Abstract
According to China’s 14th Five-Year Development Plan, China aims to peak its carbon emissions by 2030 and achieve carbon neutral by 2060, which will be a major strategy for China to implement in the coming period of time. All kinds of industries need to take the industry characteristics into account and gradually form relative carbon reduction targets according to the National Carbon Summit Action Program. Under the constraints of carbon emission reduction, enterprises face trade-off when making emission reduction decisions. How to systematically optimize the profitable and environmentally friendly decisions, under the consideration of carbon emission production, is gradually becoming a main concern of regulated enterprises. In this paper, a Cournot game model is constructed to explore optimal production carbon abatement decisions for two oligopolistic firms, under the governance of a cap-and-trade mechanism. Real case data collected from China’s airlines is an example to test the validity of our model. The qualitative analysis shows that, through a reasonable output and emission reduction investment, companies are capable of efficiently minimizing the negative impact brought about by the carbon trading system. A numerical experiment indicates that the companies on one side can reach a decision equilibrium in some circumstances, but on the other side, there exists a lack of incentive to reduce their emissions. Additional government incentives or increased investment in technological improvements will be needed to encourage companies to further reduce carbon emissions. In this paper, while analyzing the choice of emission reduction strategy for enterprises under the carbon trading system, it also provides effective emission reduction approaches for the government and industry managers, hoping to provide some references for the establishment of emission reduction system and policy formulation.
Highlights
At the end of the 20th century, with the rapid development of industrialization, the greenhouse effect caused by carbon emissions began to attract widespread attention worldwide
We focus on the competitive decisions between the firms already in a market, rather than an enter-response strategy; secondly, we consider a two-stage model whereas the last paper essentially used a single-stage one, the authors constructed a time-line event for the gaming process; thirdly, the operation of the carbon trading system is considered in our paper; e.g., in charge of quota allocations and the gradual reduction of a free quota
From the enterprise’s perspective, this study discusses how to make production and emission reduction strategies to achieve the maximum profit under the pressures of an oligopolic competition and low-carbon regulation
Summary
At the end of the 20th century, with the rapid development of industrialization, the greenhouse effect caused by carbon emissions began to attract widespread attention worldwide. In December 2015, 200 party-member countries in Paris reached the “Paris agreement” and developed a “nonretreat” ratchet locking mechanism In this context, governments have begun pushing related policies and devising trading mechanisms to enhance the regulation intensity, while companies are required to keep constantly reinforcing their low-carbon investments. Mathematical Problems in Engineering is paper is motivated to explore the optimal production and emission strategies for the companies in a competitive environment, under the governance of the carbon trading mechanism. A cap-and-trade mechanism is launched to regulate the industrial carbon emissions against the quota that was set by the government based on the emission level of the firms in the first stage. A two-stage Cournot game model will be constructed to qualitatively discuss the optimal emission reduction strategies, with discussion on related managerial insights regarding the oligopolistic market’s capand-trade mechanism.
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