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The System Dynamics (SD) Analysis of the Government and Power Producers’ Evolutionary Game Strategies Based on Carbon Trading (CT) Mechanism: A Case of China

Xin-gang Zhao () and Yu-zhuo Zhang ()
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Xin-gang Zhao: School of Economics and Management, North China Electric Power University, Beijing 102206, China
Yu-zhuo Zhang: School of Economics and Management, North China Electric Power University, Beijing 102206, China

Sustainability, 2018, vol. 10, issue 4, 1-18

Abstract: Climate warming caused by carbon emissions is one of the most serious problems faced by human beings, and the carbon trading (CT) mechanism is an effective way to promote carbon emission reduction and achieve green and low-carbon development. Scholars have mainly studied the impact of CT on the energy economy system, and few scholars studied the game process and behavior strategies of government and power producers in the implementation of a CT mechanism. This paper will fill this gap. This paper firstly constructs the evolutionary game model of government and power producers based on CT, and then simulates the evolutionary process of game behavior strategies by establishing a system dynamics (SD) model, and finally studies the influence of government controllable key factors on system stability. The combination of evolutionary game and SD in our study not only clearly reveals the complex and dynamic evolution process of game models under bounded rationality, but also provides a qualitative and quantitative simulation platform for analyzing the dynamic game process between government and power producers. The results show that: (1) There is no evolutionarily stable strategy (ESS) in the game system between government and power producers under CT, and the system evolution is characterized by periodicity; (2) When the government implements dynamic subsidies or punitive measures, the mixed strategy of the game system has ESS; (3) Reducing the unit subsidy and raising the unit fine can both promote the participation of power producers in CT, but the former increases the probability of government supervision; thus, it is best to increase the fines when the government makes strategic adjustments, followed by reducing subsidies.

Keywords: carbon trading; evolutionary game; behavior strategies; system dynamics (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2018
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