The Equilibrium Model for the Coexistence of Renewable Portfolio Standards and Emissions Trading: The Supply Chain Analysis

Wenhui Zhao, Xiongjiantao Bao, Guanghui Yuan, Xiaomei Wang and Hongbo Bao
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Wenhui Zhao: College of Economics and Management, Shanghai University of Electric Power, Shanghai 200090, China
Xiongjiantao Bao: Wuhu Power Supply Company, State Grid Anhui Electric Power Company, Wuhu 241000, China
Guanghui Yuan: Fintech Research Institute & School of Information Management and Engineering, Shanghai University of Finance and Economics, Shanghai 200433, China
Xiaomei Wang: College of Economics and Management, Shanghai University of Electric Power, Shanghai 200090, China
Hongbo Bao: Anqing Power Supply Company, State Grid Anhui Electric Power Company, Anqing 246000, China

Energies, 2019, vol. 12, issue 3, 1-29

Abstract: China will impose both renewable portfolio standards (RPS) and emissions trading (ET) on the electricity industry, but the product competition in the retail market and the influence of the supply chain network structure has not been investigated. This paper studies policy effects by comparing equilibrium results under different supply chain network structures, and we use the concept of consumer environmental awareness to capture a product’s substitutability. Results indicate that: (1) Both increases in the permit price and the rise of the quota obligation reduces the aggregate profits of the supply chain, but the former rather than the latter increases the profits of the renewable power generating company; (2) the differential pricing improves the retailer’s flexibility in the charged price when confronting increases in the permit price and the quota obligation; (3) higher consumer environmental awareness makes the supply chain less profitable and increases the costs of ET suffered by the consumer; (4) the cooperation between the thermal power generating company and the retailer significantly increases the aggregated profits of the supply chain, although the cooperative profit is sensitive to environmental awareness. Moreover, the consumer suffers the highest costs that the retailer passes on them, and may prefer to feel that the emission cost and compliance cost are less affordable. In contrast, the cooperation between power generating companies removes the influence of environmental awareness, but the aggregated profits of the supply chain are smaller than in the decentralized decision scenario.

Keywords: renewable portfolio standards; emissions trading; supply chain network structure; environmental awareness (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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