Allocation of emission allowances considering strategic voting

Tianhua Mei, Jie Liu, Jianming Guo, Pierluigi Siano and Xuanxuan Jin

Energy Economics, 2022, vol. 114, issue C

Abstract: The initial allocation of carbon emission rights among different generating units is an important element in the initial stage of the construction of the carbon emission market for the power system, and is also the focus of attention in the construction of the current carbon market for the power system in China.In practical situations, a variety of equity principles have been utilized in different allocation problems. However, conflicts always exist among these principles. It is necessary to justify and coordinate different allocation schemes.This paper tries to apply the axiomatic method and social choice theory to propose an axiomatic and fair allocation method based on iterative election and establish a mathematical model for the fair allocation of initial carbon emission rights in power systems. This paper studies the game equilibrium problem under the iterative election allocation mechanism, and describes the finite rationality of participants in a complex environment by means of the “local optimal search” and “greedy algorithm”.The general equilibrium under specific conditions and the game equilibrium under four axiomatic allocation strategies (namely UG, UL, PRO, T) are analyzed and solved in detail by introducing the method of strict preference ordering list. Finally, some real-world case studies are carried out to show that the iterative election allocation algorithm can satisfy the main principle of fair allocation and the given allocation results are easily accepted by each unit owner.This study not only provides a reasonable and feasible path for China's power system to realize the scientific research on the fair distribution of initial carbon emissions and the practicability of distribution methods, but also provides profound policy enlightenment for the construction of carbon emission market in China's power industry.

Keywords: Carbon emission allowances; Equity allocation; Axioms; Bounded rationality; Games; Power systems (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:114:y:2022:i:c:s0140988322004029

DOI: 10.1016/j.eneco.2022.106262

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