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EMISSIONS MARKETS, POWER MARKETS AND MARKET POWER:
A STUDY OF THE INTERACTIONS BETWEEN
CONTEMPORARY EMISSIONS MARKETS AND
DEREGULATED ELECTRICITY MARKETS
by
Noah Christopher Dormady
A Dissertation Presented to the
FACULTY OF THE USC GRADUATE SCHOOL
UNIVERSITY OF SOUTHERN CALIFORNIA
In Partial Fulfillment of the
Requirements for the Degree
DOCTOR OF PHILOSOPHY
(PUBLIC POLICY, PLANNING AND DEVELOPMENT)
August 2012
Copyright 2012 Noah Christopher Dormady
Object Description
| Title | Emissions markets, power markets and market power: a study of the interactions between contemporary emissions markets and deregulated electricity markets |
| Author | Dormady, Noah Christopher |
| Author email | dormady@usc.edu;dormady.1@osu.edu |
| Degree | Doctor of Philosophy |
| Document type | Dissertation |
| Degree program | Policy, Planning and Development |
| School | School of Policy, Planning and Development |
| Date defended/completed | 2012-04-27 |
| Date submitted | 2012-07-02 |
| Date approved | 2012-07-02 |
| Restricted until | 2012-07-02 |
| Date published | 2012-07-02 |
| Advisor (committee chair) | Mazmanian, Daniel |
| Advisor (committee member) |
Rose, Adam Jurewitz, John Wilkie, Simon |
| Abstract | Chapter 1: A Monte Carlo Approach ❧ The use of auctions to distribute tradeable property rights to firms in already heavily concentrated markets may further exacerbate the problems of market power that exist within those markets. This chapter provides a model of a two-stage emissions market modeled after a contemporary regional permit trading market in the United States, the Regional Greenhouse Gas Initiative, Inc. (RGGI). It then introduces Oligopsony 1.0, a C# software package constructed in the .NET environment that simulates uniform-price auctions using stochastic Monte Carlo simulation for modeling market power in tradeable property rights auctions. Monte Carlo methods add a probabilistic element to standard auction theoretic equilibria. The results of these simulations indicate that there can be significant non-linearities between profit and market power as exercised through strategic demand reduction. This analysis finds the optimum point of strategic demand reduction that enables the firm to exploit these non-linearities, and it determines the probability distributions of these optima using kernel density analysis. ❧ Chapter 2: An Experimental Approach ❧ How will emerging auction-based emissions markets function within the context of today’s deregulated auction-based electricity markets? This chapter provides an experimental analysis of a joint energy-emissions market. The impact of market power and collusion among dominant firms is evaluated to determine the extent to which an auction-based tradeable permit market influences performance in an adjacent electricity market. The experimental treatment design controls for a variety of real-world institutional features, including variable demand, permit banking, inter-temporal (multi-round) dynamics, a tightening cap, and resale. Results suggest that the exercise of market power significantly increases electricity auction clearing prices, without significantly increasing emissions auction clearing prices, and in some cases, even significantly suppresses them. The institution of auction-based carbon markets in the already-concentrated energy sector can further strengthen the market position of dominant firms who can leverage energy-emissions market linkages to their operational advantage. ❧ Chapter 3: Regulatory Mechanisms and Policy Approaches ❧ Contemporary deregulated electricity markets are defined by a complex array of multi-settlement markets, with additional market-based mechanisms designed, to a large extent, to limit the exercise of market power by dominant firms. On top of the already complex nature of these markets, policymakers are also adding market-based mechanisms to curtail greenhouse gases. Key linkages exist between electricity and emissions markets that may be utilized by dominant firms. This chapter provides an analysis of three specific policy mechanisms that are utilized in contemporary markets to effectively reduce the incentive of dominant firms to exercise market power. These include convergence bidding, consignment auctions and multilevel holding accounts. |
| Keyword | emissions markets; power markets; electricity markets; market power; oligopoly; oligopsony; monopoly; monopsony; cap-and-trade; cap and trade; Monte Carlo; human experiments; economics experiments; laboratory experiments; experimental economics; environmental economics; energy economics |
| Language | English |
| Part of collection | University of Southern California dissertations and theses |
| Publisher (of the original version) | University of Southern California |
| Place of publication (of the original version) | Los Angeles, California |
| Publisher (of the digital version) | University of Southern California. Libraries |
| Provenance | Electronically uploaded by the author |
| Type | texts |
| Legacy record ID | usctheses-m |
| Rights | Dormady, Noah Christopher |
| Access conditions | The author retains rights to his/her dissertation, thesis or other graduate work according to U.S. copyright law. Electronic access is being provided by the USC Libraries in agreement with the author, as the original true and official version of the work, but does not grant the reader permission to use the work if the desired use is covered by copyright. It is the author, as rights holder, who must provide use permission if such use is covered by copyright. The original signature page accompanying the original submission of the work to the USC Libraries is retained by the USC Libraries and a copy of it may be obtained by authorized requesters contacting the repository e-mail address given. |
| Repository name | University of Southern California Digital Library |
| Repository address | USC Digital Library, University of Southern California, University Park Campus MC 7002, 106 University Village, Los Angeles, California 90089-7002, USA |
| Repository email | cisadmin@usc.edu |
| Archival file | uscthesesreloadpub_Volume4/etd-DormadyNoa-911.pdf |
Description
| Title | Page 1 |
| Full text | EMISSIONS MARKETS, POWER MARKETS AND MARKET POWER: A STUDY OF THE INTERACTIONS BETWEEN CONTEMPORARY EMISSIONS MARKETS AND DEREGULATED ELECTRICITY MARKETS by Noah Christopher Dormady A Dissertation Presented to the FACULTY OF THE USC GRADUATE SCHOOL UNIVERSITY OF SOUTHERN CALIFORNIA In Partial Fulfillment of the Requirements for the Degree DOCTOR OF PHILOSOPHY (PUBLIC POLICY, PLANNING AND DEVELOPMENT) August 2012 Copyright 2012 Noah Christopher Dormady |
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