An agent-based modeling approach for analyzing the influence of market participants’ strategic behavior on green certificate trading

China has announced that the mandatory green certificate trading would be implemented in 2021. The mandatory green certificate trading not only fosters the liquidity of the green certificate market but also induces the possibility of market participants taking strategic behavior to gain more market...

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Bibliographic Details
Published in:Energy (Oxford) 2021-03, Vol.218, p.119463, Article 119463
Main Authors: Hui, Wang, Xin-gang, Zhao, Ling-zhi, Ren, Fan, Lu
Format: Article
Language:English
Subjects:
Agent-based modeling
Agent-based models
Green certificate trading
Herd effect
Liquidity
Renewable portfolio standards
Strategic behavior
Strategy
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Summary:China has announced that the mandatory green certificate trading would be implemented in 2021. The mandatory green certificate trading not only fosters the liquidity of the green certificate market but also induces the possibility of market participants taking strategic behavior to gain more market returns. Generally, the self-interested strategic behavior was not conducive to improving market efficiency, thereby impeding the implementation of mandatory green certificate trading. To evaluate the influence of market participants’ strategic behavior on the green certificate trading, we embed the strategic behavior model into the artificial green certificate market to simulate the market participants’ strategic behavior in green certificate trading. The results indicate: (1) in green certificate market, the strength of the herd effect determines the average compliance costs level; (2) the value-trading strategy is the optimal strategy for renewable obligation subjects to reduce the compliance costs of mandatory green certificate trading; (3) market participants’ strategic behavior mainly affect the stability of green certificate price, and the greater the price fluctuation, the slower convergence speed to the equilibrium price. •A strategic behavior model is embedded into artificial green certificate market.•Herd effect of among the market participants is studied.•The influence of market participants’ strategic behavior on green certificate trading is analyzed.
ISSN:0360-5442
1873-6785
DOI:10.1016/j.energy.2020.119463