Studying the effects of CO2 emissions trading on the electricity market - A multi-agent-based approach

In this paper, we present a basic approach for modelling electricity and emissions markets under the paradigm of agent-based computational economics (ACE). Different market players will be modelled as independent entities using autonomous software agents; they operate and communicate independently on power markets and on markets for emission allowances. The agent types involved and their relationships are described. The aim of the model is to investigate the interplay between the market players, with a focus lying on the dynamics in a market for CO2 emission allowances and its effects on the electricity markets. Simulations with this model will enable us to draw conclusions about the economic performance of different possible emissions trading designs. These findings are of interest for decision makers to evaluate the testing phase of the EU emissions trading scheme (from 2005 to 2007) in a qualified way.