The Optimal Carbon Emission Reduction and Prices with Cap and Trade Mechanism and Competition
1
Management Science and Engineering Postdoctoral Mobile Station, Shandong Normal University, Ji’nan 250014, China
2
Antai College of Economics and Management, Shanghai Jiaotong University, Shanghai 200030, China
3
Business School, Shandong Normal University, Ji’nan 250014, China
4
School of Economics and Management, Hangzhou Normal University, Hangzhou 311121, China
*
Author to whom correspondence should be addressed.
Int. J. Environ. Res. Public Health 2018, 15(11), 2570; https://doi.org/10.3390/ijerph15112570
Received: 15 October 2018
/
Revised: 13 November 2018
/
Accepted: 14 November 2018
/
Published: 16 November 2018
(This article belongs to the Special Issue Decision Models for Sustainable and Coordinated Development of Environment, Economy, and Society)
More and more countries employ the Carbon Cap and Trade mechanism (CCT-mechanism) to stimulate the manufacturer to produce much more eco-friendly products. In this paper, we study how the CCT-mechanism affects competitive manufacturers’ product design and pricing strategies. Assume that there are two competitive manufacturers; we give the optimal closed form solutions of the carbon emission reduction rates and retail prices in the Nash game model and the Stackelberg game model with CCT-mechanism, respectively. Additionally, we also discuss the impacts of CCT-mechanism, consumer environmental awareness (CEA), and the sensitivity of switchovers toward price on the optimal carbon emission reduction rates, retail prices, and manufacturers’ profits. We find that (i) when the carbon quota is not enough, there is a trade off between investing in producing much greener product and purchasing carbon quota; when the carbon price is not high, the manufacturer tends to purchase the carbon quota; and when the carbon price is much higher, the manufacturer is more willing to increase the environmental quality of the product; (ii) manufacturer’s size affects product’s emission reduction rate and manufacturer’s optimal profit; larger manufacturer tends to produce much greener product, but it does not mean that he could obtain much more money than the small manufacturer; and (iii) the decision sequence changes manufacturer’s strategies; the optimal emission reduction rate in Nash and Stackelberg game models are almost the same, but the differences of prices and profits between Nash and Stackelberg model’s are much bigger.
View Full-Text
Keywords:
Carbon cap and trade mechanism; carbon emission reduction; manufacturer size; consumer environment awareness; competition
▼
Show Figures
Figure 1
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited
MDPI and ACS Style
Zhang, L.; Zhou, H.; Liu, Y.; Lu, R. The Optimal Carbon Emission Reduction and Prices with Cap and Trade Mechanism and Competition. Int. J. Environ. Res. Public Health 2018, 15, 2570. https://doi.org/10.3390/ijerph15112570
AMA Style
Zhang L, Zhou H, Liu Y, Lu R. The Optimal Carbon Emission Reduction and Prices with Cap and Trade Mechanism and Competition. International Journal of Environmental Research and Public Health. 2018; 15(11):2570. https://doi.org/10.3390/ijerph15112570
Chicago/Turabian StyleZhang, Linghong, Hao Zhou, Yanyan Liu, and Rui Lu. 2018. "The Optimal Carbon Emission Reduction and Prices with Cap and Trade Mechanism and Competition" International Journal of Environmental Research and Public Health 15, no. 11: 2570. https://doi.org/10.3390/ijerph15112570
Find Other Styles
Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.
