Quantitative models in emission trading system research: A literature review

Abstract Diverse quantitative models have been applied to analyse emission trading system, as the top effective climate change policy. This paper aims to present a comprehensive literature review on full-scale types of quantitative models in emission trading system research. The models dominating emission trading system-related literature can be categorized as optimization models, simulation models, assessment models, statistical models, artificial intelligences and ensemble models. Using different quantification and solution tools, these models complemented and enriched each other in serving the various agents involved in emission trading system and facilitating their respective emission trading system related works: the government to design emission trading system policies, enterprises to participate in emission trading system and goods markets, third parties to regulate emission trading system and emission trading system markets involving different agents. For each agent, a systematic analysis is provided on research hotspots (the challenges to address), quantitative models (to describe the problems and find the results), main findings (the policy implications from the models) and future research (potential improvements on existing models). Some conclusions are obtained. (1) Generally, China was the largest contributor to emission trading system research using quantitative models (representing 35.71% of the total articles). (2) The research hotspots were decision making by enterprises under an emission trading system (20.92%), spillovers amongst emission trading system and other markets (17.54%) and allowance allocation by the government (12.52%). (3) Popular quantitative models included various optimization models (32.00%) and simulation models (29.64%).

[1]  Yong Wang,et al.  Initial Provincial Allocation and Equity Evaluation of China’s Carbon Emission Rights—Based on the Improved TOPSIS Method , 2018 .

[2]  Tao Zhang,et al.  Forecasting carbon price using empirical mode decomposition and evolutionary least squares support vector regression , 2017 .

[3]  Gengui Zhou,et al.  Supply chain coordination with revenue‐sharing contracts considering carbon emissions and governmental policy making , 2016 .

[4]  Wei Li,et al.  The assessment framework of provincial carbon emission driving factors: An empirical analysis of Hebei Province. , 2018, The Science of the total environment.

[5]  K. Jayanthakumaran,et al.  Bi-lateral CO2 emissions embodied in Australia–China trade , 2016 .

[6]  M. Siriwardana,et al.  The impact of an ETS on the Australian energy sector: An integrated CGE and electricity modelling approach , 2018 .

[7]  Wei Ming Huang,et al.  GHG legislation: Lessons from Taiwan , 2009 .

[8]  Katsuya Hihara,et al.  Analysis on bargaining about global climate change mitigation in international aviation sector , 2011 .

[9]  Xiaofeng Zhou,et al.  Statistical regularities of Carbon emission trading market: Evidence from European Union allowances , 2015 .

[10]  Jinpeng Liu,et al.  Regional carbon emission evolution mechanism and its prediction approach driven by carbon trading – A case study of Beijing , 2018 .

[11]  M. Salvador,et al.  Environmental versus economic performance in the EU ETS from the point of view of policy makers: A statistical analysis based on copulas , 2018 .

[12]  Lean Yu,et al.  Carbon allowance auction design of China's emissions trading scheme: A multi-agent-based approach , 2017 .

[13]  Yi-Ming Wei,et al.  Carbon emissions quotas in the Chinese road transport sector: A carbon trading perspective , 2017 .

[14]  Masahide Horita,et al.  Applying Matching Strategies in Climate Change Negotiations , 2014 .

[15]  Ling Tang,et al.  An EEMD-based multi-scale fuzzy entropy approach for complexity analysis in clean energy markets , 2017, Appl. Soft Comput..

[16]  Peter Morrell.  An evaluation of possible EU air transport emissions trading scheme allocation methods , 2007 .

[17]  Ibrahim Ahamada,et al.  Documents de Travail du Centre d ’ Economie de la Sorbonne The impact of the European Union Emission Trading Scheme on electricity generation sectors , 2009 .

[18]  Yuan Tian,et al.  Does the carbon market help or hurt the stock price of electricity companies? Further evidence from the European context , 2016 .

[19]  Shanyong Wang,et al.  Exploring the effect of cap-and-trade mechanism on firm's production planning and emission reduction strategy , 2018 .

[20]  Sharon S. Yang,et al.  Detecting and modelling the jump risk of CO2 emission allowances and their impact on the valuation of option on futures contracts , 2016 .

