Energy-conservation model of inter-provincial cooperation that accounts GDP and social benefits

Abstract

With rapid development of the global economy, economic growth is increasingly dependent on energy consumption, and the world faces the associated problems of environmental pollution and depletion of energy sources. This creates a challenge: Our ability to achieve these goals is severely constrained by the current governance based on non-cooperative energy conservation. To improve energy conservation in China, we developed an energy-conservation model based on market mechanisms. The model has three parts: (1) a two-objective (GDP and social benefits) optimization model; (2) a model that determines the optimal trading volume for energy conservation quotas in each province, including division of provinces into quota buyers and sellers and a cooperative game model for energy conservation quotas; and (3) a Nash distribution model for inter-provincial cooperation to fairly distribute the benefits from cooperation. We then used Shandong, Zhejiang, and Jiangsu provinces for an empirical analysis of the cooperative model. With the current territorial management approach, the social benefits of the inter-provincial cooperation based on option trading increased by 2.79 %, and GDP increased by 273.636 × 109 CNY. After a reasonable distribution of the benefits, each province benefited from the cooperation. This demonstrates that our model can improve China's current energy conservation governance.