Strict Cap Research Articles

Balancing equity and policyholder protection: Assessing insurer's interests in green lending under cap-and-trade regulations.

This paper presents a contingent claim model designed to assess an insurer's equity within the framework of carbon trading regulations imposed on borrowing firms while also considering the integration of green lending. The development of this model is particularly relevant for regions with established carbon trading markets, with a specific focus on the post-period following the 2015 Paris Agreement concerning climate change. We focus on shareholders and policyholders to optimize equity and ensure maximum protection. Strict caps in cap-and-trade harm interest margins, reducing guaranteed rates for equity maximization and compromising policyholder protection. Government intervention through sustainable production carbon trading hinders win-win outcomes. Green subsidies can improve insurer margins, but achieving win-win solutions remains challenging. A collective approach is needed to share sustainable production and finance benefits among diverse economic sectors.

Accelerating China’s power sector decarbonization can save lives: integrating public health goals into power sector planning decisions

China, the world’s largest greenhouse gas emitter in 2022, aims to achieve carbon neutrality by 2060. The power sector will play a major role in this decarbonization process due to its current reliance on coal. Prior studies have quantified air quality co-benefits from decarbonization or investigated pathways to eliminate greenhouse gas emissions from the power sector. However, few have jointly assessed the potential impacts of accelerating decarbonization on electric power systems and public health. Additionally, most analyses have treated air quality improvements as co-benefits of decarbonization, rather than a target during decarbonization. Here, we explore future energy technology pathways in China under accelerated decarbonization scenarios with a power system planning model that integrates carbon, pollutant, and health impacts. We integrate the health effects of power plant emissions into the power system decision-making process, quantifying the public health impacts of decarbonization under each scenario. We find that compared with a reference decarbonization pathway, a stricter cap (20% lower emissions than the reference pathway in each period) on carbon emissions would yield significant co-benefits to public health, leading to a 22% reduction in power sector health impacts. Although extra capital investment is required to achieve this low emission target, the value of climate and health benefits would exceed the additional costs, leading to $824 billion net benefits from 2021 to 2050. Another accelerated decarbonization pathway that achieves zero emissions five years earlier than the reference case would result in lower net benefits due to higher capital costs during earlier decarbonization periods. Treating air pollution impacts as a target in decarbonization can further mitigate both CO2 emissions and negative health effects. Alternative low-cost solutions also show that small variations in system costs can result in significantly different future energy portfolios, suggesting that diverse decarbonization pathways are viable.

Cap-and-trade mechanisms, green technology investment, and shadow insurance in a black swan environment

This study aims to evaluate an insurer's equity during a black swan event by developing a capped call option model. The capped call captures the lending-borrowing relationship by integrating the credit risk from the carbon emission reductions of the carbon-intensive borrowing firm with the insurer's shadow insurance in an imperfectly competitive life insurance market. We show that the borrowing firm invests significantly in green technology, increasing its equity value and the insurer's interest margin, but harms policyholders. Increasing shadow insurance enhances the insurer's interest margin and firm equity. Moreover, we find that stringent cap regulation of the cap-and-trade scheme decreases the insurer's interest margin when the black swan impact becomes significant. This strict cap regulation helps policyholder protection, but harms borrowing firm equity. We suggest that the government shrink the cap of the cap-and-trade scheme, contributing to insurance stability. Colossal black swan increases the insurer's interest margin, policyholder protection, and borrowing firm equity. In conclusion, we show that the capped call option model is relevant to green finance for an insurer-borrowing firm.

A multi-objective model for sustainable closed-loop supply chain of perishable products under two carbon emission regulations

PurposeThis paper aims to minimize the total carbon emissions and costs and also maximize the total social benefits.Design/methodology/approachThe present study develops a mathematical model for a closed-loop supply chain network of perishable products so that considers the vital aspects of sustainability across the life cycle of the supply chain network. To evaluate carbon emissions, two different regulating policies are studied.FindingsAccording to the obtained results, increasing the lifetime of the perishable products improves the incorporated objective function (IOF) in both the carbon cap-and-trade model and the model with a strict cap on carbon emission while the solving time increases in both models. Moreover, the computational efficiency of the carbon cap-and-trade model is higher than that of the model with a strict cap, but its value of the IOF is worse. Results indicate that efficient policies for carbon management will support planners to achieve sustainability in a cost-effectively manner.Originality/valueThis research proposes a mathematical model for the sustainable closed-loop supply chain of perishable products that applies the significant aspects of sustainability across the life cycle of the supply chain network. Regional economic value, regional development, unemployment rate and the number of job opportunities created in the regions are considered as the social dimension.

