A two stage cap-and-trade model with allowance re-trading and capacity investment: The case of the Chilean NDC targets

摘要: Abstract In this work, we study an alternative approach for capping and pricing carbon emissions in electric markets: the cap-and-trade paradigm with re-trade of allowances. We model market (generators allowances’ auctioneer) as a two stage stochastic capacity expansion equilibrium problem, where allow future investment re-trading emission permits among generators. The studies generation investments sector regimes demand: deterministic stochastic. configuration enforces reduction by setting budget, which allows to assess impact green policies pledges concerning system. use proposed analyze Chilean under existing tax. show that pledge regarding reductions does not encourage shift greener technologies. Moreover, characterize strategies comply renewable targets mid-century. On one hand, stringent budget induces high price phases out coal-based other less target significantly encourages technologies, but low remaining shares towards 2050.