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Enterprise Scenario Analysis: A Systematic Framework for Monetizing CO 2 Compliance

Author

Listed:
  • Wei Long

    (School of Electromechanical and Vehicle Engineering, Chongqing Jiaotong University, Chongqing 400064, China)

  • Zhenfei Zhan

    (School of Electromechanical and Vehicle Engineering, Chongqing Jiaotong University, Chongqing 400064, China)

  • Cheng Hong

    (School of Electromechanical and Vehicle Engineering, Chongqing Jiaotong University, Chongqing 400064, China)

  • Liuzhu Qian

    (School of Electromechanical and Vehicle Engineering, Chongqing Jiaotong University, Chongqing 400064, China)

Abstract

The global automotive industry is currently undergoing a period of radical transformation as a result of the ongoing electrification of automobiles. China has established rigorous energy-saving and emission-reduction targets and regulations. Consequently, the automotive industry must take into account the limitations of carbon emission reduction and carbon trading when formulating major business strategies. A related question is how “internal incentives” should be set to maximize the variable profitability of automotive companies while meeting compliance constraints. In response, in this study, a unified and mutually consistent modeling framework for enterprise scenario analysis is proposed to align the product portfolio within an enterprise. Firstly, a game model of the new energy vehicle market is proposed to forecast general trends and provide forward-looking inputs for firms to develop business plans. Next, this paper proposes a framework for monetizing CO 2 compliance using the Pigovian tax/subsidy concept. The equilibrium is achieved through the imposition of a tax or subsidy by the company on each of its internal models. Utilizing historical data from A Motors, we clearly illustrate how our approach works and demonstrate its consistency with observations of the new energy vehicle market.

Suggested Citation

  • Wei Long & Zhenfei Zhan & Cheng Hong & Liuzhu Qian, 2025. "Enterprise Scenario Analysis: A Systematic Framework for Monetizing CO 2 Compliance," Sustainability, MDPI, vol. 17(3), pages 1-20, February.
    • Handle: RePEc:gam:jsusta:v:17:y:2025:i:3:p:1264-:d:1583620
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    References listed on IDEAS

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