Supply-side management of CO₂ emissions in a competitive market
by Hiroshi Takamori; Eiroku Go; Ken Nagasaka
International Journal of Advanced Mechatronic Systems (IJAMECHS), Vol. 5, No. 3, 2013

Abstract: This paper aims to design a programme for managing CO₂ emissions in the electricity supply industry. Managing emissions, though a control problem, is much different from controlling mechanical or physical systems. The subject matter is a collection of firms, each of which behaves purposefully and competitively in seeking its own objectives. Emissions, a by-product, are outside of firms' business concerns, and represent externalities. An effective instrument for controlling the externalities is a pricing mechanism that induces firms to act in line with the global objective. This instrument works when the competitors are driven by profit seeking incentive. The paper presents a model and algorithm for the regulator to price emissions and grandfather allowances.

Online publication date: Sat, 12-Jul-2014

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