Simulating the impact of demand-side policies on low-carbon technology diffusion: A demand-supply coevolutionary model

Abstract

Alleviating the pressure of climate and energy calls for an improved understanding of how policy interventions influence the diffusion of low-carbon technologies (LCTs) among enterprises. With the rapid convergence of supply-side policy effects, implementing demand-side policies to drive LCT diffusion may be a promising area for carbon abatement action. This study proposes a demand-supply coevolutionary model embedded in two-layer network is to capture the LCT diffusion among supply-side enterprises and low-carbon consumption diffusion among demand-side consumers. Using this model, we simulate the effects of demand-side policies, including public procurement, financial incentives for consumers, public information dissemination, and policy mixes combined with these instruments on LCT diffusion. The results show that public procurement can effectively facilitate LCT diffusion and restrain the magnitudes of market fluctuations caused by demand-side dynamics in the diffusion process. The high consumer incentives facilitate the rapid diffusion of LCTs, but there are noticeable diminishing marginal effects; even if subsidies are only used on the demand side, the promotion effect on LCT can still be achieved through the demand-supply interaction. Furthermore, the public information dissemination improves LCT diffusion and stabilizes the adaptive behavior of enterprises, but its time-lag effect leads to the pattern of “hot policies and cold markets.” The introduction of policy mixes verifies these findings and reveals that although the public information dissemination is constrained by other policies, it may still be the premise of large-scale LCT diffusion. This study develops a valuable framework that enriches the modeling practice of LCT and provides insights for implementing well-designed policy packages.