The impact of the under enforcement of RPS in China: An evolutionary approach

Debin Fang, Chaoyang Zhao, Andrew N. Kleit

Research output: Contribution to journalArticle

Abstract

The implementation of renewable portfolio standards (RPS) in China is limited by the interests of the sector being regulated. Power companies generally lack the incentive to generate renewable power. They can be expected to resist the implementation of RPS standards, which will in turn affect the successful implementation of the RPS policy. Thus studying the strategic interaction and co-evolution between the government and power companies under the RPS regulation is of great importance. The RPS policy has uncertain effects because of its complexity, market dynamics and information asymmetry. Given this, we study the expected effect of the under-enforcement of RPS standards using an evolutionary approach. In the context of bounded rationality, our model creates a regulatory evolutionary game model of RPS between the regulators and types of power companies based on cost structures. This model considers the competitive relationship between power companies of fossil and renewable sources in the face of the static and dynamic subsidies and punishment mechanisms. The show that a dynamic subsidy and punishment mechanism not only helps achieve a better regulatory effect than a static mechanism, but also restrains the evolutionary oscillation.

Original languageEnglish (US)
Article number111021
JournalEnergy Policy
Volume135
DOIs
StatePublished - Dec 2019

Fingerprint

Industry
enforcement
coevolution
asymmetry
incentive
oscillation
fossil
market
power company
cost
effect
Costs
policy
subsidy

All Science Journal Classification (ASJC) codes

  • Energy(all)
  • Management, Monitoring, Policy and Law

Cite this

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abstract = "The implementation of renewable portfolio standards (RPS) in China is limited by the interests of the sector being regulated. Power companies generally lack the incentive to generate renewable power. They can be expected to resist the implementation of RPS standards, which will in turn affect the successful implementation of the RPS policy. Thus studying the strategic interaction and co-evolution between the government and power companies under the RPS regulation is of great importance. The RPS policy has uncertain effects because of its complexity, market dynamics and information asymmetry. Given this, we study the expected effect of the under-enforcement of RPS standards using an evolutionary approach. In the context of bounded rationality, our model creates a regulatory evolutionary game model of RPS between the regulators and types of power companies based on cost structures. This model considers the competitive relationship between power companies of fossil and renewable sources in the face of the static and dynamic subsidies and punishment mechanisms. The show that a dynamic subsidy and punishment mechanism not only helps achieve a better regulatory effect than a static mechanism, but also restrains the evolutionary oscillation.",
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The impact of the under enforcement of RPS in China : An evolutionary approach. / Fang, Debin; Zhao, Chaoyang; Kleit, Andrew N.

In: Energy Policy, Vol. 135, 111021, 12.2019.

Research output: Contribution to journalArticle

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