Carbon emission reduction policy with privatization in an oligopoly model

Abstract

This paper constructs a mixed oligopoly model composed of a public enterprise and two private enterprises, and explores the equilibrium results under different carbon emission policies. In addition, this paper also analyzes the optimal carbon emission trading price and the optimal privatization level decision. The results show that the proportion of state-owned shares and the equity efficiency gap have impacts on the equilibrium results under different carbon emission policies. Privatization increases the profits of public firm but does not necessarily promote social welfare. Different carbon emission policy decisions have different impacts on the equilibrium results, and the emission reduction target is not completely consistent with the maximum social welfare target. The government can intervene by setting carbon emissions trading prices and making privatization decisions. Both full and partial privatization may be the optimal decision. Keywords: carbon emission policy; privatization; oligopoly; carbon emission trading price 1. Introduction With the increasingly negative impact of climate change, more and more attention is paid to the issue of carbon emissions (Sarkar et al. 2022a,b;Wang et al. 2022;Taleizadeh et al. 2021). It has become an international consensus to reduce carbon emissions through active policy measures (Chen & Nie, 2020a;Dabaghian et al. 2022). As early as 1997, to coordinate carbon emission behaviors, the participating countries of the United Nations Framework Convention on Climate Change formulated the "Kyoto Protocol". One of the important emission reduction policies is to

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