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1. Welcome to the home site of the Emission Trading Simulator developed within the GGI-supported collaborative activity by the IIASA Integrated Modeling Environment Project in collaboration with the LUC, APD and FOR Programs. This site provides links to the application and the background article, as well as to the contact to the developers.
1. ETS - Emission Trading Simulator   is a very easy to use application for exploring optimal carbon emission tradings that depend on various combinations of parties participating in the emission permit market. The basic assumptions are as follows:
1. Each party (country) is characterized by:
• Base (current) emission level
• Target emission level, i.e., the emission level the party has committed to achieve
• Minimum (technically possible) emission level
• Cost functions reflecting marginal costs of achieving an emission level.
2. Each party can either:
• Achieve its target emission level by implementing the necessary measures, or
• Make a smaller emission reduction, i.e., decide a higher (than the target) emission level, and buy the emission permits to cover the difference, or
• Make a larger emission reduction, i.e., decide a smaller (than the target) emission level, and sell the corresponding emission permits.
3. The corresponding emission levels are denoted (in the table shown at the top of the corresponding solution page) by: Base, Target, and Optimal, respectively. The Optimal means the levels that minimize the total costs of all parties. The emission Permits stands for the amount of permits either bought (if the number is positive) or sold (if the number is negative). Obviously, the following relation holds for the corresponding emission levels of each party:
Target = Optimal - Permits.
4. The costs (shown in the same table as the emissions) are defined as follows:
• Base_red.: cost of emission reduction to the base level (this is equal to zero by definition).
• Target_red.: cost of emission reduction to the target emission level.
• Opt_red.: cost of emission reduction to the optimal emission level.
• Permits: cost of purchasing the emission permits (it is negative for sold permits).
• Total_opt = Opt_red + Permits, i.e., equal to the total cost of reaching the optimal solution composed of the optimal emission level and amount of (either bought or sold) permits.
• Profit = Target_red - Total_opt, i.e., equal to the difference of costs between two approaches to reaching the commitments of emission reduction, namely without and with participation in the emission trading.
5. The cost of one unit of emission permit is equal to the marginal cost (Lagrange multiplier) associated with the constraint guaranteeing that the sum of optimal emission levels (by all parties) is smaller or equal to the sum of emission target. This marginal cost is shown at the top of the results, together with the overall profit from the emission trading (the latter equal to the sum of profits of all parties).
6. Below the result summary table described above, the components of the solution corresponding to each party are shown. These are composed of:
• The three emission levels: base, target, minimum
• A chart showing the four costs described above
• A chart showing the marginal costs of emission reduction as the piece-wise linear function of emission level
• A table showing the values corresponding to the points defining the cost function.

To access the ETS please click   here. The developers wish you an interesting exploration of the features of the emission trading.

Please note that the data used in this version of the ETS have been compiled for research purposes only, and therefore represent neither the actual emission reduction commitments nor actual emission reduction costs of the corresponding parties.

Please share comments and suggestions using the   Contact  link, also available at the top of the ETS.

2. Background article:
1. T. Ermolieva, Y. Ermoliev, G. Fischer, M. Jonas, M. Makowski, F. Wagner,   Carbon emission trading and carbon taxes under uncertainties , Climatic Change (2010), 103:277-289