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The Effects of Allowance Price on Energy Demand under a Personal Carbon Trading Scheme

Author

Listed:
  • Jin Fan

    (School of Management, University of Science and Technology of China)

  • Jun Li

    (School of Management, University of Science and Technology of China)

  • Yanrui Wu

    (Business School, University of Western Australia)

  • Shanyong Wang

    (School of Management, University of Science and Technology of China)

  • Dingtao Zhao

    (School of Management, University of Science and Technology of China)

Abstract

Personal carbon trading (PCT) is a downstream cap-and-trade scheme which could be used to reduce carbon emissions from the household sector. To explore the effectiveness of this scheme, it is necessary to investigate how consumers respond to allowance price change.. In this paper, a general utility optimization (GUO) model and a constant elasticity of substitution (CES) utility function are proposed to examine the price, substitution and income effects of carbon allowance price changes. It is shown that higher income consumers are more sensitive to the allowance price changes than lower income consumers. Moreover, the short-run adjustment in consumers’ consumption of electricity in response to a change in allowance price would be lower than the long-run value. According to the sensitivity analysis, downward (upward) adjustments in the elasticity of substitution result in a positive (negative) effect on price effect. The findings in this study are used to draw policy implications. Suggestions for future research are also provided.

Suggested Citation

  • Jin Fan & Jun Li & Yanrui Wu & Shanyong Wang & Dingtao Zhao, 2016. "The Effects of Allowance Price on Energy Demand under a Personal Carbon Trading Scheme," Economics Discussion / Working Papers 16-07, The University of Western Australia, Department of Economics.
    • Handle: RePEc:uwa:wpaper:16-07
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    Cited by:

    1. Wenzhu Liao & Lin Liu & Jiazhuo Fu, 2019. "A Comparative Study on the Routing Problem of Electric and Fuel Vehicles Considering Carbon Trading," IJERPH, MDPI, vol. 16(17), pages 1-25, August.
    2. Ameni Boumaiza, 2024. "Carbon and Energy Trading Integration within a Blockchain-Powered Peer-to-Peer Framework," Energies, MDPI, vol. 17(11), pages 1-18, May.
    3. Anna-Katharina Kothe & Alexander Kuptel & Roman Seidl, 2021. "Simulating Personal Carbon Trading (PCT) with an Agent-Based Model (ABM): Investigating Adaptive Reduction Rates and Path Dependence," Energies, MDPI, vol. 14(22), pages 1-15, November.
    4. Nie, Qingyun & Zhang, Lihui & Li, Songrui, 2022. "How can personal carbon trading be applied in electric vehicle subsidies? A Stackelberg game method in private vehicles," Applied Energy, Elsevier, vol. 313(C).
    5. Gaoyuan Qin & Fengming Tao & Lixia Li, 2019. "A Vehicle Routing Optimization Problem for Cold Chain Logistics Considering Customer Satisfaction and Carbon Emissions," IJERPH, MDPI, vol. 16(4), pages 1-17, February.
    6. Fang, Guochang & Tian, Lixin & Liu, Menghe & Fu, Min & Sun, Mei, 2018. "How to optimize the development of carbon trading in China—Enlightenment from evolution rules of the EU carbon price," Applied Energy, Elsevier, vol. 211(C), pages 1039-1049.
    7. Abdul Salam Khan & Bashir Salah & Dominik Zimon & Muhammad Ikram & Razaullah Khan & Catalin I. Pruncu, 2020. "A Sustainable Distribution Design for Multi-Quality Multiple-Cold-Chain Products: An Integrated Inspection Strategies Approach," Energies, MDPI, vol. 13(24), pages 1-25, December.
    8. Lin, Boqiang & Jia, Zhijie, 2017. "The impact of Emission Trading Scheme (ETS) and the choice of coverage industry in ETS: A case study in China," Applied Energy, Elsevier, vol. 205(C), pages 1512-1527.
    9. Jing Chen & Pengfei Gui & Tao Ding & Sanggyun Na & Yingtang Zhou, 2019. "Optimization of Transportation Routing Problem for Fresh Food by Improved Ant Colony Algorithm Based on Tabu Search," Sustainability, MDPI, vol. 11(23), pages 1-22, November.
    10. Hua, Weiqi & Jiang, Jing & Sun, Hongjian & Teng, Fei & Strbac, Goran, 2022. "Consumer-centric decarbonization framework using Stackelberg game and Blockchain," Applied Energy, Elsevier, vol. 309(C).
    11. Yao Li & Shuai Wang, 2023. "Personal emission permit trading scheme: urban spatial equilibrium and planning," 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. 116(1), pages 1239-1259, March.
    12. Lihua Liu & Aneng He & Tian Tian & Lai Soon Lee & Hsin-Vonn Seow, 2024. "Bi-Objective Mixed Integer Nonlinear Programming Model for Low Carbon Location-Inventory-Routing Problem with Time Windows and Customer Satisfaction," Mathematics, MDPI, vol. 12(15), pages 1-35, July.
    13. Wadud, Zia & Chintakayala, Phani Kumar, 2019. "Personal Carbon Trading: Trade-off and Complementarity Between In-home and Transport Related Emissions Reduction," Ecological Economics, Elsevier, vol. 156(C), pages 397-408.
    14. Fan, Jin & He, Haonan & Wu, Yanrui, 2016. "Personal carbon trading and subsidies for hybrid electric vehicles," Economic Modelling, Elsevier, vol. 59(C), pages 164-173.
    15. Yue‐Jun Zhang & Wei Shi & Lin Jiang, 2020. "Does China's carbon emissions trading policy improve the technology innovation of relevant enterprises?," Business Strategy and the Environment, Wiley Blackwell, vol. 29(3), pages 872-885, March.
    16. Li, Wei & Lu, Can & Ding, Yi & Zhang, Yan-Wu, 2017. "The impacts of policy mix for resolving overcapacity in heavy chemical industry and operating national carbon emission trading market in China," Applied Energy, Elsevier, vol. 204(C), pages 509-524.
    17. Hua, Weiqi & Jiang, Jing & Sun, Hongjian & Wu, Jianzhong, 2020. "A blockchain based peer-to-peer trading framework integrating energy and carbon markets," Applied Energy, Elsevier, vol. 279(C).
    18. Lin, Boqiang & Jia, Zhijie, 2018. "Impact of quota decline scheme of emission trading in China: A dynamic recursive CGE model," Energy, Elsevier, vol. 149(C), pages 190-203.
    19. Yue-Rong Hong & Chien-Ming Lee & Tsai-Chi Kuo, 2023. "Operationalizing Carbon-Neutral Living: A Case Study of A Business Model for Carbon-Negative Products," Sustainability, MDPI, vol. 15(14), pages 1-13, July.
    20. Máximo A. Domínguez-Garabitos & Víctor S. Ocaña-Guevara & Félix Santos-García & Adriana Arango-Manrique & Miguel Aybar-Mejía, 2022. "A Methodological Proposal for Implementing Demand-Shifting Strategies in the Wholesale Electricity Market," Energies, MDPI, vol. 15(4), pages 1-28, February.
    21. Zhang, Lirong & Li, Yakun & Jia, Zhijie, 2018. "Impact of carbon allowance allocation on power industry in China’s carbon trading market: Computable general equilibrium based analysis," Applied Energy, Elsevier, vol. 229(C), pages 814-827.

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