bankable permits for the control of environmental pollution abstract intertemporal trading of emission permits banking is often identified as one of three promising market mechanisms for controlling pollution along with averaging and trading surprisingly the efficiency properties of permit banking systems have not been investigated using a simple optimal control model this paper investigates firms incentives for banking or borrowing emission permits and compares the emission and output streams firms would choose with the socially optimal solution we find that in many cases firms will suboptimally choose excessive damage and output levels in early periods and correspondingly too few in later periods if given the opportunity to freely move emissions between time periods we propose a simple alternative trading scheme we term modified banking that counters this problem and should be no more difficult for an environmental authority to implement than a straigth banking system

emissions trading and technology deployment in an energy systems bottom up model with technology learning abstract an important criterion in the analysis of climate policy instruments is their ability to stimulate the technological change necessary to enable the long term shift towards a low carbon global energy system in this paper some effects of emissions trading on technology deployment when technology learning is endogenized are examined with a multi regional bottom up energy systems optimization markal model of the global energy system in this framework due to the action of spillovers of learning imposing emission constraints on a given region may affect the technology choice and emissions profiles of other unconstrained regions the effects depend on the geographical scale of the learning process but also on the presence of emissions trading the regions that join the trade system and their timing for doing so incorporating endogenous technology learning and allowing for spillovers across regions appears as an important mechanism for capturing the possibility of induced technological change due to environmental constraints in bottom up models

impacts of eu carbon emission trade directive on energy intensive industries indicative micro economic analyses the cost impacts from the european emission trading system ets on energy intensive manufacturing industries have been investigated the effects consist of direct costs associated to the co2 reduction requirements stated in the eu directive and of indirect costs of comparable magnitude that originate from a higher electricity price triggered by the ets in the power sector the total cost impacts remain below 2 of the production value for most industries within the ets in the kyoto period in the post kyoto phase assuming a 30 co2 reduction the total cost impact may raise up to 8 of production value in the heaviest industry sectors in steel and cement industries the cost impacts are 3 4 fold compared to the least affected pulp and paper and oil refining electricity intensive industries outside the ets will also be affected for example in aluminum and chlorine production the indirect cost impacts from ets could come up to 10 of production value already in the kyoto period as industry sectors are affected differently by the ets some correcting mechanisms may be worthwhile to consider in securing the operation of the most electricity intensive sectors e g balancing taxation schemes that may include as income source a levy on the wind fall profits of the power sector due to ets a future improvement in ets for industries within the scheme could be scaling of the emission reduction requirement so that the relative total emission reduction costs are at about the same level

integrating replenishment decisions with advance demand information there is a growing consensus that a portfolio of customers with different demand lead times can lead to higher more regular revenues and better capacity utilization customers with positive demand lead times place orders in advance of their needs resulting inadvance demand information this gives rise to the problem of finding effective inventory control policies under advance demand information we show that state dependent s s and base stock policies are optimal for stochastic inventory systems with and without fixed costs the state of the system reflects our knowledge of advance demand information we also determine conditions under which advance demand information has no operational value a numerical study allows us to obtain additional insights and to evaluate strategies to induce advance demand information

bounded growth of the bullwhip effect under a class of nonlinear ordering policies abstract this paper analyzes the bullwhip effect in multi echelon supply chains under a general class of nonlinear ordering policies a describing function approach from control theory is used to derive closed form formulas to predict amplification of order fluctuations along the supply chain it is proven that with consideration of nonlinearity in the ordering policy the magnitude of the bullwhip effect will eventually become bounded after growing through the first few stages of the supply chain it is also proven that the average customer demand as well as the demand fluctuation frequency would directly affect the bounded magnitude while the suppliers demand forecasting method has no effect at all for illustration analytical results for a class of order up to policies are derived and verified by numerical simulations the proposed modeling framework holds the promise to not only explain empirical observations but also serve as the basis for developing counteracting strategies against the bullwhip effect

