Optimal production policy of complete monopoly firm with Carbon Emissions Trading

Abstract

In this paper we investigate the optimal production policy of complete monopoly firm, establish and solve the model with and without Carbon Emissions Trading. We obtain the optimal production and maximum profit in different cases. The results show that when carbon emission quotas distributed by the government are greater than the firm's needs, firm's optimal production is not affected, and the maximum profit with Carbon Emissions Trading is bigger than the case without Carbon Emissions Trading; when carbon emission quotas distributed by the government are less than the firm's needs, the optimal production and maximum profit with Carbon Emissions Trading are both greater than the case without Carbon Emissions Trading. So the Carbon Emission Trading creates a new profit space for the firms.