The effect of state gun laws on youth suicide by firearm: 1981-2017.

Many studies have found that state gun laws that regulate the purchase and possession of firearms can lead to a reduction in suicide rates. Yet, the literature has primarily focused on the effects of state gun laws on adult suicides, despite the fact that some gun laws are specifically tailored to restrict the purchase and possession of firearms by youths. In this study, we estimate the effect of two such laws-Child Access Prevention (CAP) laws and minimum age laws-on youth suicide by firearm rates. Our sample consists of state-level panel data for 41 states observed over the years 1981-2017. Based on a series of negative binomial regression analyses, we confirm previous research by finding that CAP laws are associated with a decrease in youth suicides by firearm, especially among males. However, we show that this effect is limited to states that have adopted relatively strict CAP laws. We also find that minimum age laws serve to reduce the youth suicide rate, but once again this effect is largely concentrated among males. Finally, we investigate the possibility that these effects were countered to some degree by "means substitution"-the substitution of firearms with other methods of suicide. Similar to other studies that have examined this question, we find no effect of youth-targeted gun laws on nonfirearm suicide deaths. Despite the noteworthy increase in youth suicide rates over the last decade, our results suggest that state laws which restrict firearm access to young people continue to represent a potentially effective strategy for suicide reduction.

An Exploration of Professional U.S.-Based Basketball Players Competing in Turkey

In the wake of the 1992 Barcelona Summer Olympic Games, basketball experienced a surge in popularity as an international sport. Recently, to field more competitive teams, professional leagues around the world have begun to recruit international players, particularly those from the United States (U.S.). Though most leagues still maintain strict caps on the number of players from a single country on a roster, the Turkey Basketball Federation (TBF) recently altered its rules to permit more international players, presenting American players greater opportunities to pursue a lucrative playing career in Turkey. Given the change in labor market characteristics, this paper examines the 102 U.S. players on 2017–2018 Turkey professional basketball rosters. Descriptive statistics for collegiate performance are presented, as well as logistic regression and network analyses that indicate players’ college choice was a crucial factor in their international professional career trajectory with collegiate conference acting as a bridge to a professional career in Turkey. These results provide context for researchers and practitioners in understanding the player statistics, social and cultural forces related to U.S.-professional basketball players in Turkey.

Taxation and Market Power in the Legal Marijuana Industry

In 2012 the state of Washington created a legal framework for production and retail sales of marijuana. Ten other U.S. states and Canada have followed. These states hope to generate tax revenue for their state budgets while limiting harms associated with marijuana sales and consumption. We use a unique administrative dataset containing all transactions in the history of the industry in Washington to evaluate the effectiveness of different tax and regulatory policies under consideration by policymakers and study the role of imperfect competition in determining these results. We use both a reduced form sufficient statistic approach and structural methods to show a number of results. First, Washington's strict cap on firm entry has resulted in retailers with substantial market power. This market power has immediate consequences for both state tax revenue and consumer welfare. Second, because these entry restrictions have caused retailers to behave like local monopolists, the state could substantially increase revenue generated from marijuana legalization by acting as the retailer itself, as it did for alcohol sales until 2012, without a large increase in prices. Third, despite having the nation's highest tax rate at 37%, marijuana in Washington is not overtaxed as many policymakers in other states have argued. The high taxes do not result in lower revenue or a substantial black market. Instead Washington is still on the upward sloping portion of the Laffer curve and the amount of revenue generated by a tax increase is significantly larger due to retailer market power than it would be under perfect competition. Our results suggest there is not widely available black market marijuana competing with legal retail sales. Finally, the high excise tax is primarily borne by consumers and not by firms, and there is a large social cost associated with each dollar raised.

Integrated decisions for supplier selection and lot-sizing considering different carbon emission regulations in Big Data environment

The rising concerns about carbon emissions due to drastic environmental changes globally has increased awareness of customers regarding the carbon footprint of the products they are consuming. Thus, compelled supply chain managers to reformulate strategies for controlling the carbon emissions. The various activities contributing to carbon emissions in a supply chain are procurement, transportation, ordering and holding of inventory. Operational decisions like selection of the right supplier of right lot-sizes can play a vital role in reducing the overall carbon footprint of a supply chain. This paper proposes a mixed-integer nonlinear program (MINLP) for supplier selection along with determining the right lot-sizes in a dynamic setting having multi-periods, multi-products and multi-suppliers with a view of overall reduction in the supply chain cost as well as associated cost of carbon emissions. The model requires a range of real time parameters from both the buyer’s and supplier’s perspectives such as costs, capacities and carbon caps. These parameters have been mapped with the different dimensions of Big Data viz. volume, velocity and variety. The model provides an optimal supplier selection and lot-sizing policy along with the carbon emissions. For the purpose of evaluating the carbon emissions, three different carbon regulating policies viz., carbon cap-and-trade, strict cap on carbon emission and carbon tax on emissions, have been considered and insights are drawn. The validation of the proposed MINLP has been done using a randomly generated dataset having the essential parameters of Big Data, i.e. volume, velocity, and variety.

