The Model of Emission Trading with Uncertainty

摘要

We start with explaining the idea of emission trading and then we describe marginal abatement curve, which are the starting point for determining the demand and supply for emission permits. In the absence of any trading the region would abate to achieve its "Kyoto target", and the corresponding price would be "autarkic" marginal costs. If emission trading were a possibility, the region would purchase or sell permits. We distinguished four regions and attempted to calculate how much each region will reduce emissions or buy permits. We consider different level of uncertainty coefficient in emission reporting and then simulate costs of abatement.