[21]  Barun Das,et al.  Green logistics under imperfect production system: A Rough age based Multi-Objective Genetic Algorithm approach , 2018, Comput. Ind. Eng..

[22]  Chao Liu,et al.  The response of the Beijing carbon emissions allowance price (BJC) to macroeconomic and energy price indices , 2017 .

[23]  Z. Tan,et al.  The Optimization Model for Interregional Power System Planning considering Carbon Emissions Trading and Renewable Energy Quota Mechanism , 2016 .

[24]  A. Barker,et al.  Monitoring, reporting and verifying emissions in the climate economy , 2015 .

[25]  Naushad Ali,et al.  The use of electronic resources at IIT Delhi Library: a study of search behaviours , 2005, Electron. Libr..

[26]  Werner Jammernegg,et al.  The economic and environmental performance of dual sourcing: A newsvendor approach , 2013 .

[27]  Kai Chang,et al.  Exploring the price dynamics of CO2 emissions allowances in China's emissions trading scheme pilots , 2017 .

[28]  Bangzhu Zhu,et al.  An intertemporal carbon emissions trading system with cap adjustment and path control , 2018, Energy Policy.

[29]  D. Roubaud,et al.  Can energy commodity futures add to the value of carbon assets , 2017 .

[30]  W. Koo,et al.  Factors affecting the carbon allowance market in the US , 2010 .

[31]  Yongrok Choi,et al.  The economy impacts of Korean ETS with an emphasis on sectoral coverage based on a CGE approach , 2017 .

[32]  Guo Li,et al.  Game theoretical analysis of firms’ operational low-carbon strategy under various cap-and-trade mechanisms , 2018, Journal of Cleaner Production.

[33]  William L. Weber,et al.  Time substitution for environmental performance: The case of Swedish manufacturing , 2018 .

[34]  Dagnija Blumberga,et al.  Implementation of Different Policy Strategies Promoting the Use of Wood Fuel in the Latvian District Heating System: Impact Evaluation through a System Dynamic Model , 2014 .

[35]  Elina Dace,et al.  How do 28 European Union Member States perform in agricultural greenhouse gas emissions? It depends on what we look at: Application of the multi-criteria analysis , 2016 .

[36]  Boqiang Lin,et al.  Impact of quota decline scheme of emission trading in China: A dynamic recursive CGE model , 2018 .

[37]  Meifeng Luo,et al.  Modeling the Impacts of Alternative Emission Trading Schemes on International Shipping , 2015 .

[38]  Ralf Martin,et al.  The Impact of the European Union Emissions Trading Scheme on Regulated Firms: What Is the Evidence after Ten Years? , 2016, Review of Environmental Economics and Policy.

[39]  G. Fischer,et al.  Carbon emission trading and carbon taxes under uncertainties , 2010 .

[40]  J. Turner,et al.  An investigation into the effects of an emissions trading scheme on forest management and land use in New Zealand , 2012 .

[41]  Y. Geng,et al.  Achieving China’s INDC through carbon cap-and-trade: Insights from Shanghai , 2016 .

[42]  Bert Scholtens,et al.  Carbon prices and firms' financial performance: an industry perspective , 2014 .

[43]  C. Krishnamurti,et al.  Efficiency of European emissions markets: Lessons and implications , 2011 .

[44]  Yalin Lei,et al.  Factors affecting the pilot trading market of carbon emissions in China , 2018, Petroleum Science.

[45]  Zhenghui Li,et al.  Green loan and subsidy for promoting clean production innovation , 2018, Journal of Cleaner Production.

[46]  Jin Li,et al.  Carbon Footprint Management of Road Freight Transport under the Carbon Emission Trading Mechanism , 2015 .

[47]  J. Rogelj,et al.  Paris Agreement climate proposals need a boost to keep warming well below 2 °C , 2016, Nature.

[48]  Kai Chang,et al.  Emissions reduction allocation and economic welfare estimation through interregional emissions trading in China: Evidence from efficiency and equity , 2016 .

