Research on Energy Trading Mechanism Based on Individual Level Carbon Quota

Round 1

Reviewer 1 Report

Comments and Suggestions for Authors

In the context of sustainable development and climate change challenges, carbon quotas have emerged as a central concept. The article, “Research on energy trading mechanism based on individual level carbon quota”, aims to provide an innovative approach, by providing the design of framework trading system, based on individual carbon asset price and blockchain technology for platform optimization.

The idea of integrating individual carbon quotas with trading mechanisms, and the use of the blockchain technology have a significant potential for advancement in sustainable energy consumption. However, despite promising foundation, the article requires substantial improvements before publication.

Suggestions are detailed in the attached file. 

Comments for author File: Comments.pdf

Comments on the Quality of English Language

Author Response

Dear Reviewer,

 

Thank you very much for your comments. You helped our paper to be more rigorous and accurate. We will reply to you one by one according to your comments:

 

1.The article requires careful proofreading. Certain paragraphs, such as those on lines Some sections need rephrasing, such as lines 111- 116, 125-133, etc.157-161 and 248-250 should be removed as they seem to be parts of a template.2.

 

Reply 1: Thank you very much for your comments. We have rewritten the language of lines 111 to 116.

“In order to ensure the authenticity and effectiveness of the remaining carbon quota trading information and prevent data fraud, this paper builds a decentralized trading carbon account trading system based on the transparency and openness of the data of blockchain technology to reduce opportunistic behavior. In addition, emission reduction behavior is inseparable from people's lives, such as taking subways and buses to work instead of driving fuel cars to work, not using non-degradable shopping bags, and so on. The above low-carbon behaviors appear in all aspects of life and can happen anytime and anywhere. Therefore, individual-level carbon trading is characterized by small amounts and high frequency. It is a tedious work to count the transactions of individual carbon allowances and carbon credits, and the trading system needs to be expanded on the basis of the original blockchain to meet the technical needs of the remaining carbon quota transactions.”(Line 116-127)

Rewrite the language of lines 125 to 133.

“(2) Based on the guarantee of individual carbon trading service level, this paper constructs a carbon trading market system based on blockchain technology. It establishes an individual carbon account trading model under the price driving mechanism of individual carbon assets, and analyzes the issuance and management of individual carbon credits. We analyze the influencing factors of individual carbon asset price and explores the multi-agent incentive model of consumers' low-carbon behavior. This paper is expected to provide suggestions for the macro-policy control of government departments. (3) The profitability of the carbon trading platform is contingent upon the service sensitivity exhibited by both parties involved. Furthermore, the societal compounded interest derived from adopting blockchain technology surpasses the social welfare obtained from abstaining its adoption.” (Line 136-146)

 Lines 157 to 161 and 248 to 250 have been deleted in the revised version.

 

2.The abstract needs significant improvement. It should clearly state the purpose of the article: whether it aims to provide a framework for a carbon quota market system, propose a model, prove that individual carbon trading can reduce the total carbon emissions of consumers, or prove that blockchain technology can improve the profitability of the platform. Additionally, a clear statement about the methodology used should be introduced in the abstract. It is also unclear why the results of the article are specifically relevant for reducing carbon emissions in the Beijing subcenter area. Clarifying these points will enhance the abstract clarity. A possible next action after these clarifications is in my opinion a change of the title, to better reflect the content of the article3.

 

Reply 2: Thank you very much for your comments. The writing technique of the abstract has been refined and the purpose of the article has been added: to establish a framework for an individual-level carbon quota trading market system, demonstrating the potential enhancement in platform service level through blockchain technology.

