Optimal carbon emission control with allowances purchasing
Abstract
Abstract In this paper, we consider a company can simultaneously reduce its emissions and buy carbon allowances at any time. We establish an optimal control model involving two stochastic processes with two control variables, which is a singular control problem. This model can then be converted into a Hamilton–Jacobi–Bellman equation, which is a 2D variational equality with gradient barrier, so that the free boundary is a surface. We prove the existence and uniqueness of the solution. Finally, some numerical results are shown.
Fields of Study & Subjects
Advanced Control Systems Optimization
Process Optimization and Integration
Climate Change Policy and Economics
Publication details
- Journal / source
- IMA Journal of Applied Mathematics
- Publisher
- Oxford University Press (OUP)
- Volume
- 91
- Issue
- 3
- Pages
- 229–272
- Publication date
- 13 May 2026
- Language
- EN