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Emission regulation of conventional energy-intensive industries

  • You-hua Chen
  • Chan WangEmail author
  • Pu-yan NieEmail author
Article

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 

List of symbols

N

Number of firms

p

Price

qi

Outputs of firm i

A

Market size

ei

Energy inputs of firm i

EMi

Emission of firm i

γ

Marginal emission

c

Marginal costs

m

Number of supervisors

pr

Probability of this firm being visited

πi

Profits of firm i with emission-reduction technology

Ex(πi)

Expected profits of firm i without emission-reduction technology

k

Number of firms use emission-reduction technology

\(\hat{h}\)

Number of firms without emission-reduction technology

Q

Total outputs

Notes

Acknowledgements

This work is partially supported by National Natural Science Foundation of PRC (71771057, 71401057), the Humanities and Social Sciences Fund of the Ministry of Education (18YJC790156), the Guangdong Social Science Foundation (GD2018CYJ01), the Soft Science Project of Guangdong Province (2014A070704008), and Innovative Group Foundation (Humanities and Social Sciences) for Higher Education of Guangdong Province (2015WCXTD009). Sincerely thank to the anonymous reviewers.

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Copyright information

© Springer Nature B.V. 2019

Authors and Affiliations

  1. 1.College of Economics and ManagementSouth China Agricultural UniversityGuangzhouPeople’s Republic of China
  2. 2.Institute of Guangdong Economy and Social Development, School of Finance, Collaborative Innovation Center of Scientific Finance and IndustryGuangdong University of Finance and Economics (GDUFE)GuangzhouPeople’s Republic of China

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