Modeling a regional emission trade market via computer simulation

To control air pollution and promote green production, China has established regional emission trade markets (RETM) at several "trial cities". These systems operate under the conditions of "Cap and Trade". Participating companies are restricted in total greenhouse-gas-emission through initial allocation of emission quotes (EQ); but allowed to purchase EQ to satisfy additional needs via a market system. Alternatively they can conduct self-purification (SP) to reduce emission level to satisfy the over-emission needs and sell the surplus (e.g. in the form of certified-emission-quotes) to gain revenue via the market. There are various risks associated with these decisions, e.g. fluctuation of market EQ price and cost of making emission reduction. The companies' decisions are individually made (i.e. decentralized) and together they impact the market's overall behavior. The interaction between many decision makers and the market performance is dynamic and uncertain. The performance is highly influenced by policy design (e.g. agencies that create, run and regulate the market). The purpose of this paper is to verify the design of a multi-agent based simulation model, based on a study in Shenzhen, to analyze the emission market's performance under different risk profiles with respect to the criteria set by system designer and policy makers.

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