Optimal Carbon Emission Control With Allowances Purchasing

Xinfu Chen, Yuchao Dong, Wenlin Huang and Jin Liang

Papers from arXiv.org

Abstract: In this paper, we consider a company can simultaneously reduce its emissions and buy carbon allowances at any time. We establish an optimal control model involving two stochastic processes with two control variables, which is a singular control problem. This model can then be converted into a Hamilton-Jacobi-Bellman (HJB) equation, which is a two-dimensional variational equality with gradient barrier, so that the free boundary is a surface. We prove the existence and uniqueness of the solution. Finally, some numerical results are shown.

Date: 2024-07
New Economics Papers: this item is included in nep-ene and nep-env
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