Dynamic analysis of the optimal guiding mechanism for second emission trading market in China

Abstract

Second emission trading market is not active in China so far, and the reason mainly lies in that enterprises do not have strong initiative for transaction. Thus it's meaningful to study related guiding mechanisms from the perspective of enterprises behavior. In this paper, an evolutionary game model and a small-world network model considering stock heterogeneity are constructed based on four given guiding mechanisms, and a simulation study is conducted through China Zhejiang emission trading market. The result shows that: (1) the optimal guiding mechanism is dynamic and changes from reward-punishment for both enterprises with surplus stock and enterprises with insufficient stock to reward-punishment for enterprises with insufficient stock when trading preferential profit coefficient increases to 1. (2) when penalty coefficient changes, the optimal guiding mechanism is the reward-punishment for both enterprises with surplus stock and enterprises with insufficient stock and keeps unchanged. (3) the enterprises with insufficient stock are more sensitive to penalty coefficient and trading preferential profit coefficient, especially to the latter, so it's better to stimulate the emission rights purchasing side and formulate positive reinforcement methods. The study of this paper can provide decision-making suggestions for Chinese government to stimulate the activity of second emission trading market.