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Optimal Implementation Strategy of Carbon Emission Reduction Policy Instruments in Consideration of Cost Efficiency

Li Xiangfei (), Qin Qin () and Gao Yang ()
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Qin Qin: School of Management, Tianjin Polytechnic University, Tianjin300387, China
Gao Yang: College of Management and Economics, Tianjin University, Tianjin300072, China

Journal of Systems Science and Information, 2017, vol. 5, issue 2, 111-127

Abstract: In this paper, regulatory and optimum programming model has been adopted. Considering the costs of emission reduction, supervision and penalty, we went all out to analyze the optimal decision of cost efficiency of regulators when implementing these three policy instruments: carbon emission standards, carbon emission trading permissions, and carbon taxes as well. Its result has indicated: In strict accordance with control target of total carbon emissions, regulators are willing to render social and economic cost able to achieve the goal of optimal cost efficiency by regulating carbon emission standards and supervising marginal cost caused by variations in the probability; fortunately, under the conditions of low supervisory cost and certain criteria which is met, the implementation of carbon emission trading permissions could provide social and economic cost with opportunities to realize that objective; through comparative analysis, carbon emission trading permissions have the advantages of higher efficiency than carbon emission standards on the premise of incomplete information. During the implementation of carbon taxes strategy, when there exists uncertainty information in the enterprises reduction behaviors, the condition which enterprises can fully comply with is the tax rate level is not higher than marginal penalty function; the tax rate level of enterprises perfect compliance ought not to be lower than the division of marginal penalty cost and marginal supervisory cost. The optimal strategy of enterprises imperfect compliance is that regulators varying the marginal cost of emission standards is equal to varying that of supervisory probability.

Keywords: carbon emission reduction; cost efficiency; carbon emission standard; carbon emission trading permission; carbon tax (search for similar items in EconPapers)
Date: 2017
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