We aim to model the European Emission Trading System in order to gain insight how different regulatory actions affect the emission permit market and the behaviour of its participants. This information can be used to learn how an emission trading system should be regulated best.
The spot price of the emission permits can be characterized by the solution of the Hamilton-Jacobi-Bellman (HJB) equation. Since it has to be solved for numerous different regulatory parameters, we wish to save computational effort by applying the Reduced Basis Method.
For the determination of an error estimator, we use a space-time formulation of these equations and apply the Brezzi-Rappaz-Raviart theory. Thus, we have to restrict to quadratic non-linearities.