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ID: 126838

Downstream regulation of CO2 emissions in California's electric / Bushnell, James; Chen, Yihsu; Zaragoza-Watkins, Matthew

Bushnell, James	Journal Article
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Publication

2014.

Summary/Abstract

This paper examines the implications of alternative forms of cap-and-trade regulations on the California electricity market. Specific focus is given to the implementation of a downstream form of regulation known as the first-deliverer policy. Under this policy, importers (i.e., first-deliverers) of electricity into California are responsible for the emissions associated with the power plants from which the power originated, even if those plants are physically located outside of California. We find that, absent strict non-economic barriers to changing import patterns, such policies are extremely vulnerable to reshuffling of import resources. The net impact implies that the first-deliverer policies will be only marginally more effective than a conventional source-based regulation.

Key Words

Climate Policy ; Electricity Markets ; Cap - and - Trade

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ID: 121340

Emission-dependent supply chain and environment-policy-making in the ‘cap-and-trade’ system / Shaofu Du; Zhu, Lili; Liang, Liang; Fang Ma

Shaofu Du	Journal Article
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Publication

2013.

Summary/Abstract

The paper focuses on a so-called emission-dependent supply chain consisting of one single emission-dependent manufacturer and one single emission permit supplier in the 'cap-and-trade' system, where emission permit becomes requisite for production. We consider the emission cap of emission-dependent manufacturer allocated by the government as a kind of environmental policy and formally investigate its influence on decision-makings within the concerned emission-dependent supply chain as well as distribution fairness in social welfare. It is proved that the system-wide and the manufacturer's profits increase with the emission cap while the permit supplier's decreases. There is room for manufacturer and permit supplier to coordinate the supply chain to get more profit in a certain condition.

Key Words

Cap - and - Trade ; Emission Cap ; Emission - Dependent Supply Chain

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ID: 125781

Market power in cap-and-trade auctions: a Monte Carlo approach / Dormady, Noah C

Dormady, Noah C	Journal Article
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Publication

2013.

Summary/Abstract

Recent greenhouse gas auctions have resulted in base level prices while remaining significantly concentrated. How do dominant firms receive such a large share of emissions allowances without bidding up the market price? This paper provides a Monte Carlo simulation analysis based on a contemporary regional greenhouse gas market in the United States. It introduces a C# simulation software environment, Oligopsony 1.0 that simulates uniform-price emissions auctions in repeated iterations. The results of these simulations indicate that there can be significant non-linearities between profit and market power as exercised through strategic demand reduction. This analysis finds the optimum point of strategic demand reduction that enables firms to exploit these non-linearities. The use of auctions to distribute tradeable pollution rights to firms in heavily concentrated markets can have significant unintended consequences, as it can exacerbate the problems of market power that exist within those markets.

Key Words

Market Power ; Auctions ; Cap - and - Trade

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