Geodesic
Which carbon derivatives are applicable in practice? A case study of a European steel company
Kybernetika, Tome 53 (2017) no. 6, pp. 1071-1085
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This paper constructs and analyses a model for optimal production and emission covering of a real-life European steel company. The emissions may be covered by a combination of EUA and CER allowances and their derivatives. The company is assumed to be risk-averse, maximizing the Mean-CVaR criterion. The problem is analysed given continuum of risk-aversion coefficients and three scenarios of the demand. It is found that the production does not depend on the risk aversion and is always maximal, but the optimal composition of the (spot) allowances and their derivatives depends non-trivially on both the risk aversion and the demand. Out of all the derivatives, only futures are used. Surprisingly, options are never used.
This paper constructs and analyses a model for optimal production and emission covering of a real-life European steel company. The emissions may be covered by a combination of EUA and CER allowances and their derivatives. The company is assumed to be risk-averse, maximizing the Mean-CVaR criterion. The problem is analysed given continuum of risk-aversion coefficients and three scenarios of the demand. It is found that the production does not depend on the risk aversion and is always maximal, but the optimal composition of the (spot) allowances and their derivatives depends non-trivially on both the risk aversion and the demand. Out of all the derivatives, only futures are used. Surprisingly, options are never used.
DOI : 10.14736/kyb-2017-6-1071
Classification : 90B30, 91B28
Keywords: carbon allowances; carbon derivatives; mean-CVaR; optimization 
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     title = {Which carbon derivatives are applicable in practice? {A} case study of a {European} steel company},
     journal = {Kybernetika},
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Šmíd, Martin; Zapletal, František; Hančlová, Jana. Which carbon derivatives are applicable in practice? A case study of a European steel company. Kybernetika, Tome 53 (2017) no. 6, pp. 1071-1085. doi: 10.14736/kyb-2017-6-1071

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