IDEAS home Printed from https://ideas.repec.org/a/spr/operea/v17y2017i3d10.1007_s12351-016-0289-y.html
   My bibliography  Save this article

Allocation of emission permits using DEA-game-theoretic model

Author

Listed:
  • Jiasen Sun

    (Soochow University
    Soochow University)

  • Yelin Fu

    (The University of Hong Kong)

  • Xiang Ji

    (University of Science and Technology of China)

  • Ray Y. Zhong

    (The University of Auckland)

Abstract

This paper discusses schemes for allocation of emission permits (AEP) among a group of manufacturing companies, aiming at controlling the total emissions of the group while maintaining efficient production. Game theory and data envelopment analysis have been integrated in different ways for constructing two variants of AEP models. The first situation is where all members in the group are cooperative and a reasonable permit allocation scheme maximizes the overall payoff of the group. The second situation is where group members are non-cooperative and each member makes every effort to selfishly maximize its own payoff. The decision maker allocates permits to firms according to their non-cooperative game equilibrium scores. Proposed models are applied to study a group of paper mills to analyze their payoffs. The results show that the methods proposed in this work can provide reasonable allocation results for all firms. In addition, although our allocation methods adopt the principle of maximizing the payoff of the firm, the efficiency of each firm from current output and input levels is still a factor that determines the permit allocation.