customer order information leadtimes and inventories we have an inventory to manage the scenario is standard in all respects save one instead of arriving unannounced customers provide advance warning of their demands how should we use this information and what is its effect on system performance the answers turn out to be strikingly simple there are very simple policies which perform effectively in some cases optimally also such demand leadtimes improve performance in precisely the same way that replenishment leadtimes degrade it

allocating tradable permits on the basis of market price to achieve cost effectiveness it is a well known result that distributional constraints can lead to an imperfectly competitive permit market where the emission target is no longer met at least cost in this paper we suggest an allocation rule for tradable permits which can handle this problem if the permit allocation is dependent on the market price for permits this allocation rule can achieve both cost effectiveness and meet specific requirements for cost distribution across agents

estimating the price of tradable permits for greenhouse gas emissions in 2008 12 abstract many attempts have been made recently to predict the prices of tradable permits for greenhouse gas ghg emissions in the first commitment period of the kyoto protocol 2008 12 in this paper we attempt to refine these price estimates based on i the results of economic models and identification of factors which influence prices but are not fully reflected in the models ii lessons from price forecasting experience in the us sulfur dioxide market and iii current price data from the nascent international market for ghg permits we expect ghg permit prices to be at the lower end of the broad spectrum of existing predictions this implies among other things that resource transfers to developing countries associated with emissions trading will be relatively low nevertheless even a modest price will have a significant influence on the decisions of consumers and investors in energy markets around the world

the market for tradable ghg permits under the kyoto protocol a survey of model studies abstract this paper gathers results from 25 models of the market for tradable greenhouse gas ghg emission permits under the kyoto protocol due to diverging projections of emissions growth and different modeling approaches the model results differ substantially the average market volume is approximately 17 and 33 billion usd under global trading and annex b trading respectively including non carbon ghg lowers compliance costs and permit prices in the absence of the us permit demand roughly equals hot air from the former soviet union these countries can increase their revenues from selling permits by restricting supply which raises the permit price

banning banking in eu emissions trading abstract admitting banking in emissions trading systems reduces overall compliance costs by allowing for inter temporal flexibility cost savings can be traded over time however unless individual eu member states ms decide differently the transfer of unused allowances from the period of 2005 2007 into the first commitment period under the kyoto protocol i e 2008 2012 will be prohibited in this paper we first explore the implications of such a ban on banking when initial emission targets are lenient this analysis is based on a simulation which was recently carried out in germany with companies and with a student control group the findings suggest that a eu wide ban on banking would lead to efficiency losses in addition to those losses which arise from the lack of inter temporal flexibility second we use simple game theoretic considerations to argue that under reasonable assumptions such a eu wide ban on banking will be the equilibrium outcome thus to avoid a possible prisoners dilemma ms should have co ordinated their banking decisions

on the design of optimal grandfathering schemes for emission allowances to meet its commitment under the kyoto protocol the eu plans to implement an emissions trading system whith grandfathering of allowances besides having distributional impacts the choice of the grandfathering scheme may affect efficiency if firms anticipate how future allocations depend on upcoming decisions in this paper we determine central design rules for optimal grandfathering within a simple two period model we find that for small open trading systems where allowance prices are exogenous first best second period grandfathering schemes must not depend on firm specific decisions in the first period second best schemes correspond to a ramsey rule of optimal tax differentiation and are generally based on both previous emissions and output however ofr closed emissions trading systems i e endogeneous allowance prices firstand second best rules coincide and must not depend on previous output levels they consist of an assignment proportional to the emissions in the first period plus a term which does not depend on firm specific decisions in either of the two periods

production smoothing in the linear quadratic inventory model contrary to popular belief the linear quadratic inventory model does not imply that in response to demand shocks output is always less variable than sales when demand shocks are not anticipated and without this assumption it is hard to see why firms should hold inventories in the first place it is shown that output can be more variable than sales even when the only shocks are demand shocks and the inventory target is not a rising function of sales the variance of output will typically exceed that of sales when the firm s marginal cost curve is fairly flat copyright 1994 by royal economic society

