Which carbon derivatives are applicable in practice? A case study of a European steel company

Martin Šmíd; František Zapletal; Jana Hančlová

Kybernetika (2017)

  • Volume: 53, Issue: 6, page 1071-1085
  • ISSN: 0023-5954

Abstract

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This paper constructs and analyses a model for optimal production and emission covering of a real-life European steel company. The emissions may be covered by a combination of EUA and CER allowances and their derivatives. The company is assumed to be risk-averse, maximizing the Mean-CVaR criterion. The problem is analysed given continuum of risk-aversion coefficients and three scenarios of the demand. It is found that the production does not depend on the risk aversion and is always maximal, but the optimal composition of the (spot) allowances and their derivatives depends non-trivially on both the risk aversion and the demand. Out of all the derivatives, only futures are used. Surprisingly, options are never used.

How to cite

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Šmíd, Martin, Zapletal, František, and Hančlová, Jana. "Which carbon derivatives are applicable in practice? A case study of a European steel company." Kybernetika 53.6 (2017): 1071-1085. <http://eudml.org/doc/294688>.

@article{Šmíd2017,
abstract = {This paper constructs and analyses a model for optimal production and emission covering of a real-life European steel company. The emissions may be covered by a combination of EUA and CER allowances and their derivatives. The company is assumed to be risk-averse, maximizing the Mean-CVaR criterion. The problem is analysed given continuum of risk-aversion coefficients and three scenarios of the demand. It is found that the production does not depend on the risk aversion and is always maximal, but the optimal composition of the (spot) allowances and their derivatives depends non-trivially on both the risk aversion and the demand. Out of all the derivatives, only futures are used. Surprisingly, options are never used.},
author = {Šmíd, Martin, Zapletal, František, Hančlová, Jana},
journal = {Kybernetika},
keywords = {carbon allowances; carbon derivatives; mean-CVaR; optimization},
language = {eng},
number = {6},
pages = {1071-1085},
publisher = {Institute of Information Theory and Automation AS CR},
title = {Which carbon derivatives are applicable in practice? A case study of a European steel company},
url = {http://eudml.org/doc/294688},
volume = {53},
year = {2017},
}

TY - JOUR
AU - Šmíd, Martin
AU - Zapletal, František
AU - Hančlová, Jana
TI - Which carbon derivatives are applicable in practice? A case study of a European steel company
JO - Kybernetika
PY - 2017
PB - Institute of Information Theory and Automation AS CR
VL - 53
IS - 6
SP - 1071
EP - 1085
AB - This paper constructs and analyses a model for optimal production and emission covering of a real-life European steel company. The emissions may be covered by a combination of EUA and CER allowances and their derivatives. The company is assumed to be risk-averse, maximizing the Mean-CVaR criterion. The problem is analysed given continuum of risk-aversion coefficients and three scenarios of the demand. It is found that the production does not depend on the risk aversion and is always maximal, but the optimal composition of the (spot) allowances and their derivatives depends non-trivially on both the risk aversion and the demand. Out of all the derivatives, only futures are used. Surprisingly, options are never used.
LA - eng
KW - carbon allowances; carbon derivatives; mean-CVaR; optimization
UR - http://eudml.org/doc/294688
ER -

References

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