An optimal control model of carbon reduction and trading

Huaying  Guo; Jin  Liang

doi:10.3934/mcrf.2016015

Article Contents

2016, Volume 6, Issue 4: 535-550. Doi: 10.3934/mcrf.2016015

This issue Previous Article Next Article Concentrating solitary waves for a class of singularly perturbed quasilinear Schrödinger equations with a general nonlinearity

An optimal control model of carbon reduction and trading

Huaying Guo^1, and
Jin Liang^1,

1.
Department of Mathematics, Tongji University, Shanghai 200092

Received: September 30, 2015

Revised: December 31, 2015

Published: November 2016

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Abstract

In this study, a stochastic control model is established for a country to formulate a carbon abatement policy to minimize the total carbon reduction costs. Under Merton's consumption framework, by considering carbon trading, carbon abatement and penalties in a synthetic manner, the model is converted into a two-dimensional Hamilton--Jacobi--Bellman equation. We rigorously prove the existence and uniqueness of its viscosity solution. We also present the numerical results and discuss the properties of the optimal carbon reduction policy and the minimum total costs.

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Mathematics Subject Classification: 93E20, 49L25, 35K58.

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