Analysis of Cap-and-trade Mechanism Represented by a Piecewise Dynamical System

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  • KOMAKI Shun
    Department of Systems and Control Engineering, Tokyo Institute of Technology
  • HAYAKAWA Tomohisa
    Department of Systems and Control Engineering, Tokyo Institute of Technology

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Other Title
  • 区分的システムで表現された排出量取引の平衡点解析と安定性

Abstract

<p>This paper considers equilibrium and stability analysis using the dynamics of a cap-and-trade system between firms considering corporate values from carbon dioxide (CO2) reductions. It turns out that the total amount of CO2 reduction increases by increasing the initial emission allowance of each agent, and the necessary conditions for achieving carbon neutrality are given by the relation between the sum of the initial CO2 emissions and the parameters characterizing the reduction cost and the corporate values due to CO2 emission reduction. In the simplest case with 2 agents, the dynamics can be expressed as a piecewise nonlinear system, and the analysis is facilitated by nonlinear coordinate transformation and dimensionality reduction. Finally, we derive a stability condition for a piecewise linearized system around the origin, and provide numerical examples to validate the stability condition.</p>

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