Emission regulation of conventional energy-intensive industries

You-hua Chen, Chan Wang () and Pu-yan Nie
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You-hua Chen: South China Agricultural University
Chan Wang: Guangdong University of Finance and Economics (GDUFE)

Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, 2020, vol. 22, issue 4, No 45, 3723-3737

Abstract: Abstract Global climate change is closely related to conventional energy consumption. Taking the regulations for emissions into account, this article uses a game theory approach to identify industries depending on conventional energies to reduce emissions. This paper proposes to design a suitable supervisory system for emission regulation based on limited supervisor and asymmetric production efficiency. Two different supervision mechanism, random and selected supervisions, are employed. Some interesting conclusions are achieved. Firstly, the greater the level of competition, the smaller the number of firms with emission-reduction technology (ERT) are. Interestingly, the number of firms without ERT increases faster than does the number of firms with ERT. Secondly, under the asymmetric case, the threshold value for firms with low production costs that always employ emission-reduction technology is presented. Finally, this paper proves that firms with higher production costs have greater incentives to avoid emission restriction. Based on the above conclusions, the corresponding policy implications or regulation institutions to reduce climate changes are outlined. Random inspect is optimal if firms’ efficiency information, measured by production cost, is incomplete, while selected supervise is better if efficiency information is complete.

Keywords: Regulation; Equilibrium; Emission restriction; Industries depending on energies (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s10668-019-00364-x

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