Shadow Pricing Method Research Articles

Study on China’s 2030 provincial carbon quota allocation scheme considering the positive and negative effects of historical emissions

The carbon quota allocation scheme serves as the fundamental backbone for ensuring the smooth and sustainable operation of the carbon market. Despite numerous prior studies, ongoing debates persist regarding the impact of historical emissions, both positive and negative, on carbon quota allocation. Utilizing the four indicators of historical emissions (both positive and negative), egalitarianism, payment capability, and emission efficiency, this paper employs the entropy method to develop 22 distinct carbon quota allocation plans tailored for China’s provincial regions in the year 2030. Subsequently, utilizing the shadow price method, the study calculates the emission reduction costs of each province under each allocation scheme, thereby evaluating the carbon quota plans from the perspective of emission reduction costs. Finally, a comparative analysis is conducted to assess the impact of both positive and negative historical emissions on the carbon quota allocation scheme, and the paper identifies the carbon quota allocation approach that minimizes the overall emission reduction cost for China. The findings suggest that: 1) allocating more allowances to provinces with higher historical emissions can effectively reduce emission reduction costs for each province; 2) the most cost-effective option for carbon quota allocation is a scheme that takes into account both egalitarian and historical emission criteria; 3) in order to further decrease the overall cost of emissions reduction, it is crucial to achieve comprehensive coverage of the carbon market and facilitate inter-provincial carbon quota trading.

Novel double auctions for spatially distributed parking slot assignment with externalities

This article considers a parking slot assignment problem in a sharing economy where parking slots are spatially heterogeneous. When buyers (i.e., the slot users) park and take their cars in the reserved parking slots, environment externalities are created. We incorporate the externality costs in our winner determination model and construct a padding-based Vickrey-Clarke-Groves (PV) double auction where each buyer submits an XOR bid on his/her desired parking slots at the same price. In the PV double auction, the padding intuition is adopted on either the supply or demand side. We then propose a padding-based shadow price (PS) double auction by integrating the padding method with the shadow price method. Due to the rises in buying prices and declines in selling prices, the PS double auction is likely to realize higher auctioneer’s payoff. Both PV and PS double auctions achieve incentive compatibility, individual rationality, budget balance and asymptotical efficiency. Our numerical experiments demonstrate that the proposed double auctions can realize high efficiency.

Research on narrow and generalized water environment carrying capacity, economic benefit of Lake Okeechobee, USA

The water environment pollution in the Lake Okeechobee (LO) basin has caused negative impacts on lake ecology and marine ecology. In particular, total phosphorus pollution is very prominent. The two-dimensional water environment mathematical simulation method is used to calculate the narrow water environment carrying capacity (N-WECC), the comprehensive indicator evaluation method is used to calculate the generalized water environment carrying capacity (G-WECC), and the shadow price method is used to calculate the economic loss caused by water environment pollution. The total amount of TP discharged into LO is 15,611 tons in 2018. Through prediction, if the 83% pollutant emission concentration can be reduced, then the total phosphorus concentration of LO can reach the target, and its N-WECC is 2654 t/year. From the four aspects of water resources index, water environment index, water ecology index and land use index, 15 comprehensive evaluation indicators adapted to LO basin are proposed. By calculating G-WECC is 0.129, in the low load state, the most important factor is serious agricultural pollution. The largest economic loss caused by water pollution. The total economic loss caused by water pollution in the LO basin is 1,185,030,095 USD in 2018. Among them, the economic loss caused by sewage discharge was 852,546,223 USD, causing economic losses of 332,149,942 USD for human health and 612,930 USD for sewage irrigation. Martin County accounted for 42.78%, Orange County accounted for 24.79%, Osceola County accounted for 12.69%, and these three counties accounted for 80.24%.

Evolution of ecosystem service value in rural regions based on geographical scope of entities: A case study of Nanjing, China

Rural areas have very important ecological service functions. This study investigated the evolution of ecosystem services value (ESV) in rural regions based on the physical geographical scope of rural areas. The replacement value method, shadow price method, precipitation stock method, quantitative measurement by Remote Sensing and Carnegie-Ames-Stanford approach (CASA) model calculations were used to analyze the evolution of ESV (Nutrient cycling, Maintaining atmospheric balance, Organic matter production, Water conservation) in Nanjing's rural regions between 1985 and 2016. The results show that: (1) From 1985 to 2000, all types of rural ESV showed a trend of decline. From 2000 to 2016, all ESV except for water conservation continued to decrease. (2) In the first stage, areas with large losses in rural ESV were mainly concentrated in southerly, southwesterly, and southeasterly directions. In the second stage, only the northerly and northwesterly directions had increased, whereas all other directions had decreased by varying extents. (3) During the stage of township industrialization, ESV were significantly affected by land use changes in rural areas. During the stage of rapid urbanization, urban expansion had a greater impact on rural ESV. Further studies reveal that rural ecosystem service changes are also influenced by deeper factors, with land use change and excessive nutrient loading as direct drivers significantly affecting rural ecosystem service change processes, and economic development and population growth as indirect drivers changing the spatial distribution of ecosystem services by affecting land use patterns and ecosystem quality. In conclusion, we combined geographical spatial analysis with ecological thinking to provide support for the maintenance of rural ESV and sustainable development.

