ETS, Emissions and the Energy-Mix Problem

36 Pages Posted: 16 Jun 2021

See all articles by Giorgio Rizzini

Giorgio Rizzini

Department of Statistics and Quantitative Methods University of Milano-Bicocca

Paolo Falbo

University of Brescia - Department of Economics and Management

Cristian Pelizzari

University of Brescia - Department of Economics and Management

Date Written: June 15, 2021

Abstract

We investigate the impact of ETS on the emissions and the energy-mix through a bilevel model where at the upper level the policymaker interacts with an oligopolistic electricity market over a finite time horizon. At the upper level, the policymaker aims at maximizing a social welfare function deciding the optimal number of allowances to be distributed to the electricity market. At the lower level, the electricity market, represented by two large producers, decide the optimal long-term capacity expansion between conventional and non-conventional technologies. The uncertainty is modeled through scenarios, obtained using a Markov chain bootstrapping, made of coal and gas prices and electricity demand. We solve the problem considering a large set of efficient equilibrium solution between the two electricity producers.

Keywords: Emission Trading System, Energy-Mix, Stochastic Programming, Electricity Market, Markov Chain Bootstrapping

JEL Classification: C02, C60, C61, C63, D43

Suggested Citation

Rizzini, Giorgio and Falbo, Paolo and Pelizzari, Cristian, ETS, Emissions and the Energy-Mix Problem (June 15, 2021). Available at SSRN: https://ssrn.com/abstract=3867180 or http://dx.doi.org/10.2139/ssrn.3867180

Giorgio Rizzini (Contact Author)

Department of Statistics and Quantitative Methods University of Milano-Bicocca ( email )

Piazza dell’Ateneo Nuovo 1, 20126 Milano
Milano, 20126
Italy

Paolo Falbo

University of Brescia - Department of Economics and Management ( email )

Contrada Santa Chiara, 50
BRESCIA, BS 25122
Italy

Cristian Pelizzari

University of Brescia - Department of Economics and Management

Contrada Santa Chiara, 50
BRESCIA, BS 25122
Italy

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