Enterprise decision-making in energy use rights trading market: A theoretical and simulation study

Energy use rights trading (EURT) is an innovative form of market-based measure in China, with the aim of energy conversion. The influence on enterprises' production decisions and energy-saving choices, and its potential economic costs, have been subjects of considerable attention and debate within China. In this study, we propose an optimization decision model to analyze the effects of EURT on enterprises' total energy consumption, energy efficiency, and economic efficiency in an equilibrium state. We found that EURT positively impacts energy conservation and energy efficiency, albeit potentially resulting in some economic efficiency loss. The price of energy use rights quotas is directly tied to overall supply, and an increase in quota price can enhance the effectiveness of dual control on energy consumption and energy intensity. Furthermore, EURT policy promotes a bias towards technological innovation. The results also demonstrate that in comparison to command-and-control regulation, EURT offers advantages in terms of regulation cost savings. The findings in this paper carry valuable insights for the economic, resource, and environmental outcomes of EURT, and enable policymakers to make well-informed decisions regarding this market-based measure.