Optimizing a two-echelon serial supply chain with different carbon policies

In recent years, organizations are becoming environment conscious due to stringent laws, competitive advantages and increasing awareness of customers. They are integrating environmental practices into their operations to curb carbon emissions. Regulatory bodies are also imposing carbon policies to check emission. In this paper, we developed three models considering three carbon policies (I. carbon tax, II. strict cap and III. cap-and-trade) and have determined the optimal order quantity and number of shipments for a two-echelon supply chain. The objective is to minimize the total supply chain cost which comprises the ordering, setup, production, inventory holding and transportation costs. In Model I tax on carbon emissions has been included in the cost function; in Model II we have considered a strict carbon cap on the total carbon emission; and in Model III trading price of carbon is included in the cost function. A numerical study is given to illustrate the solution procedure. Further, sensitivity analyses are performed to examine the impact of the various parameters on the total cost and total emission.

The design of optimal climate policy with air pollution co-benefits

This paper develops a model of an optimal regulatory program for greenhouse gases (GHGs) emissions that accommodates the benefits due to reductions of co-pollutants including: sulfur dioxide (SO2), nitrogen oxides (NOx), volatile organic compounds (VOC), and fine particulate matter (PM2.5). Employing per ton damage estimates for the co-pollutants produced by an integrated assessment model, co-pollutant damage estimates per ton carbon dioxide equivalent (CO2e) are developed for over 10,000 sources of GHGs in the lower 48 states including both transportation sources and electric power generation. For coal-fired electric power generation, the co-pollutant damages are larger in magnitude than recent peer-reviewed estimates of the marginal damage for GHGs. The co-pollutant damage per ton CO2e varies considerably across source types and source location. The paper estimates the welfare gain from adopting a policy that encompasses the spatially variant co-pollutant damage to be between $1 million and $85 million annually. The range depends on the slope of the marginal abatement cost curve. The paper also shows that a distortionary aggregate emission cap reduces the advantage of differentiated policy. Provided an excessively strict cap, the spatially differentiated policy may reduce aggregate welfare. This result has important implications for GHG policy in the United States; although co-pollutant benefits of abating GHGs have been shown to be significant in magnitude, tailoring climate policy to reflect these source-specific co-benefits is not necessarily socially beneficial. This bolsters arguments for upstream policy designs.

Optimal trading with linear costs

We consider the problem of the optimal trading strategy in the presence of linear costs, and with a strict cap on the allowed position in the market. Using Bellman’s backward recursion method, we show that the optimal strategy is to switch between the maximum allowed long position and the maximum allowed short position, whenever the predictor exceeds a threshold value, for which we establish an exact equation. This equation can be solved explicitely in the case of a discrete Ornstein-Uhlenbeck predictor. We discuss in detail the dependence of this threshold value on the transaction costs. Finally, we establish a strong connection between our problem and the case of a quadratic risk penalty, where our threshold becomes the size of the optimal non-trading band.

The Cause of the War over Caps and How to End It

Industrialized countries are demanding that developing countries accept binding emission targets, but developing countries refuse these caps. Developing countries, in turn demand that Industrialized countries accept much tighter caps than any have considered. Industrialized countries refuse such caps.Developing countries sell carbon offset credits at a profit, but that profit would be reduced if they accepted any cap on emissions. This increases their resistance to accepting such caps. But stricter caps on industrialized countries would cause those countries to buy more offsets from developing countries. The increased profits from increased offset sales is one reason developing countries demand such strict caps.If industrialize countries accepted extremely strict caps and met them by buying enough offsets from developing countries, this could limit emissions enough to meet a reasonable global target. But the high cost to industrialized countries makes this approach politically infeasible. If however, developed countries are allowed to commit to a binding carbon-price target instead of an emission target, this would eliminate their major objections—it would not cap them below developing countries, and it would not prevent them from reaching the same level of development. Industrialized countries could then commit to caps that were guaranteed to be equally effective.