Sequential game of an emissions trading scheme

Saesin Oh, Sunjin Kim and Doojin Ryu

Energy Economics, 2025, vol. 150, issue C

Abstract: We examine how the strategic behavior of electric utilities influences a multistage carbon emissions trading market without allowance banking. Using a sequential two-stage game model, we identify key factors that shape trading outcomes over time. In competitive carbon markets with non-excessive allowance allocation, the second-stage price is higher than the first-stage price. Heightened competition induces sales of allowances in the first stage and amplifies their prices in the second stage. Utilities' roles as buyers or sellers depend on the relative scales of the electricity and carbon markets, which mediate the broader effects of competition and technological advancement on strategic trading behavior across stages.

Keywords: Carbon emissions trading; Cournot competition; Electricity markets; Energy economics; Sequential game (search for similar items in EconPapers)
JEL-codes: C72 D21 H23 P48 Q48 Q54 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988325006516
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:150:y:2025:i:c:s0140988325006516

DOI: 10.1016/j.eneco.2025.108824

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().