Evaluating the performance of different emission trading schemes using multicriteria analysis methods - AHP and promethee
Student name: Mr Aditya Mudgal
Guide: Dr Kamna Sachdeva
Year of completion: 2009
Host Organisation: Emergent Ventures India Pvt. Ltd. and TERI University
Supervisor (Host Organisation): Mr Ritesh Awasthi
Abstract: This study compares Emission Trading as Climate Change Mitigation
instrument, by incorporating multicriteria analysis as a management
tool. Three different Emission Trading Schemes (ETS) viz European
Union ETS, Australian ETS, New Zealand ETS are compared to bring
out the strength and weakness of each of them to analyze which is better
than the other and to what extent. The multicriteria framework consists
of selecting the most meaningful criteria of evaluation and the required
decision parameters. The multicriteria methodologies used in this study
are Analytic Hierarchy Process (AHP) and Promethee. AHP helps in
structuring the problem that offers deep insight in the problem and helps
in determining the weight coefficients of the performance measures or
criteria’s. While Promethee helped in revealing the preference order of
the alternative ETS. Methodology given in this paper processes three
first level and thirteen second level ETS performance measures and then
generates the ETS performance index for the three alternatives selected.
The results obtained using AHP and Promethee indicate that GHG
Reduction and Implementation Simplicity are the two performance
measures which affect the rankings of the alternative trading schemes.
The study concluded that in their present framework of policies EU ETS
is marginally better than NZ ETS and AU ETS grabs last position in
three. The difference between the EU ETS and NZ ETS is so small that
changing the weights of performance measures can change the ranking
of the two. Scenarios are developed to analyze the variation in the
ranking of the three alternatives. Sensitivity analysis is carried out to
check the stability of the methods used in the given set of problems. This
application demonstrates both the stability of the method and its ability
to generate results that will greatly assist decision makers in developing
the framework for future Emission Trading Schemes.
Key words: Australian Emission Trading Scheme, European Emission
Trading Scheme, New Zealand Emission Trading Scheme, Multicriteria
Analysis, AHP, Promethee
