How to facilitate efficient blue carbon trading? A simulation study using the game theory to find the optimal strategy for each participant

Yixiong He, Fengxuan Zhang and Yanwei Wang

Energy, 2023, vol. 276, issue C

Abstract: Blue carbon trading provides not only an extra impetus to the diversification of the carbon trading system, but also substantial support for achieving the net-zero greenhouse gas emission target. Being aware of its importance, this study strives to lay a theoretical foundation for it and help blue carbon fully realize its value. While staying realistic and considering the complex relationship among the relevant participants in blue carbon trading, as well as their objective needs, this paper develops an evolutionary game model consisting of a demander, a supplier, the government, and a third-party institution to make a simulation analysis based on certain key parameters in order to determine how to maximize efficiency of blue carbon trading. The results show: (1) an extraordinarily high or low price will simply benefit one party to a transaction, but at considerable cost to the interests of the other party, which hence is unfavorable to blue carbon trading in the long run; (2) the government may increase, directly or indirectly, the willingness of the other three parties to participate in the trading through appropriate regulations, especially through adjustments to the emission quotas, which has the most significant impacts on overall blue carbon trading; (3) although the final choices of the demander, supplier, and third-party institution on whether to participate in a transaction are generally consistent, nonetheless, high derivative values of blue carbon products may drive the supplier to continue to engage in the related industry even when the demander has no purchase intent. In this case, the supplier does objectively provide a continuous supply of blue carbon, though it does not subjectively intend to do so.

Keywords: Carbon trading; Blue carbon; Four-player game; Trading mechanism; Third-party institution (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:276:y:2023:i:c:s0360544223009155

DOI: 10.1016/j.energy.2023.127521

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