Investment strategy analysis of emission-reduction technology under cost subsidy policy in the carbon trading market

Abstract

Purpose The authors consider a dynamic emission-reduction technology investment decision-making problem for an emission-dependent dyadic supply chain consists of a manufacturer and a retailer under subsidy policy for carbon emission reduction. The consumers are assumed to prefer to low-carbon products and formulate a supply chain optimal control problem. Design/methodology/approach The authors adopt differential game to analyze investment strategies of cost subsidy coefficient with respect to vertical incentive of a manufacturer and a retailer. A comparison analysis under four different decision-making situations, including decentralized decision-making, centralized decision-making, maximizing social welfare, is obtained. Findings The results show that the economic benefit and environmental pressure have a win–win performance in centralized decision-making. In four different game models, equilibrium strategies, profits and social welfare show changing diversity and have a consistent development trend as time goes on. Research limitations/implications The authors estimate the demand function is a linear function in this paper. According to the consumers’ preference to low-carbon products, consumer’s awareness meets the law of diminishing marginal utility like advertising goodwill accumulation. The carbon-sensitive coefficient might be a quadratic expression, which will complicate the problem and be consistent with reality. Practical implications It captures that there is a necessity to strengthen cooperation and exchange of carbon emission technology among the enterprises by simulation of different decision-makings when government granted cost subsidy. Social implications The results provide significant guidelines for the supply chain to make decision-makings of emission-reduction technology investment and relevant government departments to determine emission subsidies costs. Originality/value An endogenous subsidies coefficient is produced by the social welfare function. Distinguished from previous study, it also considered the influences of carbon emission trade policy and consumer preference.

Impact of government subsidy on the optimal strategies of improving water use efficiency for a high-water-consumption manufacturer

“…However, little attention has been paid to examining the role of government subsidy on the best choice of water-saving mode for HWC manufacturers. Additionally, subsidy schemes on environmental innovation have been designed from different angles, such as manufacturer's investment cost subsidy (Hou and Sun, 2020) and consumer subsidy (CS) on buying green products (Bian et al, 2020) to encourage investment in emission reduction technologies; output quantity subsidy (QS) to increase production (Zhang et al, 2021), innovative products subsidy for the manufacturer (Liu and Li, 2014) as well as unit resource-saving effort/effect subsidy (Chen and Wang, 2020). Despite the above studies contribute a lot to our research, few have investigated the selection of water-saving modes considering different government subsidy schemes.…”

Dynamic Strategy Analysis of Emission-Reduction Technology Investment Based on Pricing Coordination Mechanism under Cost Subsidy Policy

“…On a different front, scholars have also studied the role of government subsidies with respect to emission reductions in the supply chain. Hou et al studied the emission reduction technology investment strategy of supply chain from a dynamic perspective under subsidy policy and obtained a comparative analysis under different decision-making scenarios [18]. Using dynamic game theory, Chen et al retrospectively analyzed the impact of different government subsidy strategies on the decision variables of each subject.…”

Stochastic Differential Game Model Analysis of Emission-Reduction Technology Under Cost-Sharing Contracts in the Carbon Trading Market

“…Furthermore, Hovelaque proposed a new model to reduce carbon emission, which considered the relationship between price, inventory policy, environmentalrelated demand, and total carbon emissions [2]. Hou et al studied the decision-making problem in a dyadic supply chain consists of a manufacturer and a retailer for dynamic emission reduction technology investment, and the comparative analysis of four different decision-making circumstances, namely decentralized decision-making, centralized decision-making, coordinated decision-making and social welfare maximization, is obtained [3]. To study the production and emission control decision-making of the supply chain, Xu et al considered how wholesale prices and cost-sharing contracts can lead to an ordered supply chain system: manufacturers use green production technology to reduce carbon emissions associated with unit products, and then cooperate with retailers through a contract to sell products to consumers with low-carbon preferences [4].…”

“…To develop an intuitive analysis of the optimal strategy trajectory for the supply chain under the carbon trading and cost-sharing scenarios, and to map the evolution trend of carbon emission reduction expectation, manufacturer's profit, and the retailer's profit, we use the method of numerical simulation to express the evolution path. Drawing on existing research [3]- [7], we set the parameters as follows: ρ = 0.3, σ = 0.2, a = 4.5, b = 1, c = 3, α = 0.8, pe = 0.02, k = 0.6, μM = 1, eM = 0.5, gM = 2，E(0)=0, and δ=0.01. In this way, as shown in Fig.…”