Séminaire Périodique LAMSIN-MIMS-IRA
René Aid (Paris Dauphine)
Title: Optimal dynamic regulation of carbon emissions market: a variational approach
We consider the problem of reducing the carbon emissions of a set of firms over a finite horizon. A regulator dynamically allocates emission allowances to each firm. Firms face idiosyncratic as well as common economic shocks on emissions, and have linear quadratic abatement costs. Firms can trade allowances so to minimise total expected costs, from abatement and trading plus a quadratic terminal penalty. Using variational methods, we exhibit in closed-form the market equilibrium in function of regulator's dynamic allocation. We then solve the Stackelberg game between the regulator and the firms. Again, we obtain a closed-form expression of the dynamic allocation policies that allow a desired expected emission reduction. Optimal policies are not unique but share common properties. Surprisingly, all optimal policies induce a constant abatement effort and a constant price of allowances. Dynamic allocations outperform static ones because of adjustment costs and uncertainty, in particular given the presence of common shocks. Our results are robust to some extensions, like risk aversion of firms or different penalty functions. Based on joint work with S. Biagini.
Le séminaire se fera a distance, sur la plateforme ZOOM. Le lien est disponible ci-dessous.
Time: May 26, 2021 11:30 PM Tunis
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https://us02web.zoom.us/j/2616756988
IRA = Institute du Risque et de l'Assurance du Mans
Organizing Commitee:
Mohamed Mnif - Anis Matoussi - Sadok Kallel
Scientific Commitee:
Mohamed Mnif - Anis Matoussi
Sponsors:
MIMS
Organizing Commitee:
Mohamed Mnif - Anis Matoussi - Sadok Kallel
Scientific Commitee:
Mohamed Mnif - Anis Matoussi
Sponsors:
MIMS