Optimal Coordination Strategy for International Production Planning and Pollution Abating under Cap-and-Trade Regulations

Baogui Xin, Wei Peng and Minghe Sun
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Baogui Xin: Nonlinear Science Center, College of Economics and Management, Shandong University of Science and Technology, Qingdao 266590, China
Wei Peng: Nonlinear Science Center, College of Economics and Management, Shandong University of Science and Technology, Qingdao 266590, China
Minghe Sun: Department of Management Science and Statistics, College of Business, The University of Texas at San Antonio, San Antonio, TX 78249-0634, USA

IJERPH, 2019, vol. 16, issue 18, 1-21

Abstract: Because both pollution emissions and production policies often are international in scope, it is necessary to find optimal coordination strategies for international production planning and pollution abating. Differential game models are developed for multiple neighboring countries to reach optimal decisions on their production planning and pollution abating under cap-and-trade regulations. Non-cooperative and cooperative differential games are presented to depict the optimal tradeoffs between production planning and pollution abating. Hamilton-Jacobi-Bellman (HJB) equations are then employed to analyze the asymmetric and symmetric feedback solutions. Numerical simulations are used to illustrate the results. Five different dividends are also discussed. With the proposed strategies, more improvement will be directed toward production supplies and environmental issues than ever before.

Keywords: optimal coordination strategy; carbon emission; production plan; pollution abatement; differential game (search for similar items in EconPapers)
JEL-codes: I I1 I3 Q Q5 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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