A two stage cap-and-trade model with allowance re-trading and capacity investment: The case of the Chilean NDC targets

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dc.coverageDOI: 10.1016/j.energy.2021.120129
dc.creatorAmigo, Pía
dc.creatorCea-Echenique, Sebastián
dc.creatorFeijoo, Felipe
dc.date2021
dc.date.accessioned05-01-2026 18:05
dc.date.available05-01-2026 18:05
dc.description<p>In this work, we study an alternative approach for capping and pricing carbon emissions in electric markets: the cap-and-trade paradigm with re-trade of allowances. We model the electric market (generators and allowances’ auctioneer) as a two stage stochastic capacity expansion equilibrium problem, where we allow future investment and re-trading of emission permits among generators. The model studies generation and future investments in the electric sector in two regimes of demand: deterministic and stochastic. The configuration enforces the reduction of carbon emissions by setting a carbon budget, which allows to assess the impact of green policies and pledges concerning an electric system. We use the proposed model to analyze the Chilean electric sector under a cap-and-trade paradigm as an alternative to the existing carbon tax. We show that the Chilean pledge regarding emissions reductions does not encourage a shift to greener technologies. Moreover, we characterize two strategies to comply with the renewable targets by mid-century. On the one hand, a stringent carbon budget that induces high price of carbon permits and phases out coal-based generators. On the other hand, a less stringent target which significantly encourages investment in renewable technologies, but with low remaining shares of coal-based electric generation towards 2050.</p>eng
dc.descriptionIn this work, we study an alternative approach for capping and pricing carbon emissions in electric markets: the cap-and-trade paradigm with re-trade of allowances. We model the electric market (generators and allowances’ auctioneer) as a two stage stochastic capacity expansion equilibrium problem, where we allow future investment and re-trading of emission permits among generators. The model studies generation and future investments in the electric sector in two regimes of demand: deterministic and stochastic. The configuration enforces the reduction of carbon emissions by setting a carbon budget, which allows to assess the impact of green policies and pledges concerning an electric system. We use the proposed model to analyze the Chilean electric sector under a cap-and-trade paradigm as an alternative to the existing carbon tax. We show that the Chilean pledge regarding emissions reductions does not encourage a shift to greener technologies. Moreover, we characterize two strategies to comply with the renewable targets by mid-century. On the one hand, a stringent carbon budget that induces high price of carbon permits and phases out coal-based generators. On the other hand, a less stringent target which significantly encourages investment in renewable technologies, but with low remaining shares of coal-based electric generation towards 2050.spa
dc.identifierhttps://investigadores.uandes.cl/en/publications/fd4da94a-7461-4e12-8849-64355c289370
dc.languageeng
dc.rightsinfo:eu-repo/semantics/openAccess
dc.sourcevol.224 (2021) date: 2021-06-01
dc.subjectCap-and-trade
dc.subjectEmissions trading
dc.subjectIncomplete markets
dc.subjectMixed complementarity problem
dc.subjectNDC
dc.subjectStochastic capacity investment
dc.subjectCap-and-trade
dc.subjectEmissions trading
dc.subjectIncomplete markets
dc.subjectMixed complementarity problem
dc.subjectNDC
dc.subjectStochastic capacity investment
dc.subjectSDG 7 - Affordable and Clean Energy
dc.titleA two stage cap-and-trade model with allowance re-trading and capacity investment: The case of the Chilean NDC targetseng
dc.typeArticleeng
dc.typeArtículospa
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