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Supplement
| HBS Case Collection
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2011
Carbon Trading Simulation: Black Cement Inc.
by
Peter A. Coles
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Abstract
This simulation presents students the opportunity to experience firsthand the economics of carbon markets and permit trading. Each student has private role information about a company he or she manages. The student must make decisions about pollution-reducing investments and production levels in the face of uncertainty about pollution permit prices. Students form groups of five, and throughout the exercise students may buy or sell permits within their group. Trading outcomes dictate permit prices, and at the end of trading, each firm calculates profits and pays over pollution penalties as needed.
Keywords: Market Design;
Pollution and Pollutants;
Investment;
Price;
Profit;
Agreements and Arrangements;
Decisions;
Service Industry;
Energy Industry;