Claim-based Fair Allocation Of Carbon Emission Allowances And Revenue Mechanisms

With increasing pressure to combat global warming, reducing carbon emission becomes one of the most important economic policy goals for governments around the world. Market force is playing a more and more critaical role in reducing social costs of carbon emission. Fair allocation of initial carbon emission allowance is the foremost issue in constructing an efficient carbon emission market. In China, electric power industry is the biggest industry when it comes to carbon emission, accounting for about half of the total CO2 emission. And carbon emission reduction has made a remarkable effect on the planning and operation, etc of power system. Fairness is the most important factor in the allocation of carbon emission allowance. So far, most studies focus on philosophy theories and their applications, and overlook the use of mathematic theory in constructing a fair allocation model, thus failing to address the issues systemically and scientifically. This thesis tries to construct mathematical models of fair allocation, which are based on analysis of Chinese unit’s carbon emission allowance claims while applying social choice theory and axiomatization method. The result shows this approach is reasonable and feasible. Since it would take a long time to construct a carbon emission trading market in China, the paper also investigates the revenue problem of the unit carbon emission allowances without carbon emission trading market in power system. As a result, a low-carbon electric dispatch model with restrictions on carbon emission allowance is proposed in the paper. The main study issues is listed as following:1. A fair allocation model based on aggregation principles is presented. This thesis discusses different claim-based fair allocation algorithms and the main controversies by studying unit’s carbon emission claims in China. Aggregation mechanism is applied to handle the allocation conflicts of different unit owners. The main properties of the aggregation algorithm is described by axioms of anonymity, monotonicity, fair ranking, independence of irrelevant share and feasibility. The aggregation function is deduced, solving the conflict of "equity" allocation. Meanwhile, the convergence, feasibility, anonymity and fair ranking of the aggregation algorithm are strictly proved, and the monotonicity on the number of participants and amount of resources are also investigated. Furthermore, game behavior under the aggregation mechanism is studied, and the existence of the game equilibrium is proved. Consequently, numerical examples of electric power carbon emission allowances allocation are presented for a real power grid, indicating that the proposed algorithm satisfies the main principles of equitable allocation.2. A fair allocation model based on majority voting is presented. The feasibility in reaching compromise among different allocation schemes by majority voting mechanism is discussed. A claims-based majority voting fair allocation model is proposed in initial power carbon emission allowance allocation. The voting allocation algorithm is axiomatized by features including anonymity, determinacy, irrelevant of inverse changing, positive responsiveness to forward changing and odd neutrality. The anonymity, independence of irrelevant share and fair ranking of the voting allocation method are verified, and the efficiency is also investigated. Finally, sample applications are carried out to show that the proposed algorithm can solve the conflicts in allocation method choosen.3. An axiomized fair allocation model based on iterative voting is proposed. Iterative mechanism is introduced to solve the efficiency and consistency problems in the voting allocation algorithm. Furthermore, the features of anonymity, independence of irrelevant share and fair ranking of the iterative voting allocation method are verified. The "UL (Uniform Loss) dominated" theorem for all agreeing voting allocation and the "UG (Uniform Gain) dominated" theorem for majority agreeing voting allocation are proved, the weakness of the iterative voting allocation algorithm is also discussed. Equilibrium problem in games is studied in the thesis too, and the bounded rationality of participants in complicated situations is described by "Local optimization" and "Greedy algorithm". Based on this, the games equilibrium is investigated for the problem with less than four strategies by introducing the strict preference ordering list, and a series of theorems are obtained. Finally, the actual case studies are carried out to show that the algorithms in this thesis meet the requirements of efficiency, consistency and other principles of equity, and can be accepted by all the unit’s owners easily.4. A fair allocation of carbon emission allowance model considering historical emission is proposed. The impact of historical deficits is one of the key problems in fair allocation of carbon emission allowance. This thesis establishes a historical deficit sharing model based on Shapley Values, and solves the problem of how to allocate historical deficits in carbon reducing years with the axiomatized allocation model. In accordance with the principle that whoever causes the problem should take the responsibility for it, a historical emission deficit sharing model among the participants is developed, solving the problem caused by reduction of participant’s claim as a result of historical deficits. Futher more, an allocation model for initial emission allowances considering the historical emission deficit is established taking consistency constraint of the allocation method into consideration. Meanwhile, this thesis studies participants’strategic behaviors under aggregation mechanism, and proves the existence of game equilibrium. The properties of historical emission sharing model, such as anonymity, efficiency and independence of irrelevant share are proved, and the fair ordering is discussed. Finally, the case study shows that the proposed method can effectively deal with historical factors and meets the basic requirements of fair allocation.5. A model for quantifying incomes in low-carbon electric dispatching is presented for carbon emission allowance. Dramatic change of different units’interests is the most serious problems in low-carbon electricity transformation. And carbon emission allowance trading is an important financial tool in balanceing the interests between different units and realizing the Pareto Improvement. A low-carbon dispatch model with carbon emission allowance constraints is proposed in this thesis. Application of aggregation method allows proper allocation of the initial carbon emission allowance. As carbon emission trading market is absent in China, the cooperative game mechanism in unit carbon emission allowance allocation is investigated. A comparison is made for the unit operation state between cooperation and noncooperation carbon reducing mechanisms. A Shapley Value model is applied to fairly allocate the cooperative surplus. The study shows the cooperative mechanism for carbon reduction benefits the power system operation and balances the interests of different units, which will ease the obstruction in low-carbon electricity transformation. The study also finds that over-ambitious the carbon reduction target dramatically increases power generation cost, and even causes load shedding. Finally, a case is introduced to demonstrate the effectiveness of the model.