“The high economic growth is accompanied by substantial consumption of fossil energy and significant negative externalities on the ecological environment. The global warming effect resulting from environmental pollution caused by energy has brought energy carbon emissions into the forefront of social attention. Establishing a carbon trading market is an essential measure to achieve the "double carbon" goal, with individual and household carbon emissions accounting for 70% of China's total emissions. Constructing an individual-level carbon trading market will facilitate the efficient realization of this goal. However, addressing the challenge of handling vast amounts of data and network congestion in relation to frequent but small-scale individual carbon trading has become an urgent issue that needs to be resolved. In light of this, the present study designs a digital technology-based framework for the carbon market trading system and proposes an individual carbon asset price-based model for carbon market trading, aiming to establish a research framework for the carbon quota market.Furthermore, blockchain technology is employed as the underlying technology in the proposed carbon trading market model to cater to individual-level carbon trading services and achieve optimal matching between carbon quota suppliers, thereby enhancing profitability of the carbon trading platform. The numerical results obtained from the model demonstrate that in absence of government subsidy mechanisms, individual-level carbon trading can effectively reduce total consumer emissions. The present study successfully overcomes the carbon lock-in effect of consumer groups and achieves the generation and trading of individual carbon assets despite capital constraints. This study facilitates accumulation and trade of individual carbon resources, reduces overall consumer emissions, enhances environmental benefits at societal level, and provides a foundation for governmental decision-making.” (Line 10-30)

 

3.The Introduction section is well organized, and the flow of idea is coherent. However, it is somewhat confusing whether the authors are referring to low carbon consumption in general (including green products, services, and behavior) or specifically to energy trading and consumption, which is the topic of the article according to the title. Clarifying the role and position of energy trading within the context of paper is crucial

 

Reply 3: Thank you for your valuable comments. Your input has helped me to further clarify the scope of low-carbon consumption in this paper. Given the limited availability of green emission reduction goods in China currently, the concept of low-carbon consumption in this study specifically refers to activities related to individuals' daily lives that can be readily engaged in, such as utilizing public transportation, cycling, and adopting degradable shopping bags. Moving forward, we will continue exploring the implementation framework and mechanisms for individual-level carbon trading system based on the expansion of low-carbon product coverage in China.

 

4.The main contributions of the paper are not well-aligned with the abstract, results, and conclusions. In particular, the second contribution requires rephrasing for better clarity. Ensuring consistency among these sections will strengthen the overall impact and coherence of the paper

 

Reply 4: Thank you very much for your suggestion. We have revised the presentation of abstracts, contributions and conclusions. " The present study successfully overcomes the carbon lock-in effect of consumer groups and achieves the generation and trading of individual carbon assets despite capital constraints."(Line26-28) is added to the abstract, thus corresponding to the first research contribution of the paper.

The expression of the second research contribution has been rewritten.” Based on the guarantee of individual carbon trading service level, this paper constructs a carbon trading market system based on blockchain technology. It establishes an individual carbon account trading model under the price driving mechanism of individual carbon assets, and analyzes the issuance and management of individual carbon credits. We analyze the influencing factors of individual carbon asset price and explores the multi-agent incentive model of consumers' low-carbon behavior. This paper is expected to provide suggestions for the macro-policy control of government departments.”(Line136-143 )

The third research contribution is added, “(3) The profitability of the carbon trading platform is contingent upon the service sensitivity exhibited by both parties involved. Furthermore, the societal compounded interest derived from adopting blockchain technology surpasses the social welfare obtained from abstaining its adoption.”(Line143-146), which corresponds to the first and second research conclusions.

 

5. In the literature review section, it is unclear how the four hypotheses derived from previous research are relevant to this paper. Clarifying the connection between these hypotheses and the current article is necessary. Some references are missing (lines179-196). The conclusions of the literature review section are not really related to the content of the section (what are the papers cited in the section that support conclusion 3 and 4?)

 

Reply 5. Thank you for your comments. We will reply to you in three small questions.

(1) Considering that the original literature review "2.1 Dynamic relationship between energy consumption and carbon emissions" has a weak relationship with the core chapter of the paper. We delete The original literature and rewrite the literature review "2.1 The impact of carbon quota trading on carbon emissions", and at the same time change the more appropriate references [6-13].