how much market do market based instruments create an analysis for the case of white certificates in the context of economic instruments for more energy efficiency and climate protection tradable certificates have been investigated for renewable energy and for a number of emissions in contrast tradable energy efficiency or white certificates have only lately been considered as a market based tool to foster energy efficiency as compared to standards and labelling for example theoretically there is little doubt about the advantages in practice however some fundamental problems arise critical issues are the design of an efficient artificial market for white certificates its compatibility with the european emissions trading system the identification of a suitable target group for an energy efficiency obligation and the measurement of energy savings as compared to a reference use of energy we use the theoretical framework of transaction cost economics to elaborate these issues we conclude that transaction costs and investment specificity will restrict markets for white certificates in practise long term contracts rather than spot trade will be the prevailing form of governance for energy efficiency investments

the effect of information sharing on supply chain stability and the bullwhip effect this paper analyzes the bullwhip effect in multi stage supply chains operated with linear and time invariant inventory management policies and shared supply chain information such information includes past order sequences and inventory records at all supplier stages the paper characterizes the stream of orders placed at any stage of the chain when the customer demand process is known and ergodic and gives an exact formula for the variance of the orders placed the paper also derives robust analytical conditions based only on inventory management policies to predict the presence of the bullwhip effect and bound its magnitude these results hold independently of the customer demand the general framework proposed in this paper allows for any inventory replenishment policies any ways of sharing and utilizing information and any customer demand processes it is also shown as a special case that sharing customer demand information across the chain significantly reduces but does not completely eliminate the bullwhip effect

the impacts of eu co2 emissions trading on electricity markets and electricity consumers in finland abstract in this paper the likely impacts of the eu emission trading system on the nordic electricity market and on the position of various market actors are assessed in its first phase the eu co 2 emission trading system includes power plants with thermal capacity greater than 20 mw metals industry pulp and paper industry mineral industry and oil refineries this paper describes the assessment done for the finnish minister of trade and industry analysing the likely impacts on power plant operators on energy intensive industries on other industries and on other consumer groups the impacts of emissions trading were studied with the vtt electricity market model and with the times energy system model the annual average electricity price was found to rise 0 74 eur mw h 1 for every 1 tonne co 2 1 in the nordic area large windfall profits were estimated to incur to electricity producers in the nordic electricity market in finland metals industry and private consumers were estimated to be most affected by the electricity market price increases expanded nuclear power generation could limit the increases in the prices of electricity to one third compared to those in the base case

price drivers and structural breaks in european carbon prices 2005 2007 this article aims at characterizing the daily price fundamentals of european union allowances euas traded since 2005 as part of the emissions trading scheme ets the presence of two structural changes on april 2006 following the disclosure of 2005 verified emissions and on october 2006 following the european commission announcement of stricter phase ii allocation allows to isolate distinct fundamentals evolving overtime the results extend previous literature by showing that eua spot prices react not only to energy prices with forecast errors but also to unanticipated temperatures changes during colder events besides the sub period decomposition of the pilot phase gives a better grasp of institutional and market events that drive allowance price changes

information distortion in a supply chain the bullwhip effect this article originally appeared in management science april 1997 volume 43 number 4 pp 546 558 published by the institute of management sciences consider a series of companies in a supply chain each of whom orders from its immediate upstream member in this setting inbound orders from a downstream member serve as a valuable informational input to upstream production and inventory decisions this paper claims that the information transferred in the form of orders tends to be distorted and can misguide upstream members in their inventory and production decisions in particular the variance of orders may be larger than that of sales and distortion tends to increase as one moves upstream a phenomenon termed bullwhip effect this paper analyzes four sources of the bullwhip effect demand signal processing rationing game order batching and price variations actions that can be taken to mitigate the detrimental impact of this distortion are also discussed

