Abstract
Operating under Cap-and-Trade programme conditions has brought new challenges to industrial organizations pursuing green sustainable development by imposing more constraints on resource/energy acquisition and disposition in order to reduce green-house-gas emissions. New factors due to the conditions interact with each other and system production/service functions, causing complicated dynamic relationships that significantly affect the overall performance of participating enterprises. Managers now have to balance production economy and green improvement. This research shows a proactive approach based on system dynamics modelling to represent such complex systems and analyse the relationship to explore the underlining logic that drives system behaviour under related conditions. The analysis provides useful insights for decision or policymakers to pursue environmentally friendly and economically sound production. Conceptual models were developed and verified for functions, and simulation experiments were designed to implement the models and compare different strategies to analyse their impact on the system’s overall performance, such as long-term over-emission, continuous green investment on emissions reduction, and cost of purchasing emissions allowance or paying penalty (via over-emission tax).
Similar content being viewed by others
References
Azzone G and Noci G (1998). Identifying effective PMSs for the deployment of green manufacturing strategies. International Journal of Operations & Production Management 18 (4): 308–335.
BenDor TK (2012). The system dynamics of U.S. automobile fuel economy. Sustainability 4 (5): 1013–1042.
Cai L (2008). The Application of System Dynamics in the Research of Sustainable Development. China Environmental Science Press: Beijing.
Checkland P and Scholes J (1990). Soft Systems Methodology in Action. John Wiley & Sons: Chichester, UK.
Chen GY (2005). A dynamic analysis on technological innovation in nonlinear systems. Systems Engineering 23 (12): 74–78.
Du S, Dong J, Liang L and Zhang J (2009). Optimal production policy with emission permits and trading. Chinese Journal of Management Science 17 (3): 81–86.
EN (Enigin News) (2010). China set to use iron hand to force energy efficiency, www.enigin.com/about/enigin-plc/news/-/enigin-news.
European Union (2012). The EU Emission Trading System (EU-ETS), http://eu.europa.eu/clima/publications.
Forrester JW (1961). Industrial Dynamics. MIT Press: Cambridge.
Garrity EJ (2011). System dynamics modeling of individual transferable quota fisheries and suggestions for rebuilding stocks. Sustainability 3 (1): 184–215.
Georgopoulou E et al (2008). BEAsT: A decision-support tool for assessing the environmental benefits and the economic attractiveness of best available techniques in industry. Journal of Cleaner Production 16 (3): 359–373.
Jasch C and Stasiskiene Z (2005). From environmental management accounting to sustainability management accounting. Environmental Research, Engineering and Management 4 (34): 77–88.
Jenkins H (2006). Small business champions for corporate social responsibility. Journal of Business Ethics 67 (3): 241–256.
Jiang K (2009). China’s green economy report. New Corporate Finance 2 (6): 47–49.
Johansson G and Winroth M (2010). Introducing environmental concern in manufacturing strategies: Implication for the decision criteria. Management Research Review 33 (9): 877–897.
Kibira D, Jain S and McLean CR (2009). A system dynamics modeling framework for sustainable manufacturing. In: Proceedings of the 27th International Conference of the System Dynamics Society, USA, pp 1–22.
Laurinkeviciute A and Stasiskiene Z (2010). Sustainable development decision-making model for small and medium enterprises. Environmental Research, Engineering and Management 2 (52): 14–24.
Montalvo C (2008). General wisdom concerning the factors affecting the adoption of cleaner technologies: A survey 1990–2007. Journal of Cleaner Production 16 (1): S7–S13.
National Bureau of Statistics of China (NBSC) (2011). Communiqué on energy consumption per 10,000 Yuan of GDP by region in 2011. National Bureau of Statistics of China (NBSC): Beijing.
Qiang R and Liao Q (2010). Research on enterprises energy saving and emission reduction based on system dynamics. Journal of Wuhan University of Science and Technology 32 (4): 126–132.
Shenzhen Emission Rights Exchange (2012). China Shenzhen Emission Exchange, www.cerx.cn/cn/.
Society of Manufacturing Engineers (SME) (1996). Green Manufacturing. SME Product ID: BB96WBD1. J.
Song S, Wei Y and Fan Y (2004). Study on system dynamics approach for sustainable development in China: A review. China Population, Resources and Environment 14 (2): 42–48.
Srivastara SK (2007). Green supply-chain management: A state-of-the-art literature review. International Journal of Management Reviews 9 (1): 53–80.
Sterman J (2012). Sustaining sustainability: Creating a systems science in a fragmented academy and polarized world. In: Weinstein MP and Turner RE. Sustainability Science: The Emerging Paradigm and the Urban Environment. Springer-Verlag: New York, 21–58.
Tahir AC and Darton RC (2010). The process analysis method of selecting indicators to quantify the sustainability performance of a business operation. Journal of Cleaner Production 18 (16): 1598–1607.
UNDSD—United Nations Division for Sustainable Development (2003). Environmental Management Accounting Procedures and Principles. EMARIC Environmental Management Accounting Research and Information Center, United Nations Publications: Herndon, USA.
US Environmental Protection Agency (EPA) (2007). http://www.epa.gov/epahome. Retrieved 12 December 2007.
Wang J and Li Y (2009). Strategic orientation and innovative behavior of private enterprises in responding to environmental regulations. China Industrial Economics 22 (9): 16–26.
Wang QP (1994). System Dynamics. (in Chinese). Qinghua University Press: Beijing.
Wei Y, Wang K, Feng Z and Cong R (2010). Carbon Finance and Carbon Market: Models and Empirical Analysis. Science Press: Beijing.
Yang J, Li J and Wei L (2012). The impact of emission policies on supply chain based on system dynamics. Industrial Engineering and Management 17 (4): 21–30.
Yi WJ, Zou LL, Guo J, Wang K and Wei YM (2011). How can China reach its CO2 intensity reduction targets by 2020? A regional allocation based on equity and development. Energy Policy 39 (5): 2407–2415.
Zhang Q, Min X and Chen Y (2011). Reflection on the development of low-carbon cities from the perspective of systems engineering. Systems Engineering 29 (1): 1–7.
Zhong Y, Jia X and Qian Y (2013). System Dynamics. 2nd edn, Science Press: Beijing.
Zhou M, Pan Y, Chen Z, Yang W and Li B (2012). Selection and evaluation of green production strategies: Analytic and simulation models. Journal of Cleaner Production 26 (5): 9–17.
Acknowledgements
This research was partially supported by the Natural Science Foundation of China (Grant No. 71101094, 71172057, 71272089, and 71472126). We are also grateful to the referees and the editors.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Zhou, M., Pan, Y., Chen, Z. et al. Enterprise behaviour under Cap-and-Trade conditions: an experimental study with system dynamic models. J Simulation 10, 12–23 (2016). https://doi.org/10.1057/jos.2014.36
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1057/jos.2014.36