Optimisation of the Corporate Emissions Trading Strategy for the Projected GHG Market in Lithuania

Abstract: The aim of this thesis is to investigate and develop a three step path for considering an optimal strategy for companies wanting to trade on the projected GHG emission market in Lithuania. An optimal strategy here is defined by two factors: financial gains by the trading company and real GHG emission reductions. The investigation included a review of the literature on the theoretical prerequisites for an efficient emission trading scheme design and the uncertainties associated with emergent GHG markets. A generic model of strategy under uncertainty was used to develop a framework for an optimal corporate emission trading (ET) strategy under a high level of uncertainty. This theoretical strategy construction constituted the first step. Further, the specific conditions related to the development and administration of a greenhouse gas (GHG) market in Lithuania were examined, including an analysis of the potential GHG market size. This was the second step in the path. As step three, a hypothetical case of trade between two major energy companies, one in Lithuania and one in Sweden, was then used to interrogate the framework for strategy under uncertainty. Finally, an optimal strategy was suggested for these two trading partners in this hypothetical scenario, taking into consideration issues of risks and profitability as well as environmental benefits. The suggested strategy in the scenario is intended to serve as a hypothesis that can be tested with further case studies and empirical analysis under different assumptions (e.g., market, policy, legislation, availability of fuels and their prices, technology development etc.) in the context of Lithuanian emissions trading developments.