Suggested Citation

  • Jiasen Sun & Yelin Fu & Xiang Ji & Ray Y. Zhong, 2017. "Allocation of emission permits using DEA-game-theoretic model," Operational Research, Springer, vol. 17(3), pages 867-884, October.
    • Handle: RePEc:spr:operea:v:17:y:2017:i:3:d:10.1007_s12351-016-0289-y
    DOI: 10.1007/s12351-016-0289-y
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s12351-016-0289-y
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s12351-016-0289-y?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. Cramton, Peter & Kerr, Suzi, 2002. "Tradeable carbon permit auctions: How and why to auction not grandfather," Energy Policy, Elsevier, vol. 30(4), pages 333-345, March.
    2. Lawrence H. Goulder & Ian W.H. Parry & Roberton C. Williams III & Dallas Burtraw, 2002. "The Cost-Effectiveness of Alternative Instruments for Environmental Protection in a Second-Best Setting," Chapters, in: Lawrence H. Goulder (ed.), Environmental Policy Making in Economies with Prior Tax Distortions, chapter 27, pages 523-554, Edward Elgar Publishing.
    3. Boaz Golany & Eran Tamir, 1995. "Evaluating Efficiency-Effectiveness-Equality Trade-Offs: A Data Envelopment Analysis Approach," Management Science, INFORMS, vol. 41(7), pages 1172-1184, July.
    4. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
    5. Jensen, Jesper & Rasmussen, Tobias N., 2000. "Allocation of CO2 Emissions Permits: A General Equilibrium Analysis of Policy Instruments," Journal of Environmental Economics and Management, Elsevier, vol. 40(2), pages 111-136, September.
    6. Erik Haites, 2003. "Output-based allocation as a form of protection for internationally competitive industries," Climate Policy, Taylor & Francis Journals, vol. 3(sup2), pages 29-41, December.
    7. Joe Zhu, 2014. "DEA Cross Efficiency," International Series in Operations Research & Management Science, in: Quantitative Models for Performance Evaluation and Benchmarking, edition 3, chapter 4, pages 61-92, Springer.
    8. Lozano, S. & Villa, G. & Brännlund, R., 2009. "Centralised reallocation of emission permits using DEA," European Journal of Operational Research, Elsevier, vol. 193(3), pages 752-760, March.
    9. Ackerman, Frank & Moomaw, William, 1997. "SO2 emissions trading: does it work?," The Electricity Journal, Elsevier, vol. 10(7), pages 61-66.
    10. Shiro Takeda & Toshi Arimura & Hanae Tamechika & Carolyn Fischer & Alan Fox, 2014. "Output-based allocation of emissions permits for mitigating the leakage and competitiveness issues for the Japanese economy," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 16(1), pages 89-110, January.
    11. Robert N. Stavins, 1998. "What Can We Learn from the Grand Policy Experiment? Lessons from SO2 Allowance Trading," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 69-88, Summer.
    12. Feng, Chenpeng & Chu, Feng & Ding, Jingjing & Bi, Gongbing & Liang, Liang, 2015. "Carbon Emissions Abatement (CEA) allocation and compensation schemes based on DEA," Omega, Elsevier, vol. 53(C), pages 78-89.
    13. Pekka Korhonen & Mikko Syrjänen, 2004. "Resource Allocation Based on Efficiency Analysis," Management Science, INFORMS, vol. 50(8), pages 1134-1144, August.
    14. Yang, Zhihua & Zhang, Qianwei, 2015. "Resource allocation based on DEA and modified Shapley value," Applied Mathematics and Computation, Elsevier, vol. 263(C), pages 280-286.
    15. Liang Liang & Jie Wu & Wade D. Cook & Joe Zhu, 2008. "The DEA Game Cross-Efficiency Model and Its Nash Equilibrium," Operations Research, INFORMS, vol. 56(5), pages 1278-1288, October.
    16. Karsten Neuhoff & Kim Keats Martinez & Misato Sato, 2006. "Allocation, incentives and distortions: the impact of EU ETS emissions allowance allocations to the electricity sector," Climate Policy, Taylor & Francis Journals, vol. 6(1), pages 73-91, January.
    17. Tetsuo Ono, 2002. "The Effects of Emission Permits on Growth and the Environment," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 21(1), pages 75-87, January.
    18. Du, Juan & Cook, Wade D. & Liang, Liang & Zhu, Joe, 2014. "Fixed cost and resource allocation based on DEA cross-efficiency," European Journal of Operational Research, Elsevier, vol. 235(1), pages 206-214.
    19. Ahman, Markus & Burtraw, Dallas & Kruger, Joseph & Zetterberg, Lars, 2007. "A Ten-Year Rule to guide the allocation of EU emission allowances," Energy Policy, Elsevier, vol. 35(3), pages 1718-1730, March.
    20. Jinye Zhao & Benjamin F. Hobbs & Jong-Shi Pang, 2010. "Long-Run Equilibrium Modeling of Emissions Allowance Allocation Systems in Electric Power Markets," Operations Research, INFORMS, vol. 58(3), pages 529-548, June.
    21. Carolyn Fischer & Alan K. Fox, 2007. "Output-Based Allocation of Emissions Permits for Mitigating Tax and Trade Interactions," Land Economics, University of Wisconsin Press, vol. 83(4), pages 575-599.
    22. M. Khodabakhshi & K. Aryavash, 2014. "The fair allocation of common fixed cost or revenue using DEA concept," Annals of Operations Research, Springer, vol. 214(1), pages 187-194, March.
    23. Atakelty Hailu & Terrence S. Veeman, 2001. "Non-parametric Productivity Analysis with Undesirable Outputs: An Application to the Canadian Pulp and Paper Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 605-616.
    24. Bohringer, Christoph & Lange, Andreas, 2005. "On the design of optimal grandfathering schemes for emission allowances," European Economic Review, Elsevier, vol. 49(8), pages 2041-2055, November.
    25. Antreas D. Athanassopoulos, 1998. "Decision Support for Target-Based Resource Allocation of Public Services in Multiunit and Multilevel Systems," Management Science, INFORMS, vol. 44(2), pages 173-187, February.
    26. Cason, Timothy N & Gangadharan, Lata, 2003. "Transactions Costs in Tradable Permit Markets: An Experimental Study of Pollution Market Designs," Journal of Regulatory Economics, Springer, vol. 23(2), pages 145-165, March.
    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. Yu, Anyu & Lee, Andy & Chen, Yao, 2021. "Carbon allocation targeting with abatement capability: A firm-level study," International Journal of Production Economics, Elsevier, vol. 235(C).
    2. Ciardiello, F. & Genovese, A. & Simpson, A., 2019. "Pollution responsibility allocation in supply networks: A game-theoretic approach and a case study," International Journal of Production Economics, Elsevier, vol. 217(C), pages 211-217.
    3. Xie, Qiwei & Xu, Qifan & Zhu, Da & Rao, Kaifeng & Dai, Qianzhi, 2020. "Fair allocation of wastewater discharge permits based on satisfaction criteria using data envelopment analysis," Utilities Policy, Elsevier, vol. 66(C).
    4. Jiasen Sun & Guo Li, 2022. "Optimizing emission reduction task sharing: technology and performance perspectives," Annals of Operations Research, Springer, vol. 316(1), pages 581-602, September.
    5. Qingxian An & Ping Wang & Honglin Yang & Zongrun Wang, 2021. "Fixed cost allocation in two-stage system using DEA from a noncooperative view," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 43(4), pages 1077-1102, December.
    6. Bo Peng & Kun Lei, 2021. "An Analytical Approach for Initial Allocation of Discharge Permits with Consideration of the Water Environmental Capacity and Industrial Technical Feasibility," Sustainability, MDPI, vol. 13(24), pages 1-16, December.