[49]  Jan Corfee-Morlot,et al.  Assessing dangerous climate change through an update of the Intergovernmental Panel on Climate Change (IPCC) “reasons for concern” , 2009, Proceedings of the National Academy of Sciences.

[50]  Hancheng Dai,et al.  A general equilibrium assessment of economic impacts of provincial unbalanced carbon intensity targets in China , 2018, Resources, Conservation and Recycling.

[51]  Jinho Lee,et al.  A Newsvendor Non-Cooperative Game for Efficient Allocation of Carbon Emissions , 2018 .

[52]  A. Fujiwara,et al.  Environmental Efficiency Model Based on Data Envelopment Analysis and Its Application to Environmentally Sustainable Transport Policies , 2010 .

[53]  Yi-Ming Wei,et al.  Potential gains from carbon emissions trading in China: A DEA based estimation on abatement cost savings , 2016 .

[54]  Yu-heng Yang,et al.  What will happen to the power supply structure and CO 2 emissions reduction when TGC meets CET in the electricity market in China? , 2018, Renewable and Sustainable Energy Reviews.

[55]  Emile J.L. Chappin,et al.  Cross-border electricity market effects due to price caps in an emission trading system: An agent-based approach , 2014 .

[56]  Kanako Tanaka.  A comparison study of EU and Japan methods to assess CO2 emission reduction and energy saving in the iron and steel industry , 2012 .

[57]  Chaomei Chen,et al.  How are they different? A quantitative domain comparison of information visualization and data visualization (2000–2014) , 2016, Scientometrics.

[58]  Helene Naegele.  Offset Credits in the EU ETS: A Quantile Estimation of Firm-Level Transaction Costs , 2015 .

[59]  Gabriela Schaad,et al.  Does EU ETS lead to emission reductions through trade? The case of the Swedish emissions trading sector participants , 2009 .

[60]  Wei Jiang,et al.  Impact of Carbon Quota Allocation Mechanism on Emissions Trading: An Agent-Based Simulation , 2016 .

[61]  Yves Smeers,et al.  Evaluating the impact of average cost based contracts on the industrial sector in the European emission trading scheme , 2007, Central Eur. J. Oper. Res..

[62]  Joseph Swierzbinski,et al.  Assessing the performance of the UK Emissions Trading Scheme , 2007 .

[63]  Wenhu Tang,et al.  Bi-level allocation of carbon emission permits based on clustering analysis and weighted voting: A case study in China , 2018, Applied Energy.

[64]  Yi-Ming Wei,et al.  China’s regional industrial energy efficiency and carbon emissions abatement costs , 2014 .

[65]  Qiang Cui,et al.  Has airline efficiency affected by the inclusion of aviation into European Union Emission Trading Scheme? Evidences from 22 airlines during 2008–2012 , 2016 .

[66]  B. Manley.  Impact of the New Zealand Emissions Trading Scheme on forest valuation , 2012 .

[67]  John Asafu-Adjaye,et al.  Implications of CO2 reduction policies for a high carbon emitting economy , 2013 .

[68]  Fan Zhang,et al.  Firm Competitiveness and the European Union Emissions Trading Scheme , 2012 .

[69]  Ling Li,et al.  Big data in tourism research: A literature review , 2018, Tourism Management.

[70]  Lei Zhu,et al.  Buying green or producing green? Heterogeneous emitters’ strategic choices under a phased emission-trading scheme , 2018, Resources, Conservation and Recycling.

[71]  Xunmin Ou,et al.  The role of multi-region integrated emissions trading scheme: A computable general equilibrium analysis☆ , 2017 .

[72]  Maosheng Duan,et al.  Cap setting and allowance allocation in China's emissions trading pilot programmes: special issues and innovative solutions , 2016 .

[73]  Dingtao Zhao,et al.  Dynamic capability matters: Uncovering its fundamental role in decision making of environmental innovation , 2018 .

[74]  Minjae Park,et al.  Predicting European carbon emission price movements , 2017 .

[75]  Marian Leimbach,et al.  Equity and carbon emissions trading: a model analysis , 2003 .

[76]  William Ho,et al.  Contract Design with Information Asymmetry in a Supply Chain under an Emissions Trading Mechanism , 2018, Decis. Sci..

