Title: Supply-side management of CO2 emissions in a competitive market

Authors: Hiroshi Takamori; Eiroku Go; Ken Nagasaka

Addresses: Environmental Research Centre, Waseda University, Bldg. 55-7f, Ohkubo, Shinjuku-ku, Tokyo, 169-8555, Japan ' CSD Corporation, KSP Nish 6F, 3-2-1 Sakato, Kawasaki, 213-0012, Japan ' Department of Electrical and Electronic Engineering, Tokyo University of Agriculture and Technology, 2-24-16 Nakamachi, Koganei-shi, Tokyo, 184-8588, Japan

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.

Keywords: emissions control; information asymmetry; environmental management; emissions pricing; allowance allocation; carbon emissions; CO2; carbon dioxide; electricity supply industry.

DOI: 10.1504/IJAMECHS.2013.057440

International Journal of Advanced Mechatronic Systems, 2013 Vol.5 No.3, pp.174 - 183

Published online: 12 Jul 2014 *

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