IDEAS home Printed from https://ideas.repec.org/a/eee/transe/v152y2021ics1366554521001526.html
   My bibliography  Save this article

An automated system of emissions permit trading for transportation firms

Author

Listed:
  • Yuan, Quan
  • Hua, Zhongsheng
  • Shen, Bin

Abstract

New technologies such as artificial intelligence (AI) play important roles in transportation emissions trading platforms. Due to the complexity and stochastically changing prices of emissions, an effective algorithm is needed in these platforms to optimize the use of emissions. By setting an upper bound for buying and a lower bound for selling, such an algorithm can reduce trading risk and ensure the stability of trading platforms. In this study, we developed an automatic emissions permit trading system using a dynamic programming approach with selling and purchasing bounds for transportation firms with non-negligible fixed transaction setup costs. We partially characterize the optimal transportation and permit trading policies by exploiting a new mathematical property that is suitable for a two-dimensional control system. We attempt to elucidate the optimal coordination of permit trading and permit consumption for a transportation firm facing both the Markov price process and random demand during a multi-period planning horizon. We prescribe an optimal trading policy and propose a well-performed heuristic policy and a tight lower bound for the platform. We also show that the easily implemented heuristic policy would not significantly increase emissions. Our findings contribute to the literature and provide guidance to help transportation firms using AI platforms.