[77]  D. Ma,et al.  How to Set the Allowance Benchmarking for Cement Industry in China’s Carbon Market: Marginal Analysis and the Case of the Hubei Emission Trading Pilot , 2017 .

[78]  Robert Sausen,et al.  How to best address aviation’s full climate impact from an economic policy point of view? – Main results from AviClim research project , 2016 .

[79]  Rita Sousa,et al.  Energy and carbon prices: a comparison of interactions in the European Union Emissions Trading Scheme and the Western Climate Initiative market , 2015 .

[80]  Lang Xu,et al.  Decision and coordination in the dual-channel supply chain considering cap-and-trade regulation , 2018, Journal of Cleaner Production.

[81]  Xiao-Yi Li,et al.  Assessing the operational performance and maturity of the carbon trading pilot program: The case study of Beijing’s carbon market , 2017 .

[82]  Anita Engels,et al.  Understanding carbon trading: Effects of delegating CO2 responsibility on organizations’ trading behaviour , 2017 .

[83]  Bo Shen,et al.  Can environmental innovation facilitate carbon emissions reduction? Evidence from China , 2017 .

[84]  Tung-Sheng Zhan,et al.  Dynamic Economic Dispatch Incorporating Wind Power Generation with Carbon Trading , 2014 .

[85]  G. Daskalakis.  Temporal restrictions on emissions trading and the implications for the carbon futures market: Lessons from the EU emissions trading scheme , 2018 .

[86]  Xianbing Liu,et al.  Business perspective to the national greenhouse gases emissions trading scheme: A survey of cement companies in China , 2018 .

[87]  Vikas Kumar,et al.  Low carbon warehouse management under cap-and-trade policy , 2016 .

[88]  Brian W. Baetz,et al.  An interval robust stochastic programming method for planning carbon sink trading to support regional ecosystem sustainability—A case study of Zhangjiakou, China , 2017 .

[90]  T. Eichner,et al.  Lobbying for and Against Subsidizing Green Energy , 2015 .

[91]  Naoya Abe,et al.  Ex-post assessment of the Kyoto Protocol – quantification of CO2 mitigation impact in both Annex B and non-Annex B countries- , 2018, Applied Energy.

[92]  Yong Geng,et al.  A general equilibrium analysis on the impacts of regional and sectoral emission allowance allocation at carbon trading market , 2018, Journal of Cleaner Production.

[93]  M. Maroto-Valer,et al.  Performance of Coriolis flowmeters in CO2 pipelines with pre-combustion, post-combustion and oxyfuel gas mixtures in carbon capture and storage , 2016 .

[94]  L. Yang,et al.  Chinese companies’ awareness and perceptions of the Emissions Trading Scheme (ETS): Evidence from a national survey in China , 2016 .

[95]  Toshihiko Masui,et al.  Aligning renewable energy targets with carbon emissions trading to achieve China's INDCs: A general equilibrium assessment , 2018 .

[96]  Ponnuthurai Nagaratnam Suganthan,et al.  Empirical Mode Decomposition based ensemble deep learning for load demand time series forecasting , 2017, Appl. Soft Comput..

[97]  Jongmin Yu,et al.  The effect of the penalty system on market prices in the Korea ETS , 2018 .

[98]  Frank Venmans,et al.  A literature-based multi-criteria evaluation of the EU ETS , 2012 .

[99]  Toshi H. Arimura,et al.  The effects of alternative carbon mitigation policies on Japanese industries , 2013 .

[100]  Guangdong Wu,et al.  Mapping the bike sharing research published from 2010 to 2018: A scientometric review , 2019, Journal of Cleaner Production.

[101]  Taehoon Hong,et al.  Development of a CO2 emission benchmark for achieving the national CO2 emission reduction target by 2030 , 2018 .

[102]  Song-min Yu,et al.  Impact of Firms’ Observation Network on the Carbon Market , 2017 .

[103]  Nicholas Z. Muller,et al.  Using air quality modeling to study source-receptor relationships between nitrogen oxides emissions and ozone exposures over the United States. , 2009, Environment international.

