A strategic optimizing carbon neutrality within profit and emission reduction efficiency: A Stackelberg game analysis under a cap-and-trade scheme

Abstract

Abstract Carbon emissions (CO2e) are a main problem, and many countries are committed to reducing CO2e to attain carbon neutrality. To narrow this gap, this research considers green technology implementation (GTI) and CO2e quota in dual green gaming. The objective is to explore the integration of GTI and CO2e quotas into optimal production and pricing decisions in emission-generating companies (EGCs). To achieve this, a two-party simulation Stackelberg game model involving the CO2e strategy of EGCs and governments is proposed. We formulate a mathematical model and experimental methods to optimize EGCs' decision-making using neutral indicators. EGCs optimize production quantity, achieving CO2e reduction through ERE maximization. EGCs exhibit a strong commitment to ERE enhancement practices, enhancing profit and carbon-neutral goals. Our findings demonstrate the effectiveness of CO2e quotas and GTI as carbon-neutral indicators in EGCs, contributing to global carbon emission reduction. Our research provides both literature and inspiration for global CO2e reduction efforts. Moreover, it aids governments in exploring optimal incentives and decisions for pricing and production. Last, this work enables EGCs to maximize profits and move toward a carbon-neutral environment.