A two-stage stochastic programming approach for reserving and allocating of emission trading permits under uncertainties

ABSTRACT

The Emissions Trading Scheme (ETS) is a market-based approach aiming at reducing greenhouse gas (GHG) emissions. It involves the allocation of emission allowances to entities that are permitted to emit certain levels of GHG, as well as the re-sale and re-allocation of these allowances among entities. Considering the uncertainty of urban traffic congestion, the problem of reserving and allocating Emission Trading Permits (ETP) under stochastic demand is investigated. The ETP reserve of each link is determined before congestion, the optimal allocation scheme of ETP is determined after congestion. A two-stage stochastic programming model is formulated to minimize the sum of the reserve cost of ETP before congestion and the expected total loss of ETP after congestion. First, the effectiveness of the stochastic programming model is verified by comparing with the traditional method. Second, the total cost increases with the increase of initial reserve cost and shortage cost, and decreases with the increase of selling price and the capacity of links by sensitivity analysis. The unit reserve cost has a negative effect on the reserve quantity, while shortage cost, selling price, and link capacity have a positive effect on the reserve quantity. At last, the validity of the stochastic programming solution can be verified by numerical analysis of the Nguyen-Dupuis network. The stochastic programming solution proposed in this study shows an 89% reduction in ETP reserve compared to the optimal initial capacity solution. When level E occurs, the total cost is correspondingly reduced by 11%.

KEYWORDS:

• Urban traffic
• emissions trading scheme
• travel stochastic demand
• two-stage stochastic programming
• China

Disclosure statement

The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

Data availability statement

The raw/processed data required to reproduce the findings in the current manuscript cannot be shared at this time as these data also for a part of an ongoing study.

Additional information

Funding

This work was supported by the National Natural Science Foundation of China (No. 71671079, 71361018).

Notes on contributors

Shuqin Zhao

Shuqin Zhao is undertaking a PhD in Management Science and Engineering in Lanzhou Jiaotong University. She is also a teacher at the School of Business Administration, Henan University of Animal Husbandry and Economy. Her current research works focus on Urban transport planning and management, Congestion Pricing Management and Traffic Carbon Emissions Management. She contributes to Conceptualization, Methodology, Software and Writing—original draft.

Linzhong Liu

Linzhong Liu is a professor at School of Traffic & Transportation, Lanzhou Jiaotong University, Lanzhou. He received the B.S. degree in mathematics from Northwest Normal University, Lanzhou, in 1986, and the M.S. degree in applied mathematics from Lanzhou Jiaotong University, Lanzhou, in 1993, and the Ph.D. degree in Operational Research and Cybernetics from Tsinghua University, Beijing, China, in 2006. He contributes to the supervision, writing—review and editing.

Ping Zhao

Ping Zhao is undertaking a PhD in Civil Engineering in Sichuan University. Her current research works focus on Study and optimization of kinetic characteristics of heat and mass transfer process in metal hydrogen storage bed and Engineering material plasticity, creep and fatigue life prediction. She contributes to formal analysis.

Xiaorong Wang

Xiaorong Wang is undertaking a PhD in Management Science and Engineering in Lanzhou Jiaotong University. She contributes to visualization.

Chunsheng Zhang

Chunsheng Zhang is undertaking a PhD in Management Science and Engineering in Lanzhou Jiaotong University. He contributes to data curation.

Shijuan Wang

Shijuan Wang is undertaking a PhD in Management Science and Engineering in Lanzhou Jiaotong University. She contributes to investigation.