The CO2 cost pass-through in nonlinear emission trading schemes

IF 3.7 4区经济学 Q1 BUSINESS, FINANCE

Journal of Commodity Markets Pub Date : 2023-06-01 DOI:10.1016/j.jcomm.2022.100286

Zhe Chen , Yan-ling Chen , Yue Su , Xue-ying Wang , You Wu

{"title":"The CO2 cost pass-through in nonlinear emission trading schemes","authors":"Zhe Chen , Yan-ling Chen , Yue Su , Xue-ying Wang , You Wu","doi":"10.1016/j.jcomm.2022.100286","DOIUrl":null,"url":null,"abstract":"<div>In this paper, we theoretically study the issues that how nonlinear structures of energy market affect <math><mrow><mi>C</mi><msub><mi>O</mi><mn>2</mn></msub></mrow></math> costs of energy firms being passed through to energy prices in emission trading schemes. We set up oligopoly models to investigate <math><mrow><mi>C</mi><msub><mi>O</mi><mn>2</mn></msub></mrow></math> cost pass-through under different emission right allocations, characterize analytic derivations of <math><mrow><mi>C</mi><msub><mi>O</mi><mn>2</mn></msub></mrow></math> cost pass-through rates and then explore the connections between <math><mrow><mi>C</mi><msub><mi>O</mi><mn>2</mn></msub></mrow></math> pass-through rates and nonlinear market structures. Our findings suggest that the <math><mrow><mi>C</mi><msub><mi>O</mi><mn>2</mn></msub></mrow></math> cost pass-though rates are not only dependent on the elasticities of energy demand and supply, but largely determined by the convexity of demand curve and the competition intensity of energy market. More importantly, an economic curiosity (<math><mrow><mi>C</mi><msub><mi>O</mi><mn>2</mn></msub></mrow></math> cost pass-through overshifting) is also observed in the emission trading schemes under suitable market conditions. The existence of <math><mrow><mi>C</mi><msub><mi>O</mi><mn>2</mn></msub></mrow></math> cost pass-through overshifting provides regulators and policy makers important information that the emission trading schemes are at the risk of imperfect competition and may require further policy adjustments.</div>","PeriodicalId":45111,"journal":{"name":"Journal of Commodity Markets","volume":"30 ","pages":"Article 100286"},"PeriodicalIF":3.7000,"publicationDate":"2023-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Commodity Markets","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S2405851322000435","RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}

引用次数: 0

Abstract

In this paper, we theoretically study the issues that how nonlinear structures of energy market affect $C O_{2}$ costs of energy firms being passed through to energy prices in emission trading schemes. We set up oligopoly models to investigate $C O_{2}$ cost pass-through under different emission right allocations, characterize analytic derivations of $C O_{2}$ cost pass-through rates and then explore the connections between $C O_{2}$ pass-through rates and nonlinear market structures. Our findings suggest that the $C O_{2}$ cost pass-though rates are not only dependent on the elasticities of energy demand and supply, but largely determined by the convexity of demand curve and the competition intensity of energy market. More importantly, an economic curiosity ( $C O_{2}$ cost pass-through overshifting) is also observed in the emission trading schemes under suitable market conditions. The existence of $C O_{2}$ cost pass-through overshifting provides regulators and policy makers important information that the emission trading schemes are at the risk of imperfect competition and may require further policy adjustments.

查看原文本刊更多论文

非线性排放交易方案中的二氧化碳成本传递

在本文中，我们从理论上研究了能源市场的非线性结构如何影响排放交易方案中能源企业的二氧化碳成本转化为能源价格的问题。我们建立了寡头垄断模型来研究不同排放权分配下的CO2成本转嫁，刻画了CO2成本转嫁率的分析导数，然后探讨了CO2转嫁率与非线性市场结构之间的联系。我们的研究结果表明，二氧化碳成本通过率不仅取决于能源需求和供应的弹性，而且在很大程度上取决于需求曲线的凸性和能源市场的竞争强度。更重要的是，在适当的市场条件下，排放交易计划中也观察到了经济好奇心（二氧化碳成本通过过度转移）。二氧化碳成本转嫁过度的存在为监管机构和政策制定者提供了重要信息，表明排放交易计划存在不完全竞争的风险，可能需要进一步的政策调整。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

求助全文

约1分钟内获得全文求助全文

来源期刊

Journal of Commodity Markets Multiple-

CiteScore

5.70

自引率

2.40%

发文量

期刊介绍： The purpose of the journal is also to stimulate international dialog among academics, industry participants, traders, investors, and policymakers with mutual interests in commodity markets. The mandate for the journal is to present ongoing work within commodity economics and finance. Topics can be related to financialization of commodity markets; pricing, hedging, and risk analysis of commodity derivatives; risk premia in commodity markets; real option analysis for commodity project investment and production; portfolio allocation including commodities; forecasting in commodity markets; corporate finance for commodity-exposed corporations; econometric/statistical analysis of commodity markets; organization of commodity markets; regulation of commodity markets; local and global commodity trading; and commodity supply chains. Commodity markets in this context are energy markets (including renewables), metal markets, mineral markets, agricultural markets, livestock and fish markets, markets for weather derivatives, emission markets, shipping markets, water, and related markets. This interdisciplinary and trans-disciplinary journal will cover all commodity markets and is thus relevant for a broad audience. Commodity markets are not only of academic interest but also highly relevant for many practitioners, including asset managers, industrial managers, investment bankers, risk managers, and also policymakers in governments, central banks, and supranational institutions.