| Emissions Trading Market Model |
| The Environment Business together with its
sister company Volterra Consulting are able to create computer
models of commodity markets. |
| When a UK Emissions Trading Scheme (ETS) was first
suggested The Environment Business (at that time part of Volterra Consulting) created a computer model
of how the emissions trading market might work. This model was based on a number of firms trading
with each other, with simple assumptions about how the firms would behave.
The model was used to look
at the circumstances in which a market would be able to produce a trading result - whether there would
be buyers and sellers - and under what circumstances stable price trends would emerge even if there are
only a few traders. Some illustrations are available to show how different
numbers of traders produce different paths for the price of permits and the numbers of trades. |
| It was found that, with as few as six firms, the
market settled down to a stable price with trading occurring. The model and its results are detailed
in the report: Emissions Trading: The Evolution of a Market for Pollution Permits |
| Since the above report was written, the model
has been significantly updated to include all firms with over 500 employees that might become involved
in emissions trading and to allow bilateral trading between firms. The model has been linked up to our
incentives model and the combined models can be used to help your company
decide whether to sign up to the UK Emissions Trading Scheme. |
