How to Optimize Production and Carbon Resources under Cap and Trade

With the increase of human carbon emissions, global climate warming is becoming more and more significant. Natural disasters, climate change and extreme weather events become more frequent, these environmental problems have caused serious influence to human life. China has established regional carbon emissions trading markets at seven pilot cities which are based on cap and trade. Participating enterprises are restricted in total carbon emissions through initial allocation of emission quotas. They can purchase emission quotas to satisfy their excessive emission needs via the carbon emissions trading market. Also, they can conduct self-purification to reduce carbon emission level to satisfy their excessive emission needs. And they can sell the surplus emission quotas to gain revenue via the carbon emission trade market. Under cap and trade, enterprises must balance their economic and environmental benefits. Based on such background, we have established a multi-period optimization model of integrated decision to help enterprises make production and carbon resource allocation decisions. It is found that government should combine industry self-purification characteristics and emission characteristics to allocate emission quotas; the fluctuations of carbon price should be considered when to set punishment force; also, self-purification, carbon trade and punishment should be balanced when to allocate carbon resources.