Agents, auctions and interactions: Modelling markets for ecosystem services and renewable energy

Doctoral thesis, 2018

If we are to mitigate climate change and tackle other pressing environmental issues such as biodiversity loss, environmental policies will be crucial. The papers in this thesis all focus on how individual behaviour and lack of information affects the outcome of environmental policy, using agent-based models where individual actors and their behaviour are explicitly modelled.
In paper I-III the focus is to compare an agent-based modelling approach with a partial equilibrium model in a framework of land-use competition between bioenergy and food crops. The agent-based model, where landowners are uncertain about price levels at the time of harvest, exhibits unstable dynamics that provides insights beyond the partial equilibrium model. This type of dynamics is typical of cobweb models, and paper I-III extends the cobweb literature by introducing markets that are interlinked through land use competition, showing how instabilities can be transferred from one market to another. The system can be stabilised, for example, by allowing a share of the actors to have perfect information of the upcoming prices.
Paper IV focus on payment for ecosystem services programs, where landowners are given monetary compensation to let their land provide an ecosystem service. The paper uses an agent-based model to explore the performance of different program designs, such as fixed payments, a uniform auction and a discriminatory auction, in differing circumstances. The main finding of the paper is that the context in which the program is implemented has a determining impact on what the best policy design is.
Paper V is centred around the allocation of subsidies for onshore wind power through auctions in Germany 2017. In these auctions a special design was used where some winners were awarded their submitted bid, while others were awarded the highest winning bid. In the paper, the specific choice of design and how it may incentivise aggressive bidding is discussed along with an analysis of the outcomes of the German auctions.