The duopoly producing strategy under carbon emissions regulation

We investigate the duopoly producing strategy under carbon emissions including the carbon emissions tax, mandatory carbon emissions capacity and cap-and-trade. We use the game theory to analyze the duopoly manufactories production quantity strategies. Result shows, under each policy, we can find the Nash Equilibrium of two firms´ optimal production quantity and expected profit. Specifically, we derive that duopoly market´s profit is optimal when implementing the cap-and-trade policy.