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Technology adoption with carbon emission trading mechanism: modeling with heterogeneous agents and uncertain carbon price

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  • Chenhao Fang

    (East China University of Science and Technology)

  • Tieju Ma

    (East China University of Science and Technology
    International Institute for Applied Systems Analysis)

Abstract

The adoption of new technologies with high efficiency and low emissions is of great importance in achieving sustainable development. Most studies of technology adoption have been criticized for idealistically assuming only one global decision agent. In this paper, an optimization model of technology adoption with heterogeneous agents is proposed. These agents have different market shares, and each one attempts to identify the optimal technology adoption for a portion of the entire system. The carbon emission trading mechanism is implemented to reduce carbon emissions. Agents’ acceptance of uncertain carbon prices is characterized by calculating their willingness to pay, and a bargaining process is introduced to reasonably allocate the profit. Computational tests are conducted with different market shares and different discounting factors. Numerical results show that implementing the carbon emission trading mechanism is an effective way to promote technology adoption and carbon emission reduction, although it does not certainly lead to less carbon emissions than implementing only a carbon cap. A small gap between agents’ market shares and an increase in the seller’s discounting factor will lead to more adoption in the entire system. A seller’s market may lead to less carbon emissions than implementing only a carbon cap, while a buyer’s market may lead to more carbon emissions. Moreover, it is suggested that governments can propose incentive policies to support small companies to develop and maintain carbon prices at a reasonable level to benefit sellers to promote technology adoption.

Suggested Citation

  • Chenhao Fang & Tieju Ma, 2021. "Technology adoption with carbon emission trading mechanism: modeling with heterogeneous agents and uncertain carbon price," Annals of Operations Research, Springer, vol. 300(2), pages 577-600, May.
    • Handle: RePEc:spr:annopr:v:300:y:2021:i:2:d:10.1007_s10479-019-03297-w
    DOI: 10.1007/s10479-019-03297-w
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    2. Wen-Hsien Tsai & Shang-Yu Lai & Chu-Lun Hsieh, 2023. "Exploring the impact of different carbon emission cost models on corporate profitability," Annals of Operations Research, Springer, vol. 322(1), pages 41-74, March.

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