Dual-credit policy failure: The emergence principle and hedging mechanisms

Jing Chen, Yushi Wang, Yangyi Xu and Jingyi Shi

Energy Economics, 2025, vol. 141, issue C

Abstract: To achieve the emission reduction targets by different countries and regions, it is crucial to accelerate the emission reduction process in the automotive industry. Evaluating the effectiveness of China's Dual-credit policy (DCP) and exploring its potential risks of failure are crucial for enhancing policy efficacy and ensuring sustainable NEV development. Adopting the agent-based modeling (ABM) method, this paper observes the effect of the dual-credit policy, incorporating the technology and economy objectives. This study investigates the reasons behind the failure of the DCP and proposes a hedging mechanism to mitigate this issue. Key findings from the results include: (1) The current DCP has a 70 % probability of failing to meet both economic and technical criteria. (2) The disparity between new energy vehicle (NEV) automakers and fuel vehicle (FV) automakers in the market results in credit prices that are lower than anticipated, the DCP failed due to the decrease in profits and production capacity of NEV automakers because of the low price of credit. (3) Under the hedging mechanism, the probability of the DCP failing to meet both economic and technical criteria is reduced to 5 %. This paper provides theoretical support for policymakers to adjust the DCP.

Keywords: Dual-credit policy; Policy failure; Hedging mechanism; Agent-based modeling (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:141:y:2025:i:c:s0140988324008338

DOI: 10.1016/j.eneco.2024.108124

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