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Allocation of emission permits using DEA-game-theoretic model

Author

Listed:
  • Jiasen Sun

    (Soochow University
    Soochow University)

  • Yelin Fu

    (The University of Hong Kong)

  • Xiang Ji

    (University of Science and Technology of China)

  • Ray Y. Zhong

    (The University of Auckland)

Abstract

This paper discusses schemes for allocation of emission permits (AEP) among a group of manufacturing companies, aiming at controlling the total emissions of the group while maintaining efficient production. Game theory and data envelopment analysis have been integrated in different ways for constructing two variants of AEP models. The first situation is where all members in the group are cooperative and a reasonable permit allocation scheme maximizes the overall payoff of the group. The second situation is where group members are non-cooperative and each member makes every effort to selfishly maximize its own payoff. The decision maker allocates permits to firms according to their non-cooperative game equilibrium scores. Proposed models are applied to study a group of paper mills to analyze their payoffs. The results show that the methods proposed in this work can provide reasonable allocation results for all firms. In addition, although our allocation methods adopt the principle of maximizing the payoff of the firm, the efficiency of each firm from current output and input levels is still a factor that determines the permit allocation.

Suggested Citation

  • Jiasen Sun & Yelin Fu & Xiang Ji & Ray Y. Zhong, 2017. "Allocation of emission permits using DEA-game-theoretic model," Operational Research, Springer, vol. 17(3), pages 867-884, October.
    • Handle: RePEc:spr:operea:v:17:y:2017:i:3:d:10.1007_s12351-016-0289-y
    DOI: 10.1007/s12351-016-0289-y
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    3. Ciardiello, F. & Genovese, A. & Simpson, A., 2019. "Pollution responsibility allocation in supply networks: A game-theoretic approach and a case study," International Journal of Production Economics, Elsevier, vol. 217(C), pages 211-217.
    4. Chu, Junfei & Hou, Tianteng & Li, Feng & Yuan, Zhe, 2024. "Dynamic bargaining game DEA carbon emissions abatement allocation and the Nash equilibrium," Energy Economics, Elsevier, vol. 134(C).
    5. Xie, Qiwei & Xu, Qifan & Zhu, Da & Rao, Kaifeng & Dai, Qianzhi, 2020. "Fair allocation of wastewater discharge permits based on satisfaction criteria using data envelopment analysis," Utilities Policy, Elsevier, vol. 66(C).
    6. Jiasen Sun & Guo Li, 2022. "Optimizing emission reduction task sharing: technology and performance perspectives," Annals of Operations Research, Springer, vol. 316(1), pages 581-602, September.
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    8. Bo Peng & Kun Lei, 2021. "An Analytical Approach for Initial Allocation of Discharge Permits with Consideration of the Water Environmental Capacity and Industrial Technical Feasibility," Sustainability, MDPI, vol. 13(24), pages 1-16, December.

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