Water Supply Portfolio Planning and Policy Evaluation under Climate Change: A Case Study of Central Taiwan

The present study examines the optimal water supply portfolio under the impact of climate change constructed by the authors previously. It incorporates feasibility planning for water supply projects, assesses a feasible water supply portfolio for central Taiwan, and uses the shadow price method to assess the rationality of the compensation policy for transferring agricultural water to ensure water supply security for the industrial sector. The study finds that Changhua and Yunlin have the highest per-unit costs of raw water, and the Nantou region has the highest carbon emission coefficient (carbon footprint) per unit of water produced. The cumulative value (2021–2031) of the water resources policy to reallocate agricultural water to achieve water supply security is about TWD 15.904–31.13 billion. The shadow price of industrial water is about TWD 40.18/cubic meter. Therefore, a compensation price for agricultural water transfer of less than TWD 40.18/cubic meter represents a rational policy.

Economic Analysis of the South-North Bali Connection Railway Plan in The Acceleration of Economic Equality Development in Bali, Indonesia

At present the economic development in the province of Bali between South and North Bali is very significant. This condition is presumed to be the transportation infrastructure for the connecting road of South Bali - the existing aiIDRort is not optimal. The alternative transportation infrastructure studied is the plan to build a railway line across South-North Bali. Mengwitani-Singaraja link road is required to be capable to provide more optimal accessibility so that there is an even distribution of economic growth.he indicators used in the feasibility analysis of economic aspects are net present value (NPV), benefit cost ratio (BCR) and economic internal rate of ruturn (EIRR) The price component is used by the shadowprice method. Costs calculated according to the life cycle cost of the project development. Benefits calculated include direct benefits in the form of passenger ticket income and indirect costs in the form of cost savings for existing road users, a multiplier effect, an increase in tourist visits to northern Bali. Economic analysis indicates that the planned North-North Bali railway line is worth proceeding, this is shown by the NPV indicator of IDR 860 billion, BCR of 1.11 and EIRR of 13.11% greater than the 12% price reduction rate. Although it shows that there is feasibility of economic studies, a strategy is needed to produce financial feasibility so that it can be offered in cooperation between government and business entities (PPP) in order to accelerate its developmen

An Economic Analysis of the South-North Bali Connection Railway Plan in The Acceleration of Economic Equality Development in Bali, Indonesia

At present the economic development in the province of Bali between South and North Bali is very significant. This condition is presumed to be the transportation infrastructure for the connecting road of South Bali - the existing aiIDRort is not optimal. The alternative transportation infrastructure studied is the plan to build a railway line across South-North Bali. Mengwitani-Singaraja link road is required to be capable to provide more optimal accessibility so that there is an even distribution of economic growth.he indicators used in the feasibility analysis of economic aspects are net present value (NPV), benefit cost ratio (BCR) and economic internal rate of ruturn (EIRR) The price component is used by the shadowprice method. Costs calculated according to the life cycle cost of the project development. Benefits calculated include direct benefits in the form of passenger ticket income and indirect costs in the form of cost savings for existing road users, a multiplier effect, an increase in tourist visits to northern Bali. Economic analysis indicates that the planned North-North Bali railway line is worth proceeding, this is shown by the NPV indicator of IDR 860 billion, BCR of 1.11 and EIRR of 13.11% greater than the 12% price reduction rate. Although it shows that there is feasibility of economic studies, a strategy is needed to produce financial feasibility so that it can be offered in cooperation between government and business entities (PPP) in order to accelerate its developmen

Calculating environmental cost indicators of apple farm practices indicates large differences between growers

ABSTRACTThis study evaluates the environmental impact of current apple cultivation practices in Flanders, Belgium. It evaluates integrated production, the most common practice, and it compares this production method with conventional and organic production. The assessment was based on Farm Accountancy Data Network data from 2010 to 2012 for 64 farms in the region and a life cycle approach was used. The findings showed no significant improvement in environmental impacts for integrated farms compared to conventional farms and, even more, the former showed significantly higher average impacts per hectare for the categories ‘acidification’, and ‘non-renewable energy use’ in comparison with the latter. The organic production group showed higher average impacts per kilogram due to lower yields. Secondly, impacts related to the categories ‘acidification’, ‘eutrophication’ and ‘global warming potential’ were monetized based on the shadow price method in order to obtain external costs. Results show that external costs increase the production costs for integrated farming at least with 5%, both when these costs are expressed per kilogram and per hectare. However, the findings show a large variability in impacts and costs per farm. Farm-specific practices have therefore an important influence on the total environmental cost rather than production group-specific practices.

