An advanced data analytic approach for reallocating green gas emissions in cap-and-trade context

Reza Farzipoor Saen (), Zohreh Moghaddas () and Majid Azadi ()
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Reza Farzipoor Saen: Sultan Qaboos University, Department of Operations Management & Business Statistics, College of Economics and Political Science
Zohreh Moghaddas: Melbourne Institute of Technology
Majid Azadi: Aston University, Operations and Information Management Department, Aston Business School

Annals of Operations Research, 2025, vol. 355, issue 1, No 19, 555-578

Abstract: Abstract The swift economic growth experienced by nations has exacerbated the challenge of global warming over the years. Cap-and-trade stands out as the most effective approach for managing and reducing greenhouse gas emissions. This study aims to construct a data envelopment analysis model to redistribute authorized emissions among decision-making units (DMUs). Notably, the model accounts for the intricate relationship between the production of desirable and undesirable outputs within the cap-and-trade framework. Furthermore, the model adapts the current mathematical modelling by addressing undesirable output as an inherent by-product of the desirable output. Emphasis is placed on maximizing the collective efficiency scores of all DMUs. Additionally, to confront the presence of multiple potential optimal solutions in the cap-and-trade context, the model computes the efficiency interval of DMUs. Finally, the paper showcases the model's capabilities by presenting a comprehensive case study, demonstrating its practical application and effectiveness in addressing emissions reallocation within the cap-and-trade system.

Keywords: Cap-and-trade; Data envelopment analysis (DEA); Efficiency; Reallocation; Undesirable outputs (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10479-024-05877-x

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