Redesigning a cap-and-trade program for air emissions by agent-based modeling

Abstract

AbstractThis paper establishes a virtual model based on the concept of agent-based method and cost-effectiveness analysis to determine the feasibility of reviewing and improving the cap-and-trade program, using the air emission program in Taiwan as a case study. We adjusted the emission baseline, reduction target proportion, and trading platform under the scheme and simulated the emission reduction and trading behavior of each type of pollutant in different cases.Based on the comparative results of the modeling schemes analyzed in this paper, it is suggested that to improve the distribution of reduction targets without including trading systems can result in the most reduction amount in the study regions. Compared with an approach that includes a trading system, the proposed method provides a simple approach without any obvious increase in the reduction objects’ average cost per unit of reduction. However, this approach makes it difficult for newly proposed investment projects to settle in the region to acquire the offset; therefore, an alternative measure should be designed for this purpose in such a case. When policy-makers default on making decisions based on air emission caps, a reduction scheme based on a supported trading system will be more adaptable for economic development. It is recommended to consider the maximum emission of the previous 7 years as a baseline, along with a trading platform, for making the market more effective and ensuring a smaller impact on the reduction target of the polluters.