Abstract: According to the current realities of industry and the target of carbon reduction,companies are classified into two categories: high and low ranked by the carbon emission per unit item and introduce' the principle of common but differentiated responsibilities'. Considering history of carbon emissions and incentive by profit margins, a carbon quota allocation policy is present. Based on the allocation policy, a Cournot duopoly model is employed to study the influences on the two categories of reduction targets, quota allocation policy and carbon emission per unit item. The result shows that the quota allocation policy has a positive sensitivity on carbon emission per unit item; generous allocation focusing on low-ranked has a stronger incentive utility on those companies. Moreover, progressive-stage reduction mechanism has a positive effect on both incentive utility of implement a low-carbon and steady implementation of policies. The study highlights the importance of verification on the carbon emissions and also extends the perspectives of research and mechanism design on carbon reduction and will contributes to carbon reduction in China.

Key words: carbon quota allocation, baseline emissions, historical emissions, duopoly competition