Evolutionary game analysis of air pollution co-investment in emission reductions by steel enterprises under carbon quota trading mechanism

Air pollution has become the focus of social attention, and the development of the steel industry has caused serious pollution problems. Currently, air pollution control is inefficient, and the Chinese government encourages steel enterprises to jointly control regional air pollution. An evolutionary game model regarding the inter-steel enterprises under the government subsidy mechanism was developed to determine the optimal synergistic air pollution management strategy between large steel enterprises and medium and small-sized steel enterprises under the government subsidy policy. Subsequently, a carbon quota trading mechanism is introduced to the base model to reduce the possibility of enterprises choosing not to carry out air pollution control investment strategies and mutual free-riding behavior among enterprises. Results suggest that government subsidies and input-output ratios are critical for enterprises to collaborate on air pollution control investments. Threshold of the input-output ratios can be lowered by reducing the benefits of free-riding behavior and input costs and increasing the benefits of government subsidies and common products. Enhancing the input-output ratios, benefits of common products, input costs, government subsidies, and benefits of free-riding behavior can lead enterprises to converge to the best choice. Furthermore, carbon quota trading mechanism can take effect only when carbon quotas sold by both enterprises are greater than the threshold value of the carbon quotas given by the government. At this time, enterprises obtain carbon trading revenue and government subsidies much more than input costs, and they invest in air pollution with no free-riding behavior. Moreover, increasing the price of carbon trading helps in the promotion of the improvement of carbon trading profits and the tendency to choose the best strategy for both enterprises.