Carbon emission trading is an effective mechanism for achieving carbon neutrality [6]. In this process, carbon emissions are treated as a tradable commodity, and government departments allocate carbon allowances to firms based on predetermined guidelines [7]. If a firm's actual carbon emissions exceed the initial quota allocated by the government, it must obtain additional allowances through the carbon trading market [8]. Conversely, if a firm's actual carbon emissions are lower than the allocated amount, it can sell excess carbon quotas for profit. Through this market-based approach, carbon quota trading effectively reduces emissions and promotes low-carbon and sustainable development. Yang C. et al (2023) [9] conducted a study on the mechanism of carbon emission quota trading using an agent negotiation model with negotiator preferences and Bayesian algorithms, resulting in a win-win situation for all parties involved in the trading process. An Q. et al. (2023) [10] adopted the two-stage data envelopment analysis method to explore the resource allocation in the carbon emission system, and proposed the two-stage research structure of the carbon trading process.

As a market mechanism, carbon quota trading promotes the reduction of global CO2 emissions [11]. While carbon quota trading has been gradually implemented in the European Union and China, it still faces several challenges. Qi X. et al (2022) [12] argue that the imbalance between supply and demand of carbon quotas could hinder the development of the carbon market, with factors such as marginal production profit, marginal emission reduction cost, and purchasing carbon quotas through carbon trading jointly influencing portfolio effects. The utilization of digital technology facilitates the trading process by abstracting buyers and sellers into distinct nodes. Moreover, incorporating big data and artificial intelligence technologies into carbon emission trading can enhance efficiency while achieving win-win outcomes through accurate matching. Based on China's experience with its pilot program for carbon trading, Shi B. et al (2022) [13] demonstrate that policy implementation not only reduces regional carbon emissions but also curbs per capita CO2 emissions. However, it is important to note that the effectiveness of these measures depends on environmental regulations' stringency as they may limit the full potential of market-based mechanisms like carbon quotas.（Line149-177）

(2) We supplement the references in lines 179-196 [20]-[26]. (Line580-596)

• We supplement the papers on conclusions 3 and 4.

Although existing research has explored the theoretical feasibility of individual carbon trading, there are still some key research gaps that need to be addressed. Most individual carbon trading designs mainly focus on resident participation incentives due to the large amount of carbon emissions data available for individuals and households in a country [19] (Line195-199 ).

Zhang T. (2023) and other scholars have pointed out that there is insufficient transparency in all aspects of current carbon trading, as well as risks associated with centralized data operations and mutual trust issues [27]. Liu Y. et al.(2022) argue that information asymmetry in carbon trading slows down the process and increases transaction costs [28]. (Line222-226 )

 

6. Section 3 needs a methodology description, before going to in-depth presentation

 

Reply 6. Thank you for your comments. We have added a description of the methodology.

The paper establishes an evolutionary game model that encompasses the carbon trading platform, the carbon quota supplier, and the carbon quota demander in order to analyze participants' decision-making choices. Factors such as carbon trading price,users' willingness to participate, and service level are examined for their impact.

We define the carbon quota, establishes a fixed total for social carbon emissions, and assigns each user their individual maximum carbon allowance. During the same period, users with low carbon consumption will have a surplus portion of their carbon quota, while users with high carbon consumption will not have any surplus or may even exceed their allocated limit. As demanders of excess carbon allowances, users with high carbon emissions seek to purchase additional quotas from the carbon trading platform. Through the trading of surplus carbon allowances, we aim to enable low-carbon consumers to receive tangible rewards while maintaining unchanged total social carbon emissions. High-carbon consumers can acquire extra allowances and avoid penalties for excessive emissions by utilizing the proposed model for trading in carbon quotas, thereby achieving Pareto optimality among participants in the market. (Line 257-271)

 

7. The Results section should align with the main argument. The authors should ensure that the sections before and after are well connected.

