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Combating the rent-seeking among enterprises in China's emissions trading system

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  • Liu, Changyu
  • Sun, Jia
  • Zheng, Luhang
  • Zhu, Renkui

Abstract

Enterprises engage in rent-seeking with third-party verification authorities (TPs) falsify carbon data has seriously distorted the order of emissions trading system (ETS). Methods of effectively regulating rent-seeking in ETS remain unclear. Based on the analysis of the formation mechanisms of rent-seeking, a tripartite evolutionary game is constructed to explore the interactive behavior of enterprises, TPs, and governments. The important factors affecting the players' behavior were verified using simulation. The results revealed the following: 1) there is a significant correlation between the probability of rent-seeking, probability of acceptation by TPs and the probability of active supervision. 2) based on the evolutionary stability strategy in the game, two kinds of governance mode of rent-seeking are proposed, the market-oriented mode is more efficient than government-led mode; 3) the initial willingness of the tripartite stakeholders, relaxed cost, the penalties for rent-seeking, and the rewards were determined to be critical factors that influence evolutionary results. Finally, the practical countermeasures are recommended to strengthen the collaborative governance of ETS.

Suggested Citation

  • Liu, Changyu & Sun, Jia & Zheng, Luhang & Zhu, Renkui, 2025. "Combating the rent-seeking among enterprises in China's emissions trading system," Emerging Markets Review, Elsevier, vol. 65(C).
    • Handle: RePEc:eee:ememar:v:65:y:2025:i:c:s1566014124001286
    DOI: 10.1016/j.ememar.2024.101233
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