) Compared with the allocation results of grandfather principle, Shanxi and Nei Mongol have great pressure on emission reduction, i.e., these regions should occupy a larger share in the future carbon emission trading market. This study is expected to provide a reference for the initial allocation of carbon emission permits, thus reducing conflicts and promoting the harmonious development of region.

Visualizing the evolution of per capita carbon emissions of Chinese cities, 2001–2016

As the world’s largest carbon emitter, China is under great pressure to cut down carbon emissions. Understanding the evolution of carbon emissions across Chinese cities is important for policymakers when allocating carbon emission quota among these cities. This paper draws upon the Open-source Data Inventory for Anthropogenic CO2 to calculate city-level per capita carbon emissions in China from 2001 to 2016. Overall, we find that per capita carbon emissions of Chinese cities have been generally on the rise during the 2001–2016 period. However, there has been on average a modest decline in per capita carbon emissions of cities in China’s Yangtze River Delta region and Pearl River Delta region from 2011 to 2016, after a remarkable increase during the 2001–2011 period. Besides, the average north-south gap has been enlarged, with northern cities having a relatively higher level of per capita carbon emissions.

The Initial Allocation of Carbon Emission Quotas in China Based on the Industry Perspective

ABSTRACT On December 19th, 2017, China’s Emissions Trading System (CETS) was officially launched, firstly only covering the power industry. Cap setting and allowance allocation are urgent issues for the government. Because of the different characteristics of sectors, this paper tries to propose a reasonable and effective allocation scheme from the industry perspective for the government. Firstly, it adopts traditional methods, namely grandfathering and benchmarking. Secondly, it proposes theoretical allocation schemes. Finally, the most effective scheme is selected for sectors. Results show that quotas of grandfathering scheme are larger than that of benchmarking scheme. Among four theoretical scenarios, quotas in the preferring capacity scenario are the lowest and those in the preferring potential scenario are the highest. Quotas of the manufacturing and electricity, gas, and water production and supply industries are higher. In the industrial sectors, quotas of the light and high-tech industries are lower. Results of regional quotas calculations in the preferring capacity scheme are consistent with the regional carbon intensity reduction target in the 13th Five-Year Plan Work Program for Controlling GHG Emissions. After comparing all schemes, this paper determines that theoretical scheme is the most effective for its balance on emissions reduction and development of sectors.

Carbon reduction in a supply chain via dynamic carbon emission quotas

Abstract Due to increasing environmental pollution, governments have issued a series of policies to control carbon emissions. A carbon quota policy is one of them. This study aimed to verify the effectiveness of the policy by examining its impact on supply chain members. This paper investigates emissions reduction in a supply chain under different carbon emission quotas in two stages. This paper constructs a supply chain model in three modes: (i) no carbon emission quota policy, (ii) the government implements the first stage of a carbon quota policy, and (iii) the government offers lower carbon quotas in the second stage. The analysis reveals that when the initial carbon quota allocated by the government meets certain conditions, the emission reduction rate in the first stage of the carbon quota policy is greater than that without the carbon quota policy; and an interesting finding is that the reduction rate further increases when the government reduces carbon quotas in the second stage. In addition to the reduction rate, the manufacturer's and the retailer's profits increase with consumers' preference for low-carbon products. With an increase of the decline parameter of free allocated carbon emission rights, the profits of both the manufacturer and the retailer decrease, but the profit of the manufacturer in the second stage is always lower than that in the first stage, whereas the retailer's profit is higher in the second stage than in the first stage.

Policy implications for achieving the carbon emission reduction target by 2030 in Japan-Analysis based on a bilevel equilibrium model

In Japan, the National Intended Determined Contributions (INDCs) towards post-2020 GHG emission reductions indicates a reduction of 26.0% is expected by the fiscal year 2030. However, regional emissions allowances have not been fully discussed based on Japan's INDCs target, which considers the regional socio-economic features. Given this, this study points out a soft-path for a fair and efficient quota allocation by proposing an integrated bilevel equilibrium model within a hierarchical structure consisting of the national government and 47 prefectural governments. This proposed model can be changed into a single level solvable equilibrium model, which can be solved by Particle Swarm Optimization (PSO) method. The major findings show that Hokkaido, Tokyo and Osaka were allowed the largest emissions quotas, while Tottori, Saga and Okinawa had the lowest emissions quotas. And the equity is necessary to be considered along with improving the emissions efficiency when reallocating carbon emission quotas, otherwise, the initiative to reduce emissions will not take place in prefectures with higher efficiency performance. Based on the findings, energy policy implications can be generated based on the above quantitative analysis to form a fair and efficient emission quota system at a sub-national level.

Carbon emission quota allocating on coal and electric power enterprises under carbon trading pilot in China: Mathematical formulation and solution technique

Abstract This paper considers the fair and efficient principles, a fairness deviation index model was established based on measurement of carbon emissions in various links inside the coal power supply chain enterprise in consideration. Meanwhile, a carbon quota allocation model was built by taking minimum fairness deviation index as the objective and department production levels inside various links as constraint conditions under the carbon trading pilot program. Furthermore, from the angle of inter-link coordination of the coal power supply chain enterprise, carbon quotas in different links were coordinated with total emission quantity and tradability of the enterprise's carbon quota taken as objectives. X coal power supply chain enterprise taken as an example, its carbon emission reduction responsibilities in raw coal mining, coal washery and various power generation links during 2018–2020 were internally decomposed under constraints of total carbon emission and emission reduction objective. Study conclusions provide a theoretical support and corresponding policy basis for internal and external coordination between coal and electric power enterprises in carbon emission reduction under the carbon quota constraint.

Research on public institutions carbon quota allocation scheme in Shenzhen

The problem of high energy consumption in public institutions has become increasingly prominent, and China has not implemented carbon trading mechanisms in the public institutions at present. This paper firstly analyzes the energy consumption of public institutions in Shenzhen, and then formulates the carbon quota allocation scheme for public institutions in Shenzhen. The historical method and baseline method are used to allocate carbon quotas to public institutions in Shenzhen, and the energy consumption data calculated by the two methods are compared with real energy consumption data. The results show that there are large differences among public institutions, it is difficult to find a suitable baseline, and the historical method is more suitable for the initial allocation of carbon emission quotas. Finally, the effectiveness of the carbon quota allocation scheme is evaluated, hoping to provide a reference for the establishment of a carbon emission trading system for public institutions in Shenzhen.