Year: 2025
Type: article
Abstract: In this study, we develop a stochastic optimal control model for corporate carbon management that synergistically combines emission reduction initiatives with carbon trading mechanisms. The model incorporates two control variables: the autonomous emission reduction rate and initial carbon allowance purchases, while accounting for both deterministic and stochastic carbon pricing scenarios. The solution is obtained through a two-step optimization procedure that addresses each control variable sequentially. In the first step, the problem is transformed into a Hamilton–Jacobi–Bellman (HJB) equation in the sense of viscosity solution. A key aspect of the methodology is deriving the corresponding analytical solution based on this equation’s structure. The second-step optimization results are shown to depend on the relationship between the risk-free interest rate and carbon price dynamics. Furthermore, we employ daily closing prices from 16 July 2021, to 31 December 2024, as the sample dataset to calibrate the parameters governing carbon allowance price evolution. The marginal abatement cost (MAC) curve is calibrated using data derived from the Emissions Prediction and Policy Analysis (EPPA) model, enabling the estimation of the emission reduction efficiency parameter. Additional policy-related parameters are obtained from relevant regulatory documents. The numerical results demonstrate how enterprises can implement the model’s outputs to inform carbon emission reduction decisions in practice and offer enterprises a decision-support tool that integrates theoretical rigor and practical applicability for achieving emission targets in the carbon market.
Source: Mathematics
DOI: 10.3390/math14010068
Authors: Wenlin Huang, Daming Shan
Institution: University of Shanghai for Science and Technology
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
SDG: Climate action
Open Access status: gold
Estimated APC paid: $3,137
Award: G6837416642
OpenAlex ID: W7117127182