measuring endogenous supply chain volatility beyond the bullwhip effect most recent research on supply chain volatility has focused on one particular dimension of that volatility namely the amplification of upstream order variability while not ignoring this aspect of supply chain volatility we focus on a different but equally critical aspect of volatility the cyclical oscillation of on hand and on order inventories about their target values we prove that such cyclicality does not require oscillatory or random retailer demand as a prerequisite the resulting volatility is therefore endogenous rather than simply an amplification of exogenous demand inputs we also measure the amount of amplification resulting from a step increase in demand the order amplification is the product of two factors each of which is clearly linked to either on hand or on order inventory our results attest that supply chain volatility can arise in the absence of exogenous oscillatory or random demand and suggest strategies for avoiding or minimizing such volatility

nonconvex costs and the behavior of inventories this paper explores one possible explanation for the apparent excess volatility of production relative to sales nonconvexities in the technology facing firms it is shown that if firms operate in a region of declining marginal costs then small shifts in demand can cause production to jump substantially estimates for six production to stock industries as well as the automobile industry suggest that all these industries behave as if they were operating in the region of nonconvex costs the results have important implications not only for inventory investment but also for the cyclical behavior of productivity and prices

the bullwhip effect in supply chain networks this paper analyzes the propagation and amplification of order fluctuations i e the bullwhip effect in supply chain networks operated with linear and time invariant inventory management policies the supply chain network is allowed to include multiple customers e g markets any network structure with or without sharing information the paper characterizes the stream of orders placed by any supplier for any stationary customer demand processes and gives exact formulas for the variance of the orders placed and the amplification of order fluctuations the paper also derives robust analytical conditions based only on inventory management policies to predict the presence of the bullwhip effect for any network structure any inventory replenishment policies and arbitrary customer demand processes numerical examples show that the analytical results accurately quantify the bullwhip effect managerial insights are drawn from the analysis the methodology presented in this paper generalizes those in previous studies for serial supply chains

flexible contracts and subjective well being theory suggests that when workers choose between permanent and flexible contracts their utility should tend to equalize across contract types new estimates of job satisfaction show the critical role played by unmeasured worker heterogeneity they reveal that flexible contracts are a strong negative determinant of satisfaction with job security but are often a positive determinant of other dimensions of job satisfaction as a consequence flexible contracts have either a weak negative influence or no influence on overall job satisfaction moreover flexible contracts generally have no impact on overall life satisfaction of the employed these results appear broadly consistent with the presence of equalizing differences jel j28 j41

the emissions trading paradox abstract this article considers the price history of co2 allowances in the eu emission trading scheme since european emissions trading started in 2005 the prices of allowances have varied between less than one and thirty euro per ton of co2 this previously unpredicted volatility and more notably a significant price crash in may 2005 led to the hypothesis that electricity producers might use their market power to influence the prices of allowances besides market power the combination of information asymmetry and price interdependencies between prices of primary goods especially electricity and allowances plays an important role in explaining the emissions trading paradox the model presented will show that banking can lead to such a price crash if market participators act rationally furthermore in such a scenario banking can be profitable for sellers at the cost of buyers

analysis of the bullwhip effect in two parallel supply chains with interacting price sensitive demands abstract this paper offers insights into how the bullwhip effect in two parallel supply chains with interacting price sensitive demands is affected in contrast to the situation of a single product in a serial supply chain in particular this research studies two parallel supply chains each consisting of a manufacturer and a retailer and the external demand for a single product depends on its price and the other s price in a situation in which each price follows a first order autoregressive process in this paper we propose an analytical framework that incorporates two parallel supply chains and we explore their interactions to determine the bullwhip effect we identify the conditions under which the bullwhip effect is amplified or lessened with interacting price sensitive demands relative to the situation without interaction

