| Title |
A Study on The Optimal Allocation of Tradable Emission Permits in Electricity Markets |
| DOI |
https://doi.org/10.5370/KIEE.2023.72.1.24 |
| Keywords |
Electricity Market; Emission Trading; Social Welfare; Nash Equilibrium; Emission Allocation; Cap-and-Trade |
| Abstract |
Various concerns and efforts have been made to reduce greenhouse gas emissions to curb global warming. The cap-and-trade system is evaluated to provide an effective incentive to reduce emissions. As the emission trading is introduced in the power sector, the generation strategy with emission trading can be obtained by the combined market model with power generation and emission trading. The performance of ETS or carbon-neutral policies is dependent on the total amount of permits and the ratio of allocations.
In this study, the maximization of Social Welfare(SW) is considered with the ratio of allocation as a variable. The relational expression for the emission price and Nash Equilibrium are derived for the condition for the optimal SW. In the numerical results, two types of generators are compared (high-cost low-emission vs. low-cost high-emission) from the viewpoint of the optimal allocation ratio and the emission price. |