Long-Run Equilibrium Modeling of Emissions Allowance Allocation Systems in Electric Power Markets

• 成果类型: Article
• 署名作者: Zhao, Jinye; Hobbs, Benjamin F.; Pang, Jong-Shi
• 署名单位: Johns Hopkins University; Johns Hopkins University; University of Illinois System; University of Illinois Urbana-Champaign
• 刊物名称: OPERATIONS RESEARCH
• ISSN/ISSBN: 0030-364X
• DOI: 10.1287/opre.1090.0771
• 发表日期: 2010
• 页码: 529-548
• 关键词: trading scheme; eu-ets; output; competitiveness; incentives; abatement

摘要

Carbon dioxide allowance trading systems for electricity generators are in place in the European Union and in several U.S. states. An important question in the design of such systems is how allowances are to be initially allocated: by auction, by giving away fixed amounts (grandfathering), or by allocating based on present or recent output, investment, or other decisions. The latter system can bias investment, operations, and product pricing decisions and increase costs relative to the other systems. A nonlinear complementarity model is proposed for investigating the long-run equilibria that would result under alternative systems for power markets characterized by time-varying demand and multiple technology types. Existence of equilibria is shown under mild conditions. Solutions for simple systems show that allocating allowances to new capacity based on fuel use or generator type can yield large distortions in capacity investment, invert the operating order of power plants, and inflate consumer costs. The distortions can be smaller for tighter CO2 restrictions and are somewhat mitigated if there is also a market for electricity capacity or minimum-run restrictions on coal plants. Distortions are also less if allowances are allocated to plants in proportion to sales rather than capacity.