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Tax or Subsidy? Optimal Carbon Emission Policy: A Supply Chain Perspective

Author

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  • Xing Yin

    (School of Management Science and Engineering, Nanjing University of Finance and Economics, Nanjing 210023, China)

  • Xiaolin Chen

    (School of Marketing and Logistics Management, Nanjing University of Finance and Economics, Nanjing 210023, China)

  • Xiaolin Xu

    (School of Business, Nanjing University, Nanjing 210093, China)

  • Lianmin Zhang

    (School of Management and Engineering, Nanjing University, Nanjing 210093, China)

Abstract

With a rigid requirement for environment protection, governments need to make appropriate policies to induce firms to adopt green technology in consideration of the rapidly increasing demand for environmentally friendly products. We investigated the government policy from the perspective of a supply chain, which consisted of the upstream government (she) and the downstream manufacturing firm (he). The government decided on the policy (tax or subsidy) to maximize the social welfare, while the firm decided on the greenness level of the product, which affects the consumers’ choice behavior and hence his own demand. Assuming else being equal, the government should adopt the tax policy if consumers are very sensitive to the greenness, the cost of greening is high, or the negative impact due to carbon emission is large, and subsidize the firm otherwise. We also conduct some numerical studies when price is endogenous. The main insights can be carried over.

Suggested Citation

  • Xing Yin & Xiaolin Chen & Xiaolin Xu & Lianmin Zhang, 2020. "Tax or Subsidy? Optimal Carbon Emission Policy: A Supply Chain Perspective," Sustainability, MDPI, vol. 12(4), pages 1-13, February.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:4:p:1548-:d:322335
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    References listed on IDEAS

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    Cited by:

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    8. Zhi-Hua Hu & Shu-Wen Wang, 2022. "An Evolutionary Game Model Between Governments and Manufacturers Considering Carbon Taxes, Subsidies, and Consumers’ Low-Carbon Preference," Dynamic Games and Applications, Springer, vol. 12(2), pages 513-551, June.

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