Agent-Based Modeling of Carbon Emission Trading Market With Heterogeneous Agents

Abstract

This paper presents an agent-based simulation model of carbon emission trading market with heterogeneous agents. The carbon emission reduction strategies available to agents are production output adjustment strategy, carbon market emissions trading strategy, carbon emission abatement technology strategy, and hybrid strategy. We discuss the impacts of these strategies on production markets, carbon emissions markets, and corporate earnings. The results show that: (1) The production output adjustment strategy makes the agent blindly expand production in the early stage, and later irrational production reduction or even stop production. (2) The carbon market emissions trading strategy can make carbon emission rights flow better among agents, so that agents with stronger output capacity can increase output, reduce actual product cost, and improve production efficiency. (3) Although the carbon emission abatement technology strategy brings high amortization cost in the initial stage, it can improve the production efficiency of carbon emission rights and prolong the production cycle. (4) The hybrid strategy can effectively extend the production cycle of agents, reduce damage to carbon emission rights, and reduce production costs.

Keywords: Carbon emissions trading, Energy finance, Experimental finance, Agent-based modeling