Optimal Strategies of Carbon Market Trading Entities and Government Control Measures Under Economic Downturn Scenario

YANG Yifan, GUO Ju'e, LI Yi, LAI Kin Keung

Journal of Systems Science and Mathematical Sciences ›› 2022, Vol. 42 ›› Issue (8) : 1990-2003.

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Journal of Systems Science and Mathematical Sciences ›› 2022, Vol. 42 ›› Issue (8) : 1990-2003. DOI: 10.12341/jssms21718

Optimal Strategies of Carbon Market Trading Entities and Government Control Measures Under Economic Downturn Scenario

  • YANG Yifan1, GUO Ju'e1, LI Yi1, LAI Kin Keung2
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Abstract

Carbon markets based on carbon emissions rights to economic value, using the price mechanism, the mechanism of supply and demand market regulation mechanism, promoting industrial upgrading and energy transformation, has become an important policy tool for the government to achieve “Double Carbon” goals. With the advancement of the carbon market financialization, however, the impact of financial risk on the carbon market will be more obvious. In this paper, cross-price and nonlinear temporary price impact functions are introduced to describe the price impact of the carbon market. Combined with policy control, an enterprise asset liquidation model is established in the context of an economic downturn, and the optimal liquidation strategy and the influence of policy control level are analyzed through the liquidation order and liquidation volume. The results show that, firstly, the carbon assets with a smaller price impact coefficient, higher initial price, and lower initial holding will be preferentially liquidated by the enterprise. Secondly, the optimal liquidation volume of assets decreases with the increase of the enterprise's loss aversion. Finally, policy control can suppress the price fluctuation of carbon assets by influencing the optimal liquidation volume of carbon assets of enterprises. Meanwhile, the decline in liquidation volume will increase the operating pressure on enterprises. Therefore, the government needs to choose a reasonable level of policy control according to the macroeconomic situation and the survival boundary of enterprises.

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Carbon market / asset liquidation model / price impact / policy control / optimal liquidation strategy

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YANG Yifan , GUO Ju'e , LI Yi , LAI Kin Keung. Optimal Strategies of Carbon Market Trading Entities and Government Control Measures Under Economic Downturn Scenario. Journal of Systems Science and Mathematical Sciences, 2022, 42(8): 1990-2003 https://doi.org/10.12341/jssms21718

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