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Determining energy and climate market policy using multiobjective programs with equilibrium constraints

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  • Siddiqui, Sauleh
  • Christensen, Adam

Abstract

Energy and climate market policy is inherently multiobjective and multilevel, in that desired choices often conflict and are made at a higher level than influenced actors. Analyzing tradeoff between reducing emissions and keeping fuel prices low, while seeking compromise among producers, traders, and consumers is the crux of the policy problem. This paper aims to address this issue by combining multiobjective optimization problems, which allow the study of tradeoff between choices, with equilibrium problems that model the networks and players over which these policies are chosen, to produce a formulation called a Multiobjective Program with Equilibrium Constraints. We apply this formulation to the United States renewable fuel market to help understand why it has been so difficult in releasing the 2014 mandate for the RFS (Renewable Fuel Standard). The RFS ensures that a minimum volume of renewable fuel is included in transportation fuel sold in the United States. Determining the RFS volume requirements involves anticipating market reaction as well as balancing policy objectives. We provide policy alternatives to aid in setting these volume obligations that are applicable to a wide variety of climate and energy market settings and explain why the RFS is not an optimal policy for reducing emissions.

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  • Siddiqui, Sauleh & Christensen, Adam, 2016. "Determining energy and climate market policy using multiobjective programs with equilibrium constraints," Energy, Elsevier, vol. 94(C), pages 316-325.
    • Handle: RePEc:eee:energy:v:94:y:2016:i:c:p:316-325
    DOI: 10.1016/j.energy.2015.11.002
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    Cited by:

    1. Peng Zhang & Jin Zhang & Gui-Hua Lin & Xinmin Yang, 2018. "Constraint Qualifications and Proper Pareto Optimality Conditions for Multiobjective Problems with Equilibrium Constraints," Journal of Optimization Theory and Applications, Springer, vol. 176(3), pages 763-782, March.
    2. Olufolajimi Oke & Daniel Huppmann & Max Marshall & Ricky Poulton & Sauleh Siddiqui, 2019. "Multimodal Transportation Flows in Energy Networks with an Application to Crude Oil Markets," Networks and Spatial Economics, Springer, vol. 19(2), pages 521-555, June.
    3. Olufolajimi Oke & Daniel Huppmann & Max Marshall & Ricky Poulton & Sauleh Siddiqui, 2016. "Mitigating Environmental and Public-Safety Risks of United States Crude-by-Rail Transport," Discussion Papers of DIW Berlin 1575, DIW Berlin, German Institute for Economic Research.
    4. Sankaranarayanan, Sriram & Feijoo, Felipe & Siddiqui, Sauleh, 2018. "Sensitivity and covariance in stochastic complementarity problems with an application to North American natural gas markets," European Journal of Operational Research, Elsevier, vol. 268(1), pages 25-36.
    5. Feijoo, Felipe & Huppmann, Daniel & Sakiyama, Larissa & Siddiqui, Sauleh, 2016. "North American natural gas model: Impact of cross-border trade with Mexico," Energy, Elsevier, vol. 112(C), pages 1084-1095.
    6. Qudrat-Ullah, Hassan, 2017. "How to enhance the future use of energy policy simulation models through ex post validation," Energy, Elsevier, vol. 120(C), pages 58-66.
    7. Debnath, Deepayan & Whistance, Jarrett & Thompson, Wyatt, 2017. "The causes of two-way U.S.–Brazil ethanol trade and the consequences for greenhouse gas emission," Energy, Elsevier, vol. 141(C), pages 2045-2053.
    8. Kerstin Dächert & Sauleh Siddiqui & Javier Saez-Gallego & Steven A. Gabriel & Juan Miguel Morales, 2019. "A Bicriteria Perspective on L-Penalty Approaches – a Corrigendum to Siddiqui and Gabriel’s L-Penalty Approach for Solving MPECs," Networks and Spatial Economics, Springer, vol. 19(4), pages 1199-1214, December.

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