The Initial Allocation Of Emission Rights Research

Initial permit distribution is a precondition of tradable emission permit markets'working order, it is the core for realizing the total emission control and it is an important factor to maximize the total welfare. As well as, the rational distribution of initial permit is propitious to allot resource effectively and make use of resource frugally, can promote technology reformation and push to attain a produce situation which has low-level pollutant but high-level yield. Furthermore, the rational distribution can avoid or weaken the inefficiency of imperfectly competitive. A fair distribution can inspire polluters'enthusiasm to control pollution and prevent governmental agency the self-regard behavior. It is important especially for Environmental Protection Agency's"The Fifth Five"programming.According to the well-known Coase Theorem, the equilibrium of a tradable emission permit market should be independent of initial allocation of property rights in the market, assuming that marker participants incur no transaction costs and no income effect. Hence, the previous studies have little focused upon the behavior of initial permit distribution. Though it has been noticed by some scholars, economists and politicians the study is commencing only. Moreover, most of researches are devoting to qualitative analysis and enacting policies, but quantitative analysis is very few. In so far as systems research, it is none by now. It is easy to see that this is not only hurtful to cognition the distribution of initial permit, also stop us realizing the target of total control.Considering the essentiality of initial permit distribution and the status quo on the problem, the case of farther studying is necessary. This paper considers initial permit distribution; the main contributions can be summarized as follows.1. Explore the relation between initial permit distribution and the emission permit market in case of a tradable permits system in a country with individual provinces having discretionary power regarding environmental policy and where transboundary pollution exists.(a) We present a model of permit emission market by assuming that one nation-wide electricity market exists and determine the first-best optimum. When asymmetry transboudary occurs, we show that in general not generate the first-best optimum.(b) We consider the distribution of permits across provinces when local government takes account of tax/subsidy, it is demonstrate that the first-best solution can be attained by allocating initial permits.(c) We next consider policy scenarios where states set the emission tax/subsidy and may withhold a certain number of permits that cannot be traded by their firms. The local government dose not impose taxes, but only rely on trade bans for correcting the externalities, a first-best solution cannot reached as well. While for some states it is optimal to impose a trade ban, if the initial allocation of permits is suboptimal.2. Analysis the relation of the emergence of market power with initial permit distribution in emission permit markets where a large number of regulated emitters participate.(a) We show that if the initial distribution of permits in an emission permit market satisfies certain conditions, some emitters will hold effective market power and then the market shares are educed.(b) The model I develop furthermore yields formulae that estimate how much permit prices in such distorted markets depart from competitive levels. These formulae clearly show the entire dependence of the ratio of market prices to competitive levels on the permit initial distribution as well as the existence of a threshold for effective market power.3. Study on the efficiency of a tradable emission permit system and a bureaucratic mechanism.(a) Under the bureaucratic mechanism while non-tradable emission quota, firms'Coumot-Nash equilibrium output is the function of production and abatement technologies and initial permit emission distribution. Given the production and relative abatement efficiency, market share effect of emission quota reallocation depends on the initial distribution.(b) Compares the influence of initial allocation on market share and industry's output under the two mechanisms, as well as consider welfare difference. We derive the conditions when a bureaucratic mechanism could yield higher output relative to competitive emission permits trading.(c) We examine some example to compare the differences of industry's output, welfare, and industry's abatement costs under a bureaucratic mechanism with a tradable emission permit system. We demonstrate that sometimes a bureaucratic mechanism is superior to a tradable emission permit system.4. Present optimality conditions of nonsmooth problems in initial permit distribution.(a) In models of initial permit distribution and economics, nonsmooth is prevalent and many nondifferentiability functions are quasidifferentiable. The first-order and second-order optimality conditions of constrained optimization problems are proposed. The differences for convex compact sets proposed by Demyanov and quasidifferential calculus developed by Demyanov and Rubinov are used.(b) Since semidefinite programming is related closely to many problems and it has been an area of intense research over the last few years. When considering the initial permit distribution from qualitative analysis to quantitative analysis, we have to deal with semidefinite programming. However, the existent theories cannot resolve the problems when objective functions are nonsmooth. Aimed at C^1,1 functions, we probe first-order and second-order optimality conditions.5. It is deemed that free allocation of initial tradable emission permits has operation in academia and practice. Nevertheless it needs some basis, so we propose a minimax model of initial emission permits and discuss the arithmetic.(a) In the initial permit emission distribution, the preference of the government to the emission firms plays an important role. Firstly, we give an example on SO₂initial distribution for the thermal power plant of some province to show the Delphi-AHP method which used to calculate the preference coefficients.(b) Based on economy efficiency and fair principle, we propose a minimax model of initial emission permits and consider the optimality conditions.(c) We give the solution of the model by using smoothing Newton methods and maximum entropy methods, and besides, some numerical examples are provided.