A bi-objective programming model for carbon emission quota allocation: Evidence from the Pearl River Delta region

As a core component of the emission trading scheme (ETS), the initial allocation of carbon quotas is extremely important. Currently, most allocation methods mainly focus on the realization of a single performance goal, which will result in conflicts between different levels of participants. To overcome this limitation, a bi-objective programming model (BPM) with two sub-objective functions of abatement costs and carbon assets is proposed. Meanwhile, cost-oriented model (CM) and asset-oriented model (AM) are implemented as comparison approaches that represent the minimization of regional abatement costs and the maximization of individual interests, respectively. The empirical results of the Pearl River Delta (PRD) region reveal that BPM is the most efficient and feasible approach to some extent. More precisely, BPM can motivate the enthusiasm of all participants while optimizing abatement costs. With the increase of regional total quotas, the advantage of BPM becomes more and more prominent. The contribution of this paper is to present a novel method for carbon emission quota allocation, which fills the gap in the existing literature. Furthermore, the proposed method that can be deployed in other similar regions assists policymakers in enacting an effective emission reduction policy and in better understanding the objectives of economy, energy and environment.