Abstract: The greenhouse effect causes global warming, which has attracted attention from all of society. Carbon emissions are the main driver of the greenhouse effect, so it is urgent to reduce them. The electric power industry is the largest carbon emitter, accounting for about 40% of total carbon emissions. Renewable energy is attractive because it produces zero carbon emissions, and increasing investment in it can help optimize the energy infrastructure. However, investment requires capital, so enterprises pursuing profit maximization are reluctant to over-invest in renewable energy. Government implementation of a cap-and-trade mechanism is one incentive for investment. Moreover, consumer preferences for renewable energy affect investment behavior because they influence market demand. Therefore, investors are influenced by cap-and-trade mechanisms and consumer preferences. In an electricity supply chain, electricity generation enterprise (“generator”) investing in renewable energy must satisfy the requirements of the cap-and-trade mechanism, while electricity retailer (“retailer”) invest in renewable energy to satisfy consumer preferences.

Key words: cap-and-trade mechanism; renewable energy investment; electricity supply chain