Bilateral emission trading behaviors analysis based on human-subjected experiment

The regulation effects of emission trading (ET), which deals with environmental externalities by defining property rights and market based mechanisms, strongly depend on participants' responses. Before implementing the emission trading scheme, the policy makers need to clarify the participants' trading behaviors under different market designs. Power industry is emission-intensive, and thus generation companies (GenCos) are major participants in the emission trading scheme around the world. In this paper, based on the emission market design in the Regional Greenhouse Gas Initiative (RGGI) and the European Union Emissions Trading Scheme (EU ETS), human-subjected power system emissions trading experiment is conducted, which covers emission allowance auction in the primary market and bilateral trading in the secondary market. Experimental results show that participants' bidding strategies are closely related to their predictions of annual unbalanced emissions and urgency to balance the emissions. Furthermore, the phenomena of "ultimatum game" and "loss aversion" are observed in the experiment.