A simulation model for carbon resource planning of production systems

Under “Cap-and-Trade” conditions, a manufacturer is restricted in total carbon dioxide equivalent (CO2e) emission through an initial allocation of emission quotes (EQ), but allowed to purchase emission quotes (i.e. commercialized permits for emitting CO2e) to satisfy additional needs via a trading market. Alternatively it can reduce its emission through self-purification (SP) to decrease its need for EQ, and/or sell the surplus (in the form of certified-emission-quotes) to gain revenue. There are multiple risks associated with these carbon-resource planning decisions, e.g. fluctuation of EQ price and changing cost of performing SP. The dynamic interactions between decision variables and influencing factors, coupled with various uncertainties associated with risk profiles, make the planning process and the evaluation of solutions extremely difficult. This research proposed a discrete-event simulation based approach to characterize carbon-resource planning process and analyze production system´s performance under the impact of multiple risks and mitigation strategies associated with a Cap-and-Trade setting.