[104]  J. Fouré,et al.  Border carbon adjustment and trade retaliation: What would be the cost for the European Union? , 2016 .

[105]  M. Terraza,et al.  Time-Frequency Analysis of the Relationship Between EUA and CER Carbon Markets , 2016, Environmental Modeling & Assessment.

[106]  Jonathan Köhler,et al.  Including aviation emissions in the EU ETS: Much ado about nothing? A review , 2010 .

[107]  K. Rennings,et al.  The Impacts of the European Union Emissions Trading Scheme on Competitiveness in Europe , 2006 .

[108]  Baochen Yang,et al.  How Will Policies of China’s CO2 ETS Affect its Carbon Price: Evidence from Chinese Pilot Regions , 2018 .

[109]  Boqiang Lin,et al.  The impact of Emission Trading Scheme (ETS) and the choice of coverage industry in ETS: A case study in China , 2017 .

[110]  Neil Perry.  A Post Keynesian Perspective on Industry Assistance and the Effectiveness of Australia's Carbon Pricing Scheme , 2012 .

[111]  Wei Sun,et al.  Analysis and forecasting of the carbon price using multi—resolution singular value decomposition and extreme learning machine optimized by adaptive whale optimization algorithm , 2018, Applied Energy.

[112]  Xueping Tan,et al.  The market performance of carbon trading in China: A theoretical framework of structure-conduct-performance , 2017 .

[113]  Ruo-Yu Ke,et al.  Integrated impact of the carbon quota constraints on enterprises within supply chain: Direct cost and indirect cost , 2018, Renewable and Sustainable Energy Reviews.

[114]  Alexander Novikov,et al.  On fair pricing of emission-related derivatives , 2010, 1011.5792.

[115]  Chi Kin Chan,et al.  Responsible production policies with substitution and carbon emissions trading , 2016 .

[116]  S. Pickl,et al.  Economic, institutional and technological uncertainties of emissions trading—a system dynamics modeling approach , 2014, Climatic Change.

[117]  Felix Suerkemper,et al.  The impact of electricity demand reduction policies on the EU-ETS: Modelling electricity and carbon prices and the effect on industrial competitiveness , 2013 .

[118]  Wei Li,et al.  Carbon tax, emission trading, or the mixed policy: which is the most effective strategy for climate change mitigation in China? , 2017, Mitigation and Adaptation Strategies for Global Change.

[119]  Lean Yu,et al.  Carbon emissions trading scheme exploration in China: A multi-agent-based model , 2015 .

[120]  Jin-Hua Xu,et al.  The impact of verified emissions announcements on the European Union emissions trading scheme: A bilaterally modified dummy variable modelling analysis , 2016 .

[121]  Ü. Gürler,et al.  On the Modeling of CO2 EUA and CER Prices of EU-ETS for the 2008-2012 Period , 2016 .

[122]  Yushan Jiang,et al.  A green vendor-managed inventory analysis in supply chains under carbon emissions trading mechanism , 2016, Clean Technologies and Environmental Policy.

[123]  Andreas Löschel,et al.  Auctioning of CO2 emission allowances in Phase 3 of the EU Emissions Trading Scheme , 2010 .

[124]  Toshihiko Masui,et al.  Impacts of low-carbon power policy on carbon mitigation in Guangdong Province, China , 2016 .

[125]  Wenhui Fan,et al.  A new chaotic time series hybrid prediction method of wind power based on EEMD-SE and full-parameters continued fraction , 2017 .

[126]  The impact of Australian ETS news on wholesale spot electricity prices: an exploratory analysis , 2010 .

[127]  The impact of phase II of the EU ETS on wholesale electricity prices , 2015 .

[128]  Y. P. Li,et al.  Planning carbon dioxide mitigation of Qingdao's electric power systems under dual uncertainties , 2016 .

[129]  F. Ramôa Ribeiro,et al.  Assessment of the impact of the European CO2 emissions trading scheme on the Portuguese chemical industry , 2010 .

[130]  Byung-Soo Kim,et al.  Analysis of the positions of domestic and international countries’ emissions trading schemes through principal component and cluster analysis , 2018 .

