TY - CHAP
T1 - Equilibria of Carbon Allowance Auctions: Emissions and Productivity
AU - Zhao, Lingxiao
AU - Polukarov, Maria
AU - Ventre, Carmine
N1 - Publisher Copyright:
© The Author(s), under exclusive license to Springer Nature Switzerland AG 2025.
PY - 2025
Y1 - 2025
N2 - The Emissions Trading System (ETS) is a market-oriented policy aimed at regulating and diminishing greenhouse gas emissions by allocating and trading carbon allowances. Previous studies have mainly focused on dynamic model simulations, while the overall equilibrium state of ETS systems has yet to be explored. To this end, this paper proposes an empirical agent-based model to analyse European carbon allowance auctions: Within the ETS framework, energy companies adopt different strategies to interact in the primary carbon auction market. We use two different methods: partial equilibrium analysis and role-symmetric game analysis to simplify the model strategy space. We then apply the α-rank algorithm to determine the model’s equilibrium strategy and conduct an in-depth analysis of the combination of these strategies. We examine carbon output levels under these conditions and find that the ETS framework effectively reduces carbon emissions across the system. We also explore the impact of different simplification methods and auction formats on the ETS market: Our results indicate that role-symmetric game analysis has better payoff performance; in addition, uniform auctions improve production efficiency, while discriminatory auctions successfully allocate resources, leading to fairer market competition.
AB - The Emissions Trading System (ETS) is a market-oriented policy aimed at regulating and diminishing greenhouse gas emissions by allocating and trading carbon allowances. Previous studies have mainly focused on dynamic model simulations, while the overall equilibrium state of ETS systems has yet to be explored. To this end, this paper proposes an empirical agent-based model to analyse European carbon allowance auctions: Within the ETS framework, energy companies adopt different strategies to interact in the primary carbon auction market. We use two different methods: partial equilibrium analysis and role-symmetric game analysis to simplify the model strategy space. We then apply the α-rank algorithm to determine the model’s equilibrium strategy and conduct an in-depth analysis of the combination of these strategies. We examine carbon output levels under these conditions and find that the ETS framework effectively reduces carbon emissions across the system. We also explore the impact of different simplification methods and auction formats on the ETS market: Our results indicate that role-symmetric game analysis has better payoff performance; in addition, uniform auctions improve production efficiency, while discriminatory auctions successfully allocate resources, leading to fairer market competition.
UR - http://www.scopus.com/inward/record.url?scp=85210161021&partnerID=8YFLogxK
U2 - 10.1007/978-3-031-77367-9_12
DO - 10.1007/978-3-031-77367-9_12
M3 - Chapter
SN - 9783031773662
T3 - Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics)
SP - 136
EP - 152
BT - Proceedings of the 25th International Conference. on Principles and Practice of Multi-Agent Systems (PRIMA 2024)
A2 - Arisaka, Ryuta
A2 - Ito, Takayuki
A2 - Sanchez-Anguix, Victor
A2 - Stein, Sebastian
A2 - Aydoğan, Reyhan
A2 - van der Torre, Leon
ER -
