We investigate how the retailer adjusts optimal ordering policy in the presence of cap-and-trade system and trade credit, and the corresponding changes of the retailer’s total costs and carbon footprint. Trade credit is one of the most used short-term financing tools. Our study shows that carbon emissions trading will shorten the ordering cycle for products that emit more carbon dioxide during ...

This paper analyses the design of carbon markets in time (intertemporally) and space (geographically) from first principles, starting initially with a relatively clean slate and asking what an optimal global carbon market would look like by around 2030. Our focus is on firmlevel trading systems, although much of what we say would also apply to government-level trading (e.g., AAU trading under t...

In recent years, carbon emission markets have become liquid and promising markets within the European Union emissions trading scheme (EU ETS). In order to fit and forecast futures price for CO2 emissions allowances, we propose a new N-factor affine term structure model for CO2 futures price and estimate parameters in the new affine model by using the Kalman filter technique. Our empirical resul...