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A Double-Weighted Bankruptcy Method to Allocate CO 2 Emissions Permits

Author

Listed:
  • Stefano Moretti

    (LAMSADE, CNRS, Université Paris-Dauphine, Université PSL, 75016 Paris, France)

  • Raja Trabelsi

    (LAMSADE, CNRS, Université Paris-Dauphine, Université PSL, 75016 Paris, France
    LARODEC, Institut Superieur de Gestion de Tunis, University of Tunis, Tunis 2000, Tunisia)

Abstract

Global warming, as a result of greenhouse gases, is exceeding the planet’s temperature stabilization capacities. Thus, greenhouse gas emissions must be reduced. We analyse a bankruptcy situation aimed at allocating emissions permits of CO 2 , the predominant greenhouse gas emitted by human activities. Inspired by the Constrained Equal Awards (CEA) solution for bankruptcy situations, we introduce a new allocation protocol based on the extension of the CEA solution over double-weighted bankruptcy situations, including two exogenous parameters aimed at providing a balance, in the request of emissions permits, between economic activities and the production of renewable energy. In these bi-criteria allocation problems, we focus on a computational approach to find an allocation protocol that does not prioritize any particular parameter. As an application of our method, we first consider CO 2 permit allocation problems in European Union (EU) countries, using real data about the gross domestic product (GDP), the production rate of renewable energies, and countries’ ‘demands’ of CO 2 emissions from 2010 to 2014. Then, we compare our approach with the CEA solution and its single-weighted extension to show the impact of using two weights over the distribution of CO 2 emissions permits; we analyse the correlation between allocations of CO 2 emission permits and the distribution of power within the EU Council to study the acceptability of alternative allocations.

Suggested Citation

  • Stefano Moretti & Raja Trabelsi, 2021. "A Double-Weighted Bankruptcy Method to Allocate CO 2 Emissions Permits," Games, MDPI, vol. 12(4), pages 1-21, October.
    • Handle: RePEc:gam:jgames:v:12:y:2021:i:4:p:78-:d:662996
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    References listed on IDEAS

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