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Allowance Trading and Energy Consumption Under a Personal Carbon Trading Scheme: A Dynamic Programming Approach

Author

Listed:
  • Jin Fan

    (School of Management, University of Science and Technology of China, P.R. China)

  • Yao Li

    (School of Management, University of Science and Technology of China, P.R. China)

  • Yanrui Wu

    (Business School, University of Western Australia)

  • Shanyong Wang

    (School of Management, University of Science and Technology of China, P.R. China)

  • Dingtao Zhao

    (School of Management, University of Science and Technology of China, P.R. China)

Abstract

In response to the challenge of climate change, personal carbon trading was put forward as a policy instrument to promote low carbon behavior in the household sector. To evaluate the effectiveness of this scheme, it is important to gain insight into the allowance trading and energy consumption behavior in a long emission commitment period. This paper proposes a dynamic programming model to investigate allowance trading and energy consumption. A main feature of the model is its consideration of allowance banking and borrowing activities. Ten simulated scenarios with different allowance prices, price volatility and carbon emission rates are discussed. The findings show that consumers would trade more actively when allowance price is volatile. It is also found that energy consumption and allowance trading will decrease when the carbon emission rate increases. Overall the analysis in this paper implies that personal carbon trading scheme would be an effective policy measure to change consumers’ behavior. Therefore it would be valuable for decision-makers to consider the introduction and implementation of this scheme.

Suggested Citation

  • Jin Fan & Yao Li & Yanrui Wu & Shanyong Wang & Dingtao Zhao, 2015. "Allowance Trading and Energy Consumption Under a Personal Carbon Trading Scheme: A Dynamic Programming Approach," Economics Discussion / Working Papers 15-19, The University of Western Australia, Department of Economics.
    • Handle: RePEc:uwa:wpaper:15-19
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    File URL: https://ecompapers.biz.uwa.edu.au/paper/PDF%20of%20Discussion%20Papers/2015/15.19%20Fan,%20J.%20et%20al.%20Allowance%20Trading%20and%20Energy%20Consumption%20under%20a%20Personal%20Carbon%20Trading%20Scheme.pdf
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    Cited by:

    1. Li, Yao & Fan, Jin & Zhao, Dingtao & Wu, Yanrui & Li, Jun, 2016. "Tiered gasoline pricing: A personal carbon trading perspective," Energy Policy, Elsevier, vol. 89(C), pages 194-201.
    2. Jiang, Jingjing & Xie, Dejun & Ye, Bin & Shen, Bo & Chen, Zhanming, 2016. "Research on China’s cap-and-trade carbon emission trading scheme: Overview and outlook," Applied Energy, Elsevier, vol. 178(C), pages 902-917.

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