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Green Innovation Mode under Carbon Tax and Innovation Subsidy: An Evolutionary Game Analysis for Portfolio Policies

Author

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  • Shengzhong Zhang

    (School of Economics and Management, Chang’an University, Xi’an 710064, China)

  • Yingmin Yu

    (School of Economics and Management, Chang’an University, Xi’an 710064, China)

  • Qihong Zhu

    (School of Business Administration, Shanghai Lixin University of Accounting and Finance, Shanghai 201620, China)

  • Chun Martin Qiu

    (Lazaridis School of Business and Economics, Wilfrid Laurier University, Waterloo, ON N2L 3C5, Canada)

  • Aixuan Tian

    (School of Economics and Management, Chang’an University, Xi’an 710064, China)

Abstract

Previous literature has shown that manufacturers’ choices between radical and incremental green innovation modes can greatly impact the tradeoff between industry growth and carbon emission reduction. Yet, how the government can motivate manufacturers to implement radical green innovations to reduce carbon emission is unclear. In this paper, the researchers construct an evolutionary game model to analyze the joint impacts of carbon tax and innovation subsidy on manufacturers’ choices of green innovation mode. We derive the conditions for manufacturers’ stable strategies. Based on those results, we find that four factors—carbon tax, innovation subsidy, consumer green preference, and manufacturers’ capabilities of absorbing and adopting new technologies—may facilitate the choice of radical innovation. Furthermore, we conduct numerical simulations to verify the theoretical results, and further illustrate how the synergy of carbon tax rate and subsidy level affects the evolution of the green innovation mode choices. Specifically, we demonstrate the superiority of portfolio policy in the early stage of green innovation over single policy. In contrast, in the later stage, it is carbon tax but not innovation subsidy that remains effective. We discuss the insights for the government to formulate appropriate environmental policies to effectively promote the adoption of green innovation and reduce carbon emission.

Suggested Citation

  • Shengzhong Zhang & Yingmin Yu & Qihong Zhu & Chun Martin Qiu & Aixuan Tian, 2020. "Green Innovation Mode under Carbon Tax and Innovation Subsidy: An Evolutionary Game Analysis for Portfolio Policies," Sustainability, MDPI, vol. 12(4), pages 1-22, February.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:4:p:1385-:d:320224
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    22. Liping Wang & Zhijia Wang & Lili Tian & Chuang Li, 2022. "Evolutionary Game and Numerical Simulation of Enterprises’ Green Technology Innovation: Based on the Credit Sales Financing Service of Supply Chain," Sustainability, MDPI, vol. 15(1), pages 1-25, December.
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