Buffer Effect and Price Effect of a Personal Carbon Trading Scheme

Jin Fan, Shanyong Wang, Yanrui Wu, Jun Li and Dingtao Zhao
Additional contact information
Jin Fan: School of Management, University of Science and Technology of China
Shanyong Wang: School of Management, University of Science and Technology of China
Jun Li: School of Management, University of Science and Technology of China
Dingtao Zhao: School of Management, University of Science and Technology of China

No 15-07, Economics Discussion / Working Papers from The University of Western Australia, Department of Economics

Abstract: Personal carbon trading (PCT) is a downstream cap-and-trade scheme used to reduce carbon emissions from the household sector. It is argued that the PCT scheme could provide a buffer between the energy price and the total energy price, and thus energy demand remains stable. However these effects have never been verified. To fill in this gap in the literature, a price effect analysis is conducted. Firstly, a general utility optimization (GUO) model is proposed to obtain the general formulae of the price effect, substitution effect and income effect under the PCT scheme. Secondly, a specific version of the GUO model, namely a Cobb-Douglas utility function model, is employed to obtain the specific effect formulae to verify the buffer effect. Finally, a numerical example and a sensitive analysis are presented to demonstrate these effects. The results indicate that, under the PCT scheme, the total energy price and energy demand are less sensitive to the energy price changes. Thus, when energy prices fluctuate, the PCT scheme is capable of providing certainty in emissions reduction and is more effective than carbon taxes. On the basis of these results, implications of this research are discussed and suggestions for future research are provided.

Pages: 37 pages
Date: 2015
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

Downloads: (external link)
https://ecompapers.biz.uwa.edu.au/paper/PDF%20of%2 ... TRADING%20SCHEME.pdf

Related works:
Journal Article: Buffer effect and price effect of a personal carbon trading scheme (2015)
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:uwa:wpaper:15-07

Access Statistics for this paper

More papers in Economics Discussion / Working Papers from The University of Western Australia, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Sam Tang ().