Interaction and Transition Between Administrative and Market-Based Policies in Corporate Low-Carbon Transformation: An Evolutionary Game Analysis

This study examines how administrative regulation and market-based mechanisms jointly shape corporate low-carbon transformation in emerging markets. A tripartite evolutionary game model involving the government, high-carbon firms, and low-carbon firms is developed to analyze evolutionary paths and stable equilibria under different policy combinations. The model is calibrated using power-sector data from China’s national emission trading system and environmental regulation. Analytical results show that policy choice is cost-driven: administrative regulation dominates when enforcement costs are lower than carbon market costs, while declining market costs promote a transformation to market-based governance. For high-carbon firms, higher inspection probability is more effective than stringent penalties in inducing early transformation, whereas market mechanisms later encourage proactive transformation. Low-carbon firms’ expansion is more strongly influenced by transaction frictions and benchmark carbon intensity than by carbon prices. Simulation results based on calibrated parameters indicate that administratively driven and high-carbon transformation-driven pathways are more stable than market-driven pathways. These findings suggest that emerging markets should adopt a stage-based balance between administrative oversight and carbon market institutions.