inventories and the volatility of production a stylized fact associated with inventory behavior is that the variance of production exceeds the variance of sales this paper presents a model of production decisions with demand uncertainty that incorporates no nnegativity constraints on inventories even with no productivity shocks optimal behavior by the firm is consistent with this stylized fact either if demand exhibits positive serial correlation or if the firm can backlog excess demand the reason is that a demand shock affects both the actual inventory level given unchanged production and the desired level production must replenish the stock and adjust to the new desired level copyright 1987 by american economic association

on the stability of supply chains this paper examines the stability of decentralized multistage supply chains under arbitrary demand conditions it looks for intrinsic properties of the inventory replenishment policies that hold for all customer demand processes and for policies with desirable properties it is found that the overall conditions experienced by suppliers several stages removed from the final customer e g the variances of the orders they receive and the inventories they keep depend on the policy much more than on the demand process a policy specific but demand independent upper bound for the order variance amplification factor of any decentralized policy is shown to exist and its formula is presented the bound is always tight for the suppliers at the end of a long chain so that a policy exhibits the bullwhip effect if and only if its bound is greater than 1 a simple necessary condition for bullwhip avoidance is also identified in terms of a policy s gain gain is the marginal change in average inventory induced by a policy when there is a small but sustained change in the demand rate it is shown thatall policies with positive gain produce the bullwhip effect if they do not use future order commitments because manufacturers can reduce costs by operating with positive gain this explains the prevalence of the bullwhip effect a family of commitment based policies that can dynamically maintain any desired inventory level for any demand rate e g achieve positive gain without the bullwhip effect is also presented the family includes just in time strategies as a special case simulation results are used as an illustration

investments in eop technologies and emissions trading results from a linear programming approach and sensitivity analysis abstract this paper offers a general approach to valuating investments in end of pipe technologies eop technologies with special regard to an emissions trading scheme since investments of this kind affect production it is necessary to derive the required payments for a financial valuation and the constraints from production theory and production planning on this basis it is possible to develop a valuation model this model considers joint production activity level dependent and independent payments and specifically includes the indivisibility of the investment applying duality theory enables us to examine the determinants of the price ceiling for such an investment sensitivity analysis shows that tradable permits have several effects on an investment and do not always encourage environmentally beneficial investments in particular cases they may even be counterproductive

market power with interdependent demand sale of emission permits and natural gas from russia with implementation of the kyoto protocol russia will most likely be able to exert market power in the emission permit market but as russia is also a big exporter of fossil fuels the incentives to boost the permit price may be weak however a significant share of russia s fossil fuel exports is natural gas if a high permit price boosts the demand for natural gas through substitution from more polluting fuels and thus increase gas profits this may increase the incentives to exert monopoly power in the permit market moreover a large fossil fuel exporter may use its market position to influence the effective demand for permits hence the relationship between permit income and fossil fuels exports runs in both directions in this article we explore the interdependence between the revenues from permit and fossil fuel exports both theoretically and numerically a computable general equilibrium model suggests the fact that russia as a big gas exporter has small effect on the incentives to exert monopoly power in the permit market moreover russia s monopoly power in the permit market has a small but non negligible impact on the optimal level of russian gas exports

the kyoto protocol market power and enforcement the kyoto protocol aims to limit aggregate carbon emissions by participating countries to 1990 emissions levels in aggregate it also allows for the creation of a permit market in which countries will be able to buy and sell the right to emit carbon dioxide this paper investigates how market power held by the countries of the former soviet union and enforcement of the carbon emission limits might affect the abatement and the cost of compliance with the kyoto protocol to do so it uses a modified version of the van egteren weber 1996 model to investigate a permit market in the presence of both market power and enforcement difficulties it then simulates the model finding that if meeting abatement targets is the goal regulating the supply side of the market and convex fine schedules are the most effective tools