Suggested Citation

  • Yuan, Quan & Hua, Zhongsheng & Shen, Bin, 2021. "An automated system of emissions permit trading for transportation firms," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 152(C).
    • Handle: RePEc:eee:transe:v:152:y:2021:i:c:s1366554521001526
    DOI: 10.1016/j.tre.2021.102385
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1366554521001526
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.tre.2021.102385?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Awi Federgruen & Zhe Liu & Lijian Lu, 2020. "Synthesis and Generalization of Structural Results in Inventory Management: A Generalized Convexity Property," Mathematics of Operations Research, INFORMS, vol. 45(2), pages 547-575, May.
    2. Wang, Minke & Wu, Jiang & Kafa, Nadine & Klibi, Walid, 2020. "Carbon emission-compliance green location-inventory problem with demand and carbon price uncertainties," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 142(C).
    3. Chen, Yuyu & Li, Bangyi & Zhang, Guoqing & Bai, Qingguo, 2020. "Quantity and collection decisions of the remanufacturing enterprise under both the take-back and carbon emission capacity regulations," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 141(C).
    4. Qing Ye & Izak Duenyas, 2007. "Optimal Capacity Investment Decisions with Two-Sided Fixed-Capacity Adjustment Costs," Operations Research, INFORMS, vol. 55(2), pages 272-283, April.
    5. Wang, Min & Zhao, Lindu & Herty, Michael, 2019. "Joint replenishment and carbon trading in fresh food supply chains," European Journal of Operational Research, Elsevier, vol. 277(2), pages 561-573.
    6. Yang, Shu-Jung Sunny & Anderson, Edward James, 2014. "Competition through capacity investment under asymmetric existing capacities and costs," European Journal of Operational Research, Elsevier, vol. 237(1), pages 217-230.
    7. Fang, Yuan & Yu, Yugang & Shi, Ye & Liu, Jie, 2020. "The effect of carbon tariffs on global emission control: A global supply chain model," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 133(C).
    8. Sun, Xuting & Chung, Sai-Ho & Choi, Tsan-Ming & Sheu, Jiuh-Biing & Ma, Hoi Lam, 2020. "Combating lead-time uncertainty in global supply chain's shipment-assignment: Is it wise to be risk-averse?," Transportation Research Part B: Methodological, Elsevier, vol. 138(C), pages 406-434.
    9. John Semple, 2007. "Note: Generalized Notions of Concavity with an Application to Capacity Management," Operations Research, INFORMS, vol. 55(2), pages 284-291, April.
    10. Haehl, Christian & Spinler, Stefan, 2018. "Capacity expansion under regulatory uncertainty:A real options-based study in international container shipping," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 113(C), pages 75-93.
    11. He, Juan & Ma, Chao & Pan, Kai, 2017. "Capacity investment in supply chain with risk averse supplier under risk diversification contract," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 106(C), pages 255-275.
    12. Dekker, Rommert & Bloemhof, Jacqueline & Mallidis, Ioannis, 2012. "Operations Research for green logistics – An overview of aspects, issues, contributions and challenges," European Journal of Operational Research, Elsevier, vol. 219(3), pages 671-679.
    13. Yu, Yugang & Zhou, Sijie & Shi, Ye, 2020. "Information sharing or not across the supply chain: The role of carbon emission reduction," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 137(C).
    14. Sarkar, Biswajit & Ganguly, Baishakhi & Sarkar, Mitali & Pareek, Sarla, 2016. "Effect of variable transportation and carbon emission in a three-echelon supply chain model," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 91(C), pages 112-128.
    15. Flora, Maria & Vargiolu, Tiziano, 2020. "Price dynamics in the European Union Emissions Trading System and evaluation of its ability to boost emission-related investment decisions," European Journal of Operational Research, Elsevier, vol. 280(1), pages 383-394.
    16. Xu, Song & Fang, Lei, 2020. "Partial credit guarantee and trade credit in an emission-dependent supply chain with capital constraint," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 135(C).
    17. De, Manoranjan & Giri, B.C., 2020. "Modelling a closed-loop supply chain with a heterogeneous fleet under carbon emission reduction policy," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 133(C).
    18. Quan Yuan & Youhua (Frank) Chen & Jian Yang & Yun Zhou, 2018. "Joint Control of Emissions Permit Trading and Production Involving Fixed and Variable Transaction Costs," Production and Operations Management, Production and Operations Management Society, vol. 27(8), pages 1420-1454, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bai, Qingguo & Chen, Jiguang & Xu, Jianteng, 2023. "Energy conservation investment and supply chain structure under cap-and-trade regulation for a green product," Omega, Elsevier, vol. 119(C).
    2. Niu, Baozhuang & Yu, Xinhu & Dong, Jian, 2023. "Could AI livestream perform better than KOL in cross-border operations?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 174(C).
    3. Wang, Xinyu & Sethi, Suresh P. & Chang, Shuhua, 2022. "Pollution abatement using cap-and-trade in a dynamic supply chain and its coordination," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 158(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wang, Xinyu & Sethi, Suresh P. & Chang, Shuhua, 2022. "Pollution abatement using cap-and-trade in a dynamic supply chain and its coordination," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 158(C).
    2. Liu, Lu & Feng, Lipan & Jiang, Tao & Zhang, Qian, 2021. "The impact of supply chain competition on the introduction of clean development mechanisms," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 155(C).
    3. Yang, Yuxiang & Goodarzi, Shadi & Jabbarzadeh, Armin & Fahimnia, Behnam, 2022. "In-house production and outsourcing under different emissions reduction regulations: An equilibrium decision model for global supply chains," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 157(C).
    4. Tao, Yi & Wu, Jianhuang & Lai, Xiaofan & Wang, Fan, 2020. "Network planning and operation of sustainable closed-loop supply chains in emerging markets: Retail market configurations and carbon policies," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 144(C).
    5. Xu, Song & Fang, Lei & Govindan, Kannan, 2022. "Energy performance contracting in a supply chain with financially asymmetric manufacturers under carbon tax regulation for climate change mitigation," Omega, Elsevier, vol. 106(C).
    6. Lijian Lu & Xiaoming Yan, 2016. "Capacity investment decisions under risk aversion," Naval Research Logistics (NRL), John Wiley & Sons, vol. 63(3), pages 218-235, April.
    7. Ozgun Caliskan-Demirag & Youhua (Frank) Chen & Yi Yang, 2012. "Ordering Policies for Periodic-Review Inventory Systems with Quantity-Dependent Fixed Costs," Operations Research, INFORMS, vol. 60(4), pages 785-796, August.
    8. Bai, Qingguo & Chen, Jiguang & Xu, Jianteng, 2023. "Energy conservation investment and supply chain structure under cap-and-trade regulation for a green product," Omega, Elsevier, vol. 119(C).
    9. Raut, Rakesh D. & Mangla, Sachin Kumar & Narwane, Vaibhav S. & Dora, Manoj & Liu, Mengqi, 2021. "Big Data Analytics as a mediator in Lean, Agile, Resilient, and Green (LARG) practices effects on sustainable supply chains," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 145(C).
    10. Saberi, Sara, 2018. "Sustainable, multiperiod supply chain network model with freight carrier through reduction in pollution stock," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 118(C), pages 421-444.
    11. Yang, Yuxiang & Goodarzi, Shadi & Bozorgi, Ali & Fahimnia, Behnam, 2021. "Carbon cap-and-trade schemes in closed-loop supply chains: Why firms do not comply?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 156(C).
    12. Gao, Jingzhe & Xiao, Zhongdong & Cao, Binbin & Chai, Qiangfei, 2018. "Green supply chain planning considering consumer’s transportation process," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 109(C), pages 311-330.
    13. Awi Federgruen & Zhe Liu & Lijian Lu, 2020. "Synthesis and Generalization of Structural Results in Inventory Management: A Generalized Convexity Property," Mathematics of Operations Research, INFORMS, vol. 45(2), pages 547-575, May.
    14. Yang, Yang & Liu, Jie & Hu, Taizhong, 2023. "Capital allocation and pricing decisions under trade credit with time-sensitive stochastic demand," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 173(C).
    15. Yi Wang & Yafei Yang & Zhaoxiang Qin & Yefei Yang & Jun Li, 2023. "A Literature Review on the Application of Digital Technology in Achieving Green Supply Chain Management," Sustainability, MDPI, vol. 15(11), pages 1-18, May.
    16. Qian Dai & Jiaqi Yang & Dong Li, 2018. "Modeling a Three-Mode Hybrid Port-Hinterland Freight Intermodal Distribution Network with Environmental Consideration: The Case of the Yangtze River Economic Belt in China," Sustainability, MDPI, vol. 10(9), pages 1-26, August.
    17. Mallidis, Ioannis & Vlachos, Dimitrios & Iakovou, Eleftherios & Dekker, Rommert, 2014. "Design and planning for green global supply chains under periodic review replenishment policies," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 72(C), pages 210-235.
    18. Jiarui Fan & Yuning Zhou, 2023. "Empirical Analysis of Financing Efficiency and Constraints Effects on the Green Innovation of Green Supply Chain Enterprises: A Case Study of China," Sustainability, MDPI, vol. 15(6), pages 1-15, March.
    19. Zhang, Abraham & Wang, Jason X. & Farooque, Muhammad & Wang, Yulan & Choi, Tsan-Ming, 2021. "Multi-dimensional circular supply chain management: A comparative review of the state-of-the-art practices and research," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 155(C).
    20. Yang, Qing & Zhang, Lei & Zhang, Jinsuo & Zou, Shaohui, 2021. "System simulation and policy optimization of China's coal production capacity deviation in terms of the economy, environment, and energy security," Resources Policy, Elsevier, vol. 74(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:transe:v:152:y:2021:i:c:s1366554521001526. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/600244/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.