[131]  Jingjing Jiang,et al.  Research on China’s cap-and-trade carbon emission trading scheme: Overview and outlook , 2016 .

[132]  Yong-Gun Kim,et al.  An Emission Trading Scheme Design for Power Industries Facing Price Regulation , 2014 .

[133]  Dapeng Liang,et al.  Region division of China's carbon market based on the provincial/municipal carbon intensity , 2017 .

[134]  Renfei Feng,et al.  Identifying optimal clean-production pattern for energy systems under uncertainty through introducing carbon emission trading and green certificate schemes , 2017 .

[135]  Joseph Sarkis,et al.  Carbon pricing versus emissions trading: A supply chain planning perspective , 2015 .

[136]  Alain Haurie,et al.  A Stochastic Dynamic Game of Carbon Emissions Trading , 2003 .

[137]  Shanying Hu,et al.  Impacts of the coming emission trading scheme on China’s coal-to-materials industry in 2020 , 2017 .

[138]  T. Nelson,et al.  A literature review of economic studies on carbon pricing and Australian wholesale electricity markets , 2012 .

[139]  Jiuping Xu,et al.  Carbon emissions quota allocation based equilibrium strategy toward carbon reduction and economic benefits in China's building materials industry , 2018, Journal of Cleaner Production.

[140]  Competitive Dominance of Emission Trading Over Pigouvian Taxation in a Globalized Economy , 2017 .

[141]  I. Diaz‐Rainey,et al.  Carbon pricing and system linking: Lessons from the New Zealand Emissions Trading Scheme , 2018, Energy Economics.

[142]  Huiqin Jiang,et al.  A Study of the Allocation of Carbon Emission Permits among the Provinces of China Based on Fairness and Efficiency , 2017 .

[143]  Juanjuan Qin,et al.  Carbon Emission Reduction with Capital Constraint under Greening Financing and Cost Sharing Contract , 2018, International journal of environmental research and public health.

[144]  Rongda Jia,et al.  The Sustainable Development of the Economic-Energy-Environment (3E) System under the Carbon Trading (CT) Mechanism: A Chinese Case , 2018 .

[145]  Wolfgang Grimme,et al.  Emissions trading for international aviation--an estimation of the economic impact on selected European airlines , 2007 .

[146]  L. Miao,et al.  Interprovincial allocation of China's national carbon emission allowance: an uncertainty analysis based on Monte-Carlo simulations , 2017 .

[147]  Zhan Shu,et al.  Blockchain Enhanced Emission Trading Framework in Fashion Apparel Manufacturing Industry , 2018 .

[148]  A. Kossoy,et al.  State and Trends of Carbon Pricing 2014 , 2014 .

[149]  Ning Zhang,et al.  Marginal abatement cost of pollutants for China: A nonparametric approach , 2016 .

[150]  Y. Liu,et al.  Linking the emissions trading schemes of Europe and China - Combining climate and energy policy instruments , 2016, Mitigation and Adaptation Strategies for Global Change.

[151]  Guohe Huang,et al.  Planning carbon emission trading for Beijing's electric power systems under dual uncertainties , 2013 .

[152]  Bart De Schutter,et al.  Forecasting spot electricity prices Deep learning approaches and empirical comparison of traditional algorithms , 2018 .

[153]  Wei Li,et al.  The impacts of policy mix for resolving overcapacity in heavy chemical industry and operating national carbon emission trading market in China , 2017 .

[154]  Ottmar Edenhofer,et al.  Causes of the EU ETS price drop: Recession, CDM, renewable policies or a bit of everything? - New evidence , 2014 .

[155]  Åsa Löfgren,et al.  Why the EU ETS needs reforming: an empirical analysis of the impact on company investments , 2014 .

[156]  Markus Kraft,et al.  Incorporating seller/buyer reputation-based system in blockchain-enabled emission trading application , 2018 .

[157]  Thomas Lux,et al.  Modeling and forecasting the volatility of carbon dioxide emission allowance prices: A review and comparison of modern volatility models , 2017 .

[158]  C. Hepburn,et al.  Emissions trading with profit-neutral permit allocations , 2013 .