A Joint Control Model Based on Emission Rights Futures Trading for Regional Air Pollution That Accounts for the Impacts on Employment

Round 1

Reviewer 1 Report

Dear Author,

the paper it's very interesting. The developed an emission rights futures trading model for  joint air pollution control that accounts for employment, and then examined SO2 control can be increase the well-being of people.

In order to improve the paper I suggest the following changes:

Introduction:

the introduction is to be improved, citing other works on similar themes, it could be interesting to talk also about techniques of reuse or recycling. 

For example: 

Investigating the feasibility of a reuse scenario for textile fibres recovered from end-of-life tyres, Waste Management (2018),

Cost-benefit analysis of a circular economy project: a study on a recycling system for end-of-life tyres, Journal of Cleaner Production (2019),

Case study:

It is necessary to insert more details on the case study, in order to make the steps carried out easier to understand.

English language and style: it is necessary to improve the style

Author Response

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Author Response File: Author Response.pdf

Reviewer 2 Report

GENERAL COMMENTS

1. I have one fundamental concern about the conceptual motivation of the whole idea of the paper. I understand that the authors are studying a permit trading system. In such a system, the price is expected to adjust in order to balance supply and demand. So, if there is more supply than demand the price is expected to fall and if there is more demand than supply, the price is expected to rise until supply and demand meet. Nevertheless, in this paper the price seems to be given in such a way that there may be more demand than supply and the other way around without those situations having any influence on the price. I would like to see some explanation about why this is expected to happen.

2. Also, it is not clear to me what is the role of the spot price and the futures price. Why is it relevant to consider both prices and how they different affect the market participants’ decisions?

3. In the literature review there seems to be a strong bias towards papers about China and/or written by Chinese authors. That’s understandable when the authors are talking about the Chinese case but it is not obvious when they are talking about general ideas not necessarily referring to China such as “Many researchers have studied the cost of air pollutant control, but have generally focused on the single goal of minimizing the cost” (page 2, line 81) or the Shapley value method and the Nucleolus method (page 9, line 283)

SPECIFIC COMMENTS

4. On Table 1 (page 4) the authors define Y as GDP. On the last line of the same page they call it “economic development”. This is confusing. The authors should not use “development”, which is related to GDP but is a broader concept.

5. On page 2, line 91 it is stated that “… pollution control has forced many pollution enterprises to relocate or close down, which will have a negative impact on regional employment”. This is not obvious since polluting firms may be replaced by cleaner ones that also generate employment

6. When one is addressing abatement, one can talk about “gross emissions” (before abatement is done) and “net emissions” (gross emissions minus the part that is abated). On page 5, line 155 “g” is define as “emissions”. I understand it is gross emissions, but I think it should be explicitly clarified.

7. Page 6, equation (9). The role of “lambda” is not clear to me. Who determines this value? The region? The environmental authority?

8. I don’t think the authors’ comment on page 6, line 204 in the sense that, when region j is the buyer of emission rights, “other areas help region j to reduce their pollutant”. I understand what they mean, but I don’t think the expression is correct. Buying permits allows a region to fulfill the legal requirements without reducing emissions (or reducing less). So, other regions help region j to compensate for the lack of emission reductions.

9. On page 7, line 223, the authors state that “each seller can get their optimal pollution abatement quantity through cooperation among the ne seller regions”. This idea is not clear to me as the concept of “optimal abatement does not seem to be clearly defined”. In this case it seems that the sellers cooperate to look for the optimal value of the aggregated result. But this does not imply that each region will reach its individual optimum.

10. On page 7, line 242, it is not clear to me the meaning of “fair competition”. Do the authors mean “perfect competition”?

11. On tables 2-5, the units should be specified. Also the size of the sample used to estimate the parameters.

MINOR COMMENTS

12. Page 5, line 166 “we classify the participating regions…”

13. Page 5, subsection 3.1.1 should be 3.3.1.

14. On page 6 line 198 it is stated that “the abatement quantity cannot be zero”. This seems to be contradictory with constraint (11), which stated that abatement is non-negative (zero or positive). Constraint (11) also seems redundant with constraint (10), which already states a positive lower bound for abatement.

15. Page 6, line 204, “the buyer of emission rights”

16. Page 7, line 221 “the sellers sell more than the buyers buy” (I understand that, in general, there may be more than one buying region and one selling region).

Author Response

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Author Response File: Author Response.pdf

Reviewer 3 Report

The paper reports a Joint Control Model that accounts for emissions reduction and the potential impact of employment for the implementation of such schemes.

The manuscript is in the main well written and structured.  Accounting for the impact of pollution control measures on employment adds a more holistic sustainability oriented overview.  The JCM model is reported in sufficient detail for transparency.  There are a few minor suggestions below that aim to be constructive.

Abstract - suggest a sentence is added at the end that summarises the implications of the research i.e at present there is a summary of the method and results - what in the authors opinion do these results mean in terms of implementing pollution control measures optimally?

Pages 10 - 11 can tables 2 and 3 be combined?  can tables 4 and 5 be combined.

page 16 lines 474-476 'Thus, the proposed JCM is obviously superior to the TCM for increasing employment and reducing pollutant control costs.' - suggest this sentence is removed as the reader can infer this from the text in the previous sentence

page 16 lines 487 - 489 states 'The United States and other developed countries have begun trading emissions future and options, and have achieved some success.' - can the authors clarify what is meant by 'some success'? it is currently a somewhat vague statement

 

Author Response

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Author Response File: Author Response.pdf

Round 2

Reviewer 2 Report

I think that it has improved and most of my comments have been addressed. Nevertheless, I'm not that convinced about the answers to my first two questions. I still do not see that the paper clearly explains the role of the spot price and the forward price and how the market reacts to an excess supply or excess demand of permits. In my opinion this should be clearly explained in the paper before being considered for publication.

Author Response

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Author Response File: Author Response.pdf