The Study of Differential Game on Government Carbon Trading Policy and Firms’ Production Strategies Under Different Market Competition Levels

Jialin Zheng, Ya Zhou (), Keqiang Li, Yang Zeng, Ruining Wang and Canmin Zhang
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Jialin Zheng: School of Systems Science, Beijing Normal University, Beijing 100875, China
Ya Zhou: School of Systems Science, Beijing Normal University, Beijing 100875, China
Keqiang Li: School of Systems Science, Beijing Normal University, Beijing 100875, China
Yang Zeng: School of Systems Science, Beijing Normal University, Beijing 100875, China
Ruining Wang: School of Systems Science, Beijing Normal University, Beijing 100875, China
Canmin Zhang: School of Systems Science, Beijing Normal University, Beijing 100875, China

Sustainability, 2024, vol. 16, issue 24, 1-24

Abstract: We construct a Stackelberg differential game model in which industries with varying degrees of market rivalry are the followers, and the government is the leader, describing their long-term dynamic optimal decision-making behaviors, and we research how the government establishes the unit carbon trading price based on feedback from various industries in the early stages of carbon trading market establishment. We also examine how to decrease the peaking period and lower the peak value of the industry’s overall carbon emissions by modifying the pivotal parameters. Furthermore, the impacts of relevant parameters on the optimal feedback strategy are also analyzed. In light of this, policymakers may obtain the optimal carbon trading price for various industries based on the actual market competition levels in those sectors, achieving the goal of reducing carbon emissions while growing the economy. The government can incentivize companies to reduce carbon emissions by reasonably allocating carbon emission quotas. This approach helps achieve a win-win situation for environmental protection and economic development, thereby promoting sustainable societal progress.

Keywords: differential game; low-carbon production; market competition; carbon emission trading (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
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