 

Reply 7. We have adjusted the conclusion to ensure that all parts are well connected.

(1) For the future big data scenario, the carbon market blockchain system architecture design scheme is built; The numerical results obtained from the model demonstrate that in absence of government subsidy mechanisms, individual-level carbon trading can effectively reduce total consumer emissions. The present study successfully overcomes the carbon lock-in effect of consumer groups and achieves the generation and trading of individual carbon assets despite capital constraints. This study facilitates accumulation and trade of individual carbon resources, reduces overall consumer emissions, enhances environmental benefits at societal level, and provides a foundation for governmental decision-making. (2) A price-driven mechanism model is proposed for individual carbon assets circulating in the side chain of the blockchain system. Based on the massive transaction data of the future carbon market, this paper proposes and analyzes the technical solutions of the practical application of blockchain, which promotes the technological transformation of important industries, helps enterprises find new business operation models, and thus contributes to the development of the national economy. (3) On the premise of not considering government subsidies, in the face of consumer personal carbon quota projects with both public welfare and commercialization, the trading mechanism of surplus carbon quota based on carbon trading platform is proposed. It breaks through the carbon locking effect of consumer groups and realizes the generation and trading of individual carbon assets under the condition of financial constraints. This paper is expected to provide suggestions for the macro-policy control of government departments. (Line 516-536)

 

8. The Conclusion section should be revised after the authors address all the issues mentioned above. Also, proofreading is necessary. For instance, line 470 states "by analyzing the development trend of China's carbon market in the future" - which does not reflect the actual content of the paper.

 

Reply 8. We revise the conclusion again. Since the previous part does not involve the analysis of the future development trend of China's carbon market, we delete this part of the content.

Author Response File: Author Response.pdf

Reviewer 2 Report

Comments and Suggestions for Authors

This article that explores theoretically the role of an individual carbon market trading system. I think this is an interesting article and the model, as far as I can see, is correct. Wile I like the article, there are several issues that should be amended. They are listed as follows.

 1. Starting paragraph is Section 2.2: I have detected a phrase that does not make sense, and probably the authors forgot to delete it. If I am wrong, then the authors should rewrite the sentence because it is difficult to follow what it says within the context of this section. The phrase is:

“Research manuscripts reporting large datasets that are deposited in a publicly available database should specify where the data have been deposited and provide the relevant accession numbers. If the accession numbers have not yet been obtained at the time of submission, please state that they will be provided during review. They must be provided prior to publication”.

2. The authors should define acronyms before using them. Not all the readers will be familiar with them. In particular, define EGT in Line 166, and GSP in line 196 Carbon.

3. I recommend the authors to send the article to a professional proof-reader. There are several paragraphs that are very difficult to understand. See for example the paragraph in Line 231:

“This chapter defines the carbon quota and allows users to trade the remaining carbon quota through the carbon trading platform to realize that the final allocation of individual carbon quota has nothing to do with the initial allocation, so as to achieve the pareto optimization of participants in the carbon trading market and the maximization of social welfare under the premise of constant total social carbon emission”.

If we read this paragraph as it is, it makes the impression that “it is the chapter that allows user to trade”. Obviously, it does not make sense. In addition, this paragraph is too long, and difficult to understand what the authors are saying.

4. In Line 245, the authors explain that Table 1 contains the description of variable symbols. What does it mean variable symbols? Some of them are coefficients. How could they be variable?

5. I got completely lost in the paragraph in Line 248: “This section may be divided by subheadings. It should provide a concise and precise description of the experimental results, their interpretation, as well as the experimental conclusions that can be drawn”.

 It appears that the authors forgot to delete this.

6. In summary, the research is interesting, but the English, grammar and the logical sequence of ideas are weak. This is why I strongly suggest sending the article to a good proof-reader.

Comments on the Quality of English Language

English spelling is correct (I didn't detect any issue).

Grammar is poor in several parts of the manuscript. There are paragraphs that are very difficult to understand.

