Impact of cap-and-trade mechanisms on investments in renewable energy and marketing effort

This paper discusses the impact of cap-and-trade mechanisms, including grandfathering and benchmarking mechanisms, on renewable energy investments and marketing efforts in the electricity market. The current system constructs a two-level electricity supply chain, with a leader's electricity generator and a follower's electricity retailer. Based on the analysis framework of the game theory, the optimal solutions under the grandfathering mechanism and benchmarking mechanism are compared. The results are as follows. First, grandfathering and benchmarking are both conducive to the investment of renewable energy. Further, the benchmarking mechanism is more conducive to investments. Second, benchmarking is beneficial to marketing efforts, while grandfathering is not. Third, the grandfathering mechanism and benchmarking mechanism are conducive to the improvement of market demands. Further, grandfathering produces more total carbon emissions, while benchmarking reduces the total carbon emissions.