Enterprise Scenario Analysis: A Systematic Framework for Monetizing CO2 Compliance

The global automotive industry is currently undergoing a period of radical transformation as a result of the ongoing electrification of automobiles. China has established rigorous energy-saving and emission-reduction targets and regulations. Consequently, the automotive industry must take into account the limitations of carbon emission reduction and carbon trading when formulating major business strategies. A related question is how “internal incentives” should be set to maximize the variable profitability of automotive companies while meeting compliance constraints. In response, in this study, a unified and mutually consistent modeling framework for enterprise scenario analysis is proposed to align the product portfolio within an enterprise. Firstly, a game model of the new energy vehicle market is proposed to forecast general trends and provide forward-looking inputs for firms to develop business plans. Next, this paper proposes a framework for monetizing CO2 compliance using the Pigovian tax/subsidy concept. The equilibrium is achieved through the imposition of a tax or subsidy by the company on each of its internal models. Utilizing historical data from A Motors, we clearly illustrate how our approach works and demonstrate its consistency with observations of the new energy vehicle market.