This paper studies how competing firms make technology choices and production decisions under the cap-and-trade policy when they engage in both product and emission trading markets. Using a two-stage game theoretical model, we analyze firms’ responses to stricter emission caps and efficiency improvements of clean technology. Interestingly, we identify a “reverse trading” phenomenon where the firm with traditional technology and hence higher emission intensity sells emission allowances to the firm with clean technology because the latter operates with a higher profit margin and can afford a higher premium for allowances. Furthermore, stricter regulations incentivize firms to adopt clean technology only if the technology efficiency exceeds a certain level. Otherwise, no matter how low the emission cap is, neither firm will adopt it due to higher production costs. Additionally, cleaner technology does not necessarily provide firms greater incentives to adopt it. The efficiency of clean technology has a non-monotonic effect on firms’ adoption incentives because it not only affects the adopting firm but also has a positive spillover effect on the firm using traditional technology through emission trading. From a regulatory perspective, we propose setting a moderate emission cap to maximize social welfare, and as clean technology becomes more efficient, the optimal cap should be further tightened when the technology is already highly efficient. These findings provide practical insights for policymakers in designing the cap-and-trade policy tailored to different levels of technology improvements.

中文翻译：

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总量控制与交易政策下的技术选择：排放总量控制与技术效率的影响


本文研究了竞争公司在参与产品和排放交易市场时，如何在限额与交易政策下做出技术选择和生产决策。使用两阶段博弈论模型，我们分析了公司对更严格的排放上限和清洁技术效率改进的反应。有趣的是，我们发现了一种“反向交易”现象，即拥有传统技术且排放强度较高的公司将排放配额出售给拥有清洁技术的公司，因为后者的利润率更高，并且能够承受更高的配额溢价。此外，更严格的法规只会在技术效率超过一定水平时激励公司采用清洁技术。否则，无论排放上限有多低，由于生产成本较高，两家公司都不会采用它。此外，更清洁的技术不一定会为公司提供更大的动力来采用它。清洁技术的效率对公司的采用激励措施具有非单调性的影响，因为它不仅影响采用的公司，而且对通过排放交易使用传统技术的公司也有积极的溢出效应。从监管的角度来看，我们建议设定一个适度的排放上限，以实现社会福利最大化，随着清洁技术变得更加高效，当该技术已经非常高效时，应该进一步收紧最佳上限。这些发现为政策制定者在设计针对不同技术改进水平的限额与交易政策时提供了实用的见解。