Valuing Social Relationships and Improved Health Condition Among the Thai Population

This paper aims to estimate the effects of the extent of social connections or relationships on an individual’s subjective well-being. The study uses the life satisfaction valuation approach, which involves estimation of the life satisfaction equation and the shadow pricing method, to put price tags on or calculate the monetary values of life satisfaction gained through social connections, relationships and health conditions. An individual’s life satisfaction, the extent of the social activities in which he or she is involved, and the individual’s health condition are subjectively measured in the nationwide Survey on Life Satisfaction among Thai people in 2012. We found that the top three social involvements that increase life satisfaction among the Thai people are interacting with neighbours frequently, participating in community religious activities all the time and participating in community cultural activities all the time. Frequencies of social interactions matter to the individual’s level of life satisfaction. An individual with good health condition tends to report a higher level of life satisfaction. Using the shadow pricing method, we found that the shadow price of having frequent face-to-face interaction with neighbours is approximately 0.51 times the monthly per capita income. The value of participating in community religious activities all the time is approximately 0.49 times the average monthly income. The value of participating in community cultural activities all the time is approximately 0.47 times the monthly income. Having good health condition has the largest effect on life satisfaction: a move from having very poor health to having good health is worth approximately 1.05 times the average monthly income.

Research on Multi-Leg Inventory Control Based on Passenger Choice

To remedy the lack of mathematical programming and the Expected Marginal Seat Revenue (EMSR) model for multi-leg seat inventory control, this paper proposes a method based on passenger choice. Except for data about which seats passengers decide to opt for, there is no need to obtain distributions of passengers' demands or other “a priori” information. The proposed method can discover the real factors that affect passengers' choices, and then estimate the probabilities of seat choices and the revenue according to the weights of the factors. Simulated experiments and comparison with the shadow price method and the virtual “bucket” method confirm the feasibility and effectiveness of the proposed method in seat inventory control for multi-leg flights.

Putting a price tag on friends, relatives, and neighbours: Using surveys of life satisfaction to value social relationships

There is substantial evidence in the psychology and sociology literature that social relationships promote happiness for the individual. Yet the size of their impacts remains largely unknown. This paper explores the use of shadow pricing method to estimate the monetary values of the satisfaction with life gained by an increase in the frequency of interaction with friends, relatives, and neighbours. Using the British Household Panel Survey, I find that an increase in the level of social involvements is worth up to an extra £85,000 a year in terms of life satisfaction. Actual changes in income, on the other hand, buy very little happiness.

An Aumann-Shapley Value Based Congestion Cost Allocating Method In Bilateral Transaction Environment

In bilateral transaction market, the congestion relief cost should be allocated in an equitable manner among all the market participants contributing to the congestion. Unfortunately in the allocation of the congestion relief cost to the congested lines, which is the first step of cost allocation, the previously proposed shadow price method and the aggregated allocation method both have some shortcomings. To overcome these shortcomings, a cost allocation method based on the Aumann-Shapley value is proposed. By means of the Aumann-Shapley value, a solution concept in the cooperative game with infinitely many players, the proposed method takes all orders of relieving congestion on the lines into consideration and satisfies the consistency of the allocation, thus guarantees equitable allocation of the congestion relief cost to the congested lines. In addition, the calculating procedure is both simple and accurate due to the use of the Gauss Integration method. Test results show that this method can lead to better allocation than do the shadow price method and the aggregated allocation method.

Economic Evaluation of Alternative Techniques: An Illustrative Case

Based on a specific case study of four alternative sanitation systems, the paper discusses the concept of 'appropriate technology' from an economic point of view. It argues that simple criteria of 'appropriateness' often used, are based on concepts such as 'capital-intensity' and 'labour-intensity' and that these concepts are ambiguous when applied to a specific case. The paper suggests an alternative definition based on a shadow pricing method (economic evaluation) but it also points out problems with such an approach. Finally, the paper emphasizes that economics is not all that matters but that it is one important aspect of the final choice of technique.