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Quantitative Finance > General Finance

arXiv:2411.06185 (q-fin)
[Submitted on 9 Nov 2024]

Title:Sensitivity Analysis of emissions Markets: A Discrete-Time Radner Equilibrium Approach

Authors:Stéphane Crépey, Mekonnen Tadese, Gauthier Vermandel
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Abstract:Emissions markets play a crucial role in reducing pollution by encouraging firms to minimize costs. However, their structure heavily relies on the decisions of policymakers, on the future economic activities, and on the availability of abatement technologies. This study examines how changes in regulatory standards, firms' abatement costs, and emissions levels affect allowance prices and firms' efforts to reduce emissions. This is done in a Radner equilibrium framework encompassing inter-temporal decision-making, uncertainty, and a comprehensive assessment of the market dynamics and outcomes. The results of this research have the potential to assist policymakers in enhancing the structure and efficiency of emissions trading systems, through an in-depth comprehension of the reactions of market stakeholders towards different market situations.
Subjects: General Finance (q-fin.GN)
Cite as: arXiv:2411.06185 [q-fin.GN]
  (or arXiv:2411.06185v1 [q-fin.GN] for this version)
  https://doi.org/10.48550/arXiv.2411.06185

Submission history

From: Mekonnen Tadese Demeke [view email]
[v1] Sat, 9 Nov 2024 13:55:42 UTC (1,357 KB)
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