european emissions trading and the international competitiveness of energy intensive industries a legal and political evaluation of possible supporting measures abstract the eu emissions trading directive is expected by european energy intensive industries to harm their competitiveness vis a vis non european competitors many additional measures have thus been proposed to level the playing field and to protect the competitiveness of european energy intensive industries within the larger effort of reducing europe s greenhouse gas emissions and of meeting its obligations under the 1997 kyoto protocol this article evaluates a range of proposed measures based on a set of political and legal criteria including environmental effectiveness the need to consider differentiated commitments responsibilities and capabilities conformity with world trade law and european union law and europe s overall political interests we discuss measures that could be adopted by the european union and its member states such as direct support for energy intensive industries restrictions of energy intensive imports into the european union through border cost adjustments quotas or technical regulations and cost reimbursement for affected developing countries we also analyse measures available to multilateral institutions such as the united nations framework convention on climate change and its kyoto protocol and the world trade organisation we conclude with a classification of the discussed measures with red unfeasible yellow potentially feasible or green feasible labels

next allocation phase of the eu emissions trading scheme how tough will the future be abstract the development of national allocation plans naps for the first phase 2005 2007 of the eu emissions trading scheme eu ets was accompanied by the stated concern of the industrial enterprises with installations that fall under the scope of the relevant directive 2003 87 since the impacts of the allocation in their financial and technical modes of operation were judged to be severe thus the intensity of the negotiations for the next allocation phase i e 2008 2012 is expected to be heated with a view to assisting enterprises especially in the energy sector or for which energy use and its management is a crucial part of their activity to incorporate in their business plans the impacts of the directive in an informed manner an attempt is made here to explore the constraints and the available options that will guide the coming eu ets potential allocations in the analysis the credits derived from the use of cdm are specifically taken into account the results show that the next allocations would tend to be significantly more stringent than the current ones because of the combined effect of no inter period transfer of allowances the amount of cdm credits expected to be available compared to the amount of effort that would be required and the yield of emission reductions from existing or planned policies and measures it becomes then crucial if not imperative for the enterprises involved as well as national governments to examine carefully means to address their obligations under the directive

market power in tradable emission markets a laboratory testbed for emission trading in port phillip bay victoria abstract in theory competitive emission permit markets minimize total abatement costs permit markets are often imperfectly competitive however and may be thin and dominated by large firms the dominant firm s could exercise market power and increase other firms costs of pollution control while reducing their own emission control costs this paper reports a testbed laboratory experiment to examine whether a dominant firm can exercise market power in a permit market organized using the double auction trading institution our parameters approximate the abatement costs of sources in a proposed tradable emissions market for the reduction of nitrogen in the port phillip watershed in victoria australia we vary across treatments the initial allocation of permits to sources so that in one treatment the seller of permits is a monopolist and in another treatment the market is duopolistic we also vary the information that subjects have about the number and abatement costs of their competitors we find that prices and seller profits are higher and efficiency is lower on average in the monopoly sessions compared with the duopoly sessions but the differences are not substantial and are not statistically significant due to pronounced variation across sessions moreover prices profits and transaction volumes are usually much closer to the competitive equilibrium ce than the monopoly equilibrium

average shadow price and equilibrium price a case study of tradable pollution permit markets abstract shadow prices indicate implicit values of limited resources at the margin and provide important information in decision making for resource management in continuous economic models shadow prices associated with demand supply balance constraints represent consumers willingness to pay and producers marginal cost hence they correspond to market equilibrium prices as well known however marginal analysis fails in the case of discrete optimization such as mixed integer programming an alternative concept has been introduced in the literature to measure the value of an extra unit of a limited resource in such cases this concept is based on average rather than marginal values thus called the average shadow price and interpreted in the same way as conventional shadow prices whether average shadow prices in a discrete economic model can serve as market equilibrium prices has not been addressed in the related literature the present paper addresses this issue in an empirical setting using a tradable pollution permit market as an example where firms yes no type technology adoption decisions are represented by binary variables we show that the average shadow price of tradable permits can be interpreted as the equilibrium price only when certain conditions related to the cost structure and emission levels hold on the other hand we show that an iterative procedure based on individual firms cost minimizing behavior presents a better approach for finding a price that can eliminate or reduce the gap between demand and supply of permits in the market

