Abstract
This paper is aimed at the call of the United Nations Intergovernmental Panel on Climate Change (IPCC) for the need to maintain global warming within a controllable range. The goal is to target carbon emissions to achieve “net-zero” emissions, along with constructing a green energy investment strategy model for firms in response to government’s environmental protection policies. The paper uses the real options approach of dynamic investment decision to construct an investment decision model. Considerations include government taxation of carbon emissions, subsidies to reduce carbon emission policies, and incentives for firms to renew their investments in green energy equipment. Assuming that there is uncertainty in government carbon emission taxes and a reduction of carbon emission subsidies, the changes follow the joint geometric Brownian movement. We used this model to solve the optimum of the threshold for carbon emission taxes and of carbon emission reduction subsidies ratio. If carbon emission taxes and carbon emission reduction subsidies ratio are higher than the threshold, a firm suspends investment in green energy equipment because government subsidies are insufficient. If carbon emission taxes and the carbon emission reduction-subsidy ratio are less than or equal to the threshold, then a firm is qualified for the government’s subsidies for reducing carbon emissions, and the firm invests in green energy equipment. The results of this study can provide reference for firms to invest in green energy equipment, and for government control of carbon emission policies. This policy can effectively reduce carbon emissions and achieve co-construction, co-governance, and the sharing of innovative social governance patterns. Finally, it can create a win–win situation between the government, firms, and society.
Highlights
Proposed by the United Nations in 2018, the world is at the most critical moment of climate change
The government should consider the issue of subsidies from a social-welfare perspective and reward carbon-reducing firms by encouraging firms to cooperate with governmental environmental-protection policies, fulfill social responsibilities, reduce carbon emissions, and invest in technological innovation by upgrading green energy equipment
Is the optimal threshold when firms invest in technological innovation and upgrading green energy equipment indicated by the ratio of government levies to firms’ carbon emission tax per unit Pe(t) divided by subsidies for firms’ carbon emissions reduced per unit Pc(t)
Summary
Proposed by the United Nations in 2018, the world is at the most critical moment of climate change. We applied the real options approach evaluate the feasibility of technological innovation and upgrading green energy equipment investment projects for firms to save energy and reduce carbon emissions. It considers the time risk factor and the uncertainty of the future, and the decision maker has the ability to respond to the choice Under this advantage, the real options approach evaluation project investment has become an important method for modern governments and firms [1]. Electricity prices, innovation subsidies, carbon taxes, the optimal investment threshold, and the timing of firms when electricity prices and solar energy costs are uncertain, they proposed policy development as the main key factor. This study applies the real options approach of dynamic investment strategy to construct an optimal decision-making model for firms to respond to government carbon emission taxes and carbon emission reduction subsidy policies
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