    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. Jie Wu & Qingyuan Zhu & Junfei Chu & Qingxian An & Liang Liang, 2016. "A DEA-based approach for allocation of emission reduction tasks," International Journal of Production Research, Taylor & Francis Journals, vol. 54(18), pages 5618-5633, September.
    2. Jie Wu & Jun-Fei Chu & Liang Liang, 2016. "Target setting and allocation of carbon emissions abatement based on DEA and closest target: an application to 20 APEC economies," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 84(1), pages 279-296, November.
    3. Ji, Xiang & Li, Guo & Wang, Zhaohua, 2017. "Allocation of emission permits for China’s power plants: A systemic Pareto optimal method," Applied Energy, Elsevier, vol. 204(C), pages 607-619.
    4. Jiasen Sun & Guo Li, 2020. "Designing a double auction mechanism for the re-allocation of emission permits," Annals of Operations Research, Springer, vol. 291(1), pages 847-874, August.
    5. Mehdi Soltanifar & Farhad Hosseinzadeh Lotfi & Hamid Sharafi & Sebastián Lozano, 2022. "Resource allocation and target setting: a CSW–DEA based approach," Annals of Operations Research, Springer, vol. 318(1), pages 557-589, November.
    6. Akram Dehnokhalaji & Mojtaba Ghiyasi & Pekka Korhonen, 2017. "Resource allocation based on cost efficiency," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 68(10), pages 1279-1289, October.
    7. Zhou, P. & Wang, M., 2016. "Carbon dioxide emissions allocation: A review," Ecological Economics, Elsevier, vol. 125(C), pages 47-59.
    8. Dai, Qianzhi & Li, Yongjun & Lei, Xiyang & Wu, Dengsheng, 2021. "A DEA-based incentive approach for allocating common revenues or fixed costs," European Journal of Operational Research, Elsevier, vol. 292(2), pages 675-686.
    9. Tao Ding & Ya Chen & Huaqing Wu & Yuqi Wei, 2018. "Centralized fixed cost and resource allocation considering technology heterogeneity: a DEA approach," Annals of Operations Research, Springer, vol. 268(1), pages 497-511, September.
    10. Frédéric Branger & Misato Sato, 2017. "Solving the clinker dilemma with hybrid output-based allocation," Climatic Change, Springer, vol. 140(3), pages 483-501, February.
    11. Xie, Qiwei & Xu, Qifan & Zhu, Da & Rao, Kaifeng & Dai, Qianzhi, 2020. "Fair allocation of wastewater discharge permits based on satisfaction criteria using data envelopment analysis," Utilities Policy, Elsevier, vol. 66(C).
    12. Wu, Jie & Zhu, Qingyuan & Liang, Liang, 2016. "CO2 emissions and energy intensity reduction allocation over provincial industrial sectors in China," Applied Energy, Elsevier, vol. 166(C), pages 282-291.
    13. Jie Wu & Qingyuan Zhu & Wade D Cook & Joe Zhu, 2016. "Best cooperative partner selection and input resource reallocation using DEA," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 67(9), pages 1221-1237, September.
    14. Chu, Junfei & Wu, Jie & Chu, Chengbin & Zhang, Tinglong, 2020. "DEA-based fixed cost allocation in two-stage systems: Leader-follower and satisfaction degree bargaining game approaches," Omega, Elsevier, vol. 94(C).
    15. Anouliès, Lisa, 2017. "Heterogeneous firms and the environment: a cap-and-trade program," Journal of Environmental Economics and Management, Elsevier, vol. 84(C), pages 84-101.
    16. Jiasen Sun & Guo Li, 2022. "Optimizing emission reduction task sharing: technology and performance perspectives," Annals of Operations Research, Springer, vol. 316(1), pages 581-602, September.
    17. Knut Einar Rosendahl & Halvor Briseid Storrøsten, 2011. "Output-based allocation and investment in clean technologies," Discussion Papers 644, Statistics Norway, Research Department.
    18. Chien-Ming Chen & Joe Zhu, 2011. "Efficient Resource Allocation via Efficiency Bootstraps: An Application to R&D Project Budgeting," Operations Research, INFORMS, vol. 59(3), pages 729-741, June.
    19. Nasim Nasrabadi & Akram Dehnokhalaji & Narsis Kiani & Pekka Korhonen & Jyrki Wallenius, 2012. "Resource allocation for performance improvement," Annals of Operations Research, Springer, vol. 196(1), pages 459-468, July.
    20. Lange, Ian & Maniloff, Peter, 2021. "Updating allowance allocations in cap-and-trade: Evidence from the NOx Budget Program," Journal of Environmental Economics and Management, Elsevier, vol. 105(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:spr:operea:v:17:y:2017:i:3:d:10.1007_s12351-016-0289-y. 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    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.