Optimization of Multi-Period Dual Credit Policy Considering the Production, R&D, and Credit Trading Decisions of Automobile Manufacturers

The Dual Credit Policy (DCP) is a market-based tradable credit mechanism designed to promote the development of the new energy vehicle industry, improve vehicle energy savings, and ultimately achieve the carbon emission reduction goals of the transportation industry. Under the DCP, automobile manufacturers (AMs) must meet both the corporate average fuel consumption (CAFC) credit requirement and the new energy vehicle (NEV) credit requirement. In a perfectly competitive market with multiple AMs that produce gasoline vehicles (GVs) and/or new energy vehicles (NEVs), we propose a mathematical model to predict each AM's vehicle production, research and development (R&D) investment, and credit trading decisions under a multi-period DCP, considering the mutual interactions between the AMs' decisions and credit prices. Taking the AMs' decisions and the credit market equilibrium as constraints, we then propose a bi-level programming problem to optimize the multi-period DCP. With numerical experiments, we found that imposing a multi-period DCP can effectively improve the market share of NEVs. The credit sales will become the primary revenue source for new energy AMs, and consumers can enjoy the price of NEVs below the cost. Under the optimal multi-period DCP, the credit requirements set by the government should have been relatively low in the previous few years, but have risen rapidly since then. This can give AMs enough time to buffer, but at the same time, it requires them to change their development strategy quickly