Incentive Contract Design considering Fairness Preferences and Carbon Emission Reduction Multiobjective Tasks

Zhipeng Li,Xinyu Cao,Shuzhen Zhu,Sang-Bing Tsai

doi:10.1155/2021/6541682

Abstract

Considering the multitargets of corporate carbon emission reduction and the fairness preference psychology of the company, a government incentive model for corporate carbon emission reduction was constructed. The impact of corporate fairness preferences on government carbon emission reduction incentive strategies is studied. In addition, numerical simulation is used to analyze the impact of changes in correlation coefficients, fairness preference coefficients, and discount rates on the optimal enterprise effort coefficient and the government optimal incentive coefficient. Research shows that the degree of fairness preference of a company has a direct impact on the degree of corporate effort, while the discount rate will only have an impact on the company’s long-term effort. In order to improve corporate carbon emission reduction efforts, the government must not only consider the impact of fairness preference on corporate efforts but also flexibly adjust the incentive coefficient of long-term and short-term tasks based on the discount rate.

Highlights

In the process of carbon emission reduction, the government can generally adopt incentive policies and restrictive policies [1]
Some scholars have used corporate data from different industries to verify the impact of carbon tax policies on corporate carbon emissions reduction [6, 7]. e implementation of the carbon tax and carbon trading system provides a way to reduce carbon emissions, but the effect seems to be suboptimal. e poor progress of the Kyoto Protocol and the sharp drop in carbon prices indicate that the current carbon trading system still has shortcomings [8]
Galinato and Yoder [9] comparatively analyze the impact of low-carbon energy subsidy policies and carbon tax policies on corporate carbon emission reduction and social welfare benefits

Summary

Incentive Contract Design under Complete Rationality

Under the condition of complete rationality, the firm’s deterministic equivalent income is. When the government carries out the carbon emission reduction incentive contract, the goal is to maximize its expected income, namely, max E πG􏼁r 1 − βr1􏼁er1 + 1 − βr2􏼁rer2 − α. If we want to encourage enterprises to actively control carbon emission reduction, we must make enterprises choose the appropriate level of effort according to their expected utility maximization: er, er2 ∈ arg max E πE􏼁r􏼁. By deriving the constraints of formula (8) to er and er, the effort degree of carbon emission reduction enterprises can be expressed as follows: er βr11−−φφr2βr2,. After substituting er and er into formula (12), the following equivalent problems are obtained: max E πG􏼁r βr1 − φrβr2 1 − φ2.

Incentive Contract Design under Fairness Preference

Numerical Analysis

Conclusion