Implementation strategy and emission reduction effectiveness of carbon cap-and-trade in heterogeneous enterprises

Economics and Econometrics Social willingness-to-pay for environmental measures 05 social sciences 1. No poverty 0211 other engineering and technologies 02 engineering and technology Incentive utility Management Science and Operations Research 7. Clean energy General Business, Management and Accounting Industrial and Manufacturing Engineering 12. Responsible consumption 13. Climate action 8. Economic growth 11. Sustainability 0502 economics and business Voluntary reduction ratio Cap-and-trade Heterogeneity [SHS.ECO] Humanities and Social Sciences/Economics and Finance [SHS.GESTION] Humanities and Social Sciences/Business administration
DOI: 10.1016/j.ijpe.2022.108501 Publication Date: 2022-04-06T23:15:25Z
ABSTRACT
In this research, a carbon emission reduction supply chain mechanism formed by government and enterprises is developed. Using a mixed game model, we study the impact of enterprise heterogeneity and social willingness-to-pay for environmental measures on the implementation strategy and effectiveness of cap-and-trade mechanism. The choice and effectiveness of the strategies are cross-influenced by the aforementioned two factors. The former has thresholds, which serve as a basic guarantee and adjustment; the latter is a key factor affecting government and enterprise decision-making and the fairness of the sharing of emission reduction responsibilities. The quotas allocation in compliance with the rule mainly affects the allocation of industry profits and consumers’ active payment among enterprises, and is an effective tool for achieving two-way incentives. The difference between quotas and the voluntary reduction of emissions is the main reason for the surplus or shortage of quotas. We propose an emission reduction integration mechanism, which is based on the social willingness-to-pay for environmental measures, the difference of carbon emissions per unit and the quota allocation schemes, can avoid negative incentives and lack of fairness. The emission reduction mechanism can only reduce the loss of social welfare, but the government can launch appropriate emission reduction practices based on the conception of carbon neutrality to improve social welfare.
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