Logo image
Decarbonisation under cap-and-trade: an integrated network Data Envelopment Analysis model with a second-scoring auction mechanism
Journal article   Open access   Peer reviewed

Decarbonisation under cap-and-trade: an integrated network Data Envelopment Analysis model with a second-scoring auction mechanism

Elnaz Azadi, Ali Emrouznejad and Xun Zhou
The Journal of the Operational Research Society, pp.1-26
05/10/2026

Abstract

Data envelopment analysis network DEA (NDEA) directional distance function second-scoring auction cap-and-trade carbon emission permits reallocation

This study develops a centralised Network Data Envelopment Analysis (NDEA) model within a Directional Distance Function (DDF) framework and integrates it with a second-scoring auction mechanism for carbon permit reallocation under a cap-and-trade system. The model evaluates the performance of Decision-Making Units (DMUs) within a two-stage network structure and determines surplus and deficit volumes of CO2 permits. An endogenous scarcity-based pricing framework is then introduced to link carbon permit prices to the permit shortages and surpluses derived from the model. Subsequently, a second-scoring auction mechanism determines endogenous transaction prices and trading volumes through bilateral permit exchanges. The proposed framework is applied to the European bioenergy supply chain to investigate whether the mechanism can facilitate permit reallocation and reduce the inefficiency of participating DMUs.

url
https://doi.org/10.1080/01605682.2026.2724041View
Published (Version of record) Open

Metrics

1 Record Views

Details

Logo image

Usage Policy