Logical sequence of ideas is missing in several parts of the article.

Author Response

Dear Reviewer,

 

Thank you very much for your comments. You helped our paper to be more rigorous and accurate. We will reply to you one by one according to your comments:

 

1.Starting paragraph is Section 2.2: I have detected a phrase that does not make sense, and probably the authors forgot to delete it. If I am wrong, then the authors should rewrite the sentence because it is difficult to follow what it says within the context of this section. The phrase is:

Research manuscripts reporting large datasets that are deposited in a publicly available database should specify where the data have been deposited and provide the relevant accession numbers. If the accession numbers have not yet been obtained at the time of submission, please state that they will be provided during review. They must be provided prior to publication”.

Reply 1: Thank you very much for your comments. We have removed these words.

2. The authors should define acronyms before using them. Not all the readers will be familiar with them. In particular, define EGT in Line 166, and GSP in line 196 Carbon.

Reply 2: Thank you very much for your comments. We have supplemented the definition of EGT in line 166, "exhaust gas temperature (EGT)"，（Line183）. The definition of GSP in line 196 is supplemented, "Generalized System of Preference (GSP)". (Line217-218)

3. I recommend the authors to send the article to a professional proof-reader. There are several paragraphs that are very difficult to understand. See for example the paragraph in Line 231:

This chapter defines the carbon quota and allows users to trade the remaining carbon quota through the carbon trading platform to realize that the final allocation of individual carbon quota has nothing to do with the initial allocation, so as to achieve the pareto optimization of participants in the carbon trading market and the maximization of social welfare under the premise of constant total social carbon emission”.

If we read this paragraph as it is, it makes the impression that “it is the chapter that allows user to trade”. Obviously, it does not make sense. In addition, this paragraph is too long, and difficult to understand what the authors are saying.

Reply 3: Thank you very much for your comments. We have rewritten this paragraph as follows:

“The paper establishes an evolutionary game model that encompasses the carbon trading platform, the carbon quota supplier, and the carbon quota demander in order to analyze participants' decision-making choices. Factors such as carbon trading price,users' willingness to participate, and service level are examined for their impact.

We define the carbon quota, establishes a fixed total for social carbon emissions, and assigns each user their individual maximum carbon allowance. During the same period, users with low carbon consumption will have a surplus portion of their carbon quota, while users with high carbon consumption will not have any surplus or may even exceed their allocated limit. As demanders of excess carbon allowances, users with high carbon emissions seek to purchase additional quotas from the carbon trading platform. Through the trading of surplus carbon allowances, we aim to enable low-carbon consumers to receive tangible rewards while maintaining unchanged total social carbon emissions. High-carbon consumers can acquire extra allowances and avoid penalties for excessive emissions by utilizing the proposed model for trading in carbon quotas, thereby achieving Pareto optimality among participants in the market. (Line 257-271)

4. In Line 245, the authors explain that Table 1 contains the description of variable symbols. What does it mean variable symbols? Some of them are coefficients. How could they be variable?

Reply 4: Thank you very much for your comments. We have deleted the inappropriate word "variable".(Line 281)

5. I got completely lost in the paragraph in Line 248: “This section may be divided by subheadings. It should provide a concise and precise description of the experimental results, their interpretation, as well as the experimental conclusions that can be drawn”.

 It appears that the authors forgot to delete this.

Reply 5: Thank you very much for your comments. This paragraph does not relate to the content of the paper and we have removed it.

6. In summary, the research is interesting, but the English, grammar and the logical sequence of ideas are weak. This is why I strongly suggest sending the article to a good proof-reader.

Reply 6: Thank you very much for your comments. We have polished the language of the paper according to your requirements.

 

Author Response File: Author Response.pdf

Round 2

Reviewer 2 Report

Comments and Suggestions for Authors

The authors have made satisfactory improvements and have addressed all my observations well. Therefore, I think the article is ready for publication.