Opportunity costs and offsets acceptance in FI-REDD model

In previous studies, we have proposed financial instruments supporting REDD (FI-REDD). Within a microeconomic framework we modeled interactions between an electricity producer (EP), electricity consumer (EC), and forest owner (FO). FI-REDD allows for optional consumption of emission offsets by the EP (any amount up to the initially contracted volume is allowed), and includes a benefit-sharing mechanism between the EP and FO as it regards unused offsets. The modeling results indicated that FI-REDD might help avoid bankruptcy of CO2-intensive producers at high levels of CO2 prices. We demonstrated the impact of benefit-sharing and risk preferences on the contracted REDD offsets quantity. Here, we further develop the FI-REDD model by introducing two modifications. Firstly, we add opportunity cost of the forest owner, i.e. forest value alternative to REDD. This change leads to a realistic risk-adjusted supply curves for REDD, which are generated by the indifference (fair) pricing model and calculated for all possible benefit-sharing ratios. Secondly, we introduce an uncertainty associated with acceptance (fungibility) of REDD offsets in the second stage of the model. Modeling results demonstrate in a quantitative way the impact of fungibility uncertainty and positive effects of the benefit-sharing mechanism. An optimal value of the benefit-sharing ratio can be found that guarantees contracting the highest amounts of offsets at the low equilibrium price. This qualitative feature of the benefit-sharing mechanism is robust with respect to the uncertainty parameters in the model. We also undertake an in-depth analysis of decision making of the electricity producer using 3D visualization tools

REDD-based Offsets: Benefit Sharing and Risks

In this study we apply systems analysis methods to modeling financial instruments supporting the Reduced Emissions from Deforestation and Degradation (REDD) program. We consider a risk-aware forest owner and an electricity producer evaluating the REDD-based offsets with benefit-sharing mechanism under uncertain CO2 prices. For a range of CO2 prices and respective risks perceived by the forest owner (seller) and electricity producer (buyer), we apply a model of fair (indifference) pricing. The decision-making process under uncertainty is formalized in the spirit of Howard Raiffa’s “Decision analysis” (1968). Parties’ risk preferences are reflected by exponential utility functions. The potentially contracted amounts of REDD offsets are analyzed under various risk preferences and for different benefit sharing opportunities and price levels. Our results show that a risk-averse attitude considerably increases the contracted amounts of REDD offsets (compared to risk-neutral case) and, therefore, creates a higher potential for REDD implementation. We demonstrate a possibility of situations, when parties could agree on a certain range of REDD contracts, for example, smaller amounts of REDD offsets are traded for higher prices, and larger amounts for lower prices, but contracting a moderate amount at a moderate price is impossible. Higher benefit-sharing ratios can also increase contracted amounts even in the case of risk-taking electricity producer. Our modeling results highlight two ways to promote higher REDD participation: (i) increasing risk aversion of the energy producers, and (ii) implementing the mechanism of benefit/risk sharing between REDD consumer and supplier

Impacts of the fairly priced REDD-based CO2 offset options on the electricity producers and consumers

This paper deals with the modeling of two sectors of a regional economy: electricity and forestry. We show that CO2 price will impact not only the profits of the CO2 emitting electricity producer (decrease), but also the electricity prices for the consumer (increase), and, hence, some financial instruments might be implemented today in order to be prepared for the uncertain CO2 prices in the future. We elaborate financial instrument based on the Reduced Emissions from Deforestation and Degradation (REDD+) mechanism. We model optimal behavior of forest owner and electricity producer under uncertainty and determine equilibrium fair prices of REDD-based-options

Nonlinear dispersion of stationary waves in collisionless plasmas

A nonlinear dispersion of a general stationary wave in collisionless plasma is obtained in a non-differential form from a single-particle oscillation-center Hamiltonian. For electrostatic oscillations in nonmagnetized plasma, considered as a paradigmatic example, the linear dielectric function is generalized, and the trapped particle contribution to the wave frequency shift $\Delta\omega$ is found analytically as a function of the wave amplitude $a$. Smooth distributions yield $\Delta\omega\sim a^{1/2}$, as usual. However, beam-like distributions of trapped electrons result in different power laws, or even a logarithmic nonlinearity, which are derived as asymptotic limits of the same dispersion relation

Intermittency transition to generalized synchronization in coupled time-delay systems

In this paper, we report the nature of transition to generalized synchronization (GS) in a system of two coupled scalar piecewise linear time-delay systems using the auxiliary system approach. We demonstrate that the transition to GS occurs via on-off intermittency route and also it exhibits characteristically distinct behaviors for different coupling configurations. In particular, the intermittency transition occurs in a rather broad range of coupling strength for error feedback coupling configuration and in a narrow range of coupling strength for direct feedback coupling configuration. It is also shown that the intermittent dynamics displays periodic bursts of period equal to the delay time of the response system in the former case, while they occur in random time intervals of finite duration in the latter case. The robustness of these transitions with system parameters and delay times has also been studied for both linear and nonlinear coupling configurations. The results are corroborated analytically by suitable stability conditions for asymptotically stable synchronized states and numerically by the probability of synchronization and by the transition of \emph{sub}Lyapunov exponents of the coupled time-delay systems. We have also indicated the reason behind these distinct transitions by referring to unstable periodic orbit theory of intermittency synchronization in low-dimensional systems.Comment: Accepted for publication in Physical Review