Abstract
Under low carbon environment, a multi-period emissions reduction problem for manufacturer is investigated in the paper, where we assume that the government sets mandatory carbon emissions limit to all the enterprises by free of charge and allows the carbon emission quota to be traded or banked inter-temporally in the carbon trading market. Using discrete-time optimal control theory, the optimal emission reduction strategies for each period are firstly explored for maximizing the sum of net profit under cap-and-trade. The optimal carbon emissions, permit trading quantity, and the number of buying Certified Emission Reduction (CER) are obtained in each period. Furthermore, the effects of carbon price and initial carbon quota given by the government on the firm’s emission reduction strategies are discussed. Finally, numerical examples are illustrated to verify the proposed model, and some managerial inferences for a multi-period emission reduction are provided in conclusions.
Highlights
The reliance on carbon-based energy in industry and economic activities has led to excessive carbon dioxide emissions, posing unprecedented challenges to the global economy and ecosystem
The mechanism sets mandatory emissions limit to all the enterprises by free of charge or auction at the beginning of the regulation period and allows the carbon emission quota to be traded in the carbon trading market
Enterprise’s carbon emissions cannot exceed the mandatory quota set by the government; once actual carbon emissions exceed this limit set by government, enterprises have to buy carbon emission permits in the trading market
Summary
The reliance on carbon-based energy in industry and economic activities has led to excessive carbon dioxide emissions, posing unprecedented challenges to the global economy and ecosystem. In order to encourage enterprises to voluntarily develop energy saving and emission reduction activities, some countries and international organizations like European Union allow enterprises to adopt a voluntary emission reductions mechanism to offset the carbon emissions (usually, there are two basic types of carbon emissions permit that need to be considered in emission trading market: one is permit that the policy-maker allocates to firms in the beginning; the other is CER that is a credit for reducing greenhouse gas emissions through environmental protection project). In this paper, noting the emergence of carbon trading markets and the particularity of emission rights as commodities in the market, we here mainly focus on how to use carbon quotas within multi-compliance periods at a regulation stage, where the carbon quota given by the government is assumed to be allocated free of charge in the beginning, and this quota can be replaced by CER.
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