An inter-provincial coordinate model under Renewable Portfolio Standards policy based on tradable green certificate options trading

Lijun Zeng, Wenjing Du, Laijun Zhao and Shuai Chen

Renewable Energy, 2024, vol. 234, issue C

Abstract: The current territorial management model under Renewable Portfolio Standards in China cannot fully develop renewable energy due to the mismatch between high energy-consumption regions and renewable energy-rich regions. Therefore, we proposed an inter-provincial coordinate model based on tradable green certificate options trading (CMTOT), which includes four components: (1) A dual-objective optimization model is established to minimize the RPS target realization cost and maximize the pollutant emission reduction based on Blacke-Scholes option pricing model. (2) The identification of buyer and seller provinces of tradable green certificate (TGC) options based on the above model. (3) An optimization model in buyers' or sellers' cooperation alliance is established. (4) The cost allocation models by Shapley value and Nucleolus are established to ensure the fairness in different scenarios. A case study of Tianjin, Shandong, Shanxi and Inner Mongolia shows that the CMTOT can effectively reduce the RPS target realization cost by 16.79 % and increase the pollutant emission reduction by 4.32 %. A sensitivity analysis confirms the robustness of the CMTOT. The results show that the CMTOT can both fully develop renewable energy and effectively reduce pollutant emission. Therefore, we proposed some policy recommendations to support the implementation of the CMTOT.

Keywords: Renewable portfolio standards; Tradable green certificate; Options trading; Cooperative game; Blacke-scholes option pricing (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:renene:v:234:y:2024:i:c:s0960148124012709

DOI: 10.1016/j.renene.2024.121202

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