can the production smoothing model of inventory behavior be saved the production smoothing model of inventory behavior has a long and venerable history and theoretical foundations that seem very strong yet certain overwhelming facts seem not only to defy explanation within the production smoothing framework but actually to argue that the basic idea of production smoothing is all wrong most prominent among these is the fact that the variance of detrended production exceeds the variance of detrended sales this paper first documents the stylized facts then it derives the production smoothing model rigorously and explains how the model can be amended to make it consistent with the facts finally it reviews the theoretical and empirical evidence and tries to draw some tentative conclusions

characterization of the bullwhip effect in linear time invariant supply chains some formulae and tests the authors analyze the bullwhip effect in multistage decentralized supply chains operated with linear and time invariant inventory management policies the focus is on robustness the supply chain is modeled as a single input single output control system driven by arbitrary customer demands the authors derive robust analytical conditions to predict the presence of the bullwhip effect and bound its magnitude based only on the way inventories are managed these results hold independently of the customer demand the authors also characterize the stream of orders placed at any stage of the chain when the customer demand process is known and ergodic and give an exact formula for the variance of the orders placed this formula generalizes existing results by broadening the class of inventory replenishment policies and customer demand processes to which it applies the authors also show that the bullwhip effect can be mitigated by introducing commitments for future orders into the ordering policies

trading hot air the influence of permit allocation rules market power and the us withdrawal from the kyoto protocol after the conferences in bonn and marrakech it is likely that international emissions trading will be realized in the near future major influences on the permit market are the institutional detail the participation structure and the treatment of hot air different scenarios not only differ in their implications for the demand and supply of permits and thus the permit price but also in their allocative effects in this paper we discuss likely the institutional designs for permit allocation in the hot air economies and the use of market power and quantify the resulting effects by using the computable general equilibrium model dart it turns out that the amount of hot air supplied will be small if hot air economies cooperate in their decisions under welfare maximization more hot airis supplied than in the case where governments try to maximize revenues from permit sales

measuring and avoiding the bullwhip effect a control theoretic approach an important contributory factor to the bullwhip effect i e the variance amplification of order quantities observed in supply chains is the replenishment rule used by supply chain members first the bullwhip effect induced by the use of different forecasting methods in order up to replenishment policies is analysed variance amplification is quantified and we prove that the bullwhip effect is guaranteed in the order up to model irrespective of the forecasting method used thus when production is inflexible and significant costs are incurred by frequently switching production quantities up and down order up to policies may no longer be desirable or even achievable in the second part of the paper a general decision rule is introduced that avoids variance amplification and succeeds in generating smooth ordering patterns even when demand has to be forecasted the methodology is based on control systems engineering and allows important insights to be gained about the dynamic behaviour of replenishment rules

the zero emission certificates a novel co2 pollution reduction instrument applied to the electricity market abstract today several instruments exist to decrease air pollution the paper discusses pollution taxes emission trading permits and green certificates applied to reduce the co 2 emissions in the electricity sector it then investigates how the different mechanisms behind these three instruments can possibly be combined the proposed approach is to introduce the concept of zero emission certificates zec zec are confirming actual emission reductions achieved by electricity producers as compared to a well defined baseline producers can trade zec on a market to achieve least cost efficiency in their reduction efforts distributors can themselves produce an additional contribution to emission reductions by decreasing the final demand i e by producing zero emission mwh in this way the electricity market is approached from both the supply and the demand sides the paper uses system dynamics to validate the approach it shows why it is in the interest of all operators to make the largest possible reduction efforts as long as they are compatible with economic efficiency