Multi-stage emissions management of a steel company

František Zapletal (), Martin Šmíd () and Miloš Kopa ()
Additional contact information
František Zapletal: VŠB - Technical University of Ostrava
Martin Šmíd: The Institute of Information Theory and Automation of the CAS
Miloš Kopa: Charles University in Prague

Annals of Operations Research, 2020, vol. 292, issue 2, No 8, 735-751

Abstract: Abstract We present a multi-stage model for determining the optimal production and emissions coverage for an industrial company participating in the European Emissions Trading System. This model is adapted for a real-life European steel company. A mean-multiperiod CVaR is used as a decision criterion. There are two stochastic parameters—market demand for products and emissions allowance price. The aim of this paper is to explore the costs and risk of a company caused by emissions trading. The presented model is solved for various values of the risk aversion parameters and initial price of the allowance. As a result, it is found that the production is little influenced by the price of allowances and it nearly does not depend on risk-aversion. The probability of the company’s default, on the other hand, is significantly influenced by the emission prices. Futures on allowances as well as banking (i.e., transferring allowances between periods) are used to reduce the risks of the emissions trading. We further exploit the same situation under different settings, namely, given random price margins, and time-dependent, deterministic and positively contaminated distributions of demand. In all these cases, the results follow patterns similar to those given the original setting.

Keywords: Multiperiod CVaR; Multi-stage model; Stochastic programming; Emission allowance; Steel company (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s10479-019-03192-4 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:spr:annopr:v:292:y:2020:i:2:d:10.1007_s10479-019-03192-4

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/10479

DOI: 10.1007/s10479-019-03192-4

Access Statistics for this article

Annals of Operations Research is currently edited by Endre Boros

More articles in Annals of Operations Research from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().