IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v14y2022i6p3453-d771897.html
   My bibliography  Save this article

The Synergy Green Innovation Effect of Green Innovation Subsidies and Carbon Taxes

Author

Listed:
  • Xiao Yu

    (Northeast Asian Research Center, Jilin University, Changchun 130400, China)

  • Yingdong Xu

    (Northeast Asian Studies College, Jilin University, Changchun 130400, China)

  • Jian Zhang

    (School of International Economics and International Relations of Liaoning University, Shenyang 110136, China)

  • Yue Sun

    (Northeast Asian Research Center, Jilin University, Changchun 130400, China)

Abstract

The economic uncertainty caused by COVID-19 has led governments around the world to attach more importance to green innovation to accomplish their carbon reduction schemes. To improve the green innovation encouraging effect of an environmental policy system, this study introduces a unit progressive carbon tax on the basis of a green innovation subsidy to discuss the synergy green innovation effect between them. We set up a dynamic evolutionary game model to analyze the respective influences of green innovation subsidies and an environmental policy system containing a unit progressive carbon tax on Low Carbon Technology (LCT) heterogeneous enterprises’ endogenous green innovation strategies. The Evolutionary Stable Strategy analysis of dynamic game models demonstrate that there does exist a synergy green innovation effect between green innovation subsidies and unit carbon taxes. The numerical simulation shows that the synergy green innovation effect of green innovation subsidies and carbon taxes contains both an overlapping policy effect and a more significant green innovation stimulating effect on enterprises with high LCT. Additionally, the introduction of a carbon tax will increase enterprises’ affordability on the green innovation cost coefficient. Furthermore, introducing a unit progressive carbon tax would also create additional stimulation for enterprises to pursue a larger carbon reduction amount for the carbon emission cost-saving advantage. Based on the synergy green innovation effect mentioned above, we also investigate the policy implications of varying the tax rate and subsidy proportion in different situations.

Suggested Citation

  • Xiao Yu & Yingdong Xu & Jian Zhang & Yue Sun, 2022. "The Synergy Green Innovation Effect of Green Innovation Subsidies and Carbon Taxes," Sustainability, MDPI, vol. 14(6), pages 1-27, March.
  • Handle: RePEc:gam:jsusta:v:14:y:2022:i:6:p:3453-:d:771897
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/14/6/3453/pdf
    Download Restriction: no

    File URL: https://www.mdpi.com/2071-1050/14/6/3453/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Corrado Di Maria & Sjak Smulders & Edwin Werf, 2017. "Climate Policy with Tied Hands: Optimal Resource Taxation Under Implementation Lags," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 66(3), pages 537-551, March.
    2. Daron Acemoglu & Philippe Aghion & Leonardo Bursztyn & David Hemous, 2012. "The Environment and Directed Technical Change," American Economic Review, American Economic Association, vol. 102(1), pages 131-166, February.
    3. André Grimaud & Luc Rouge, 2008. "Environment, Directed Technical Change and Economic Policy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 41(4), pages 439-463, December.
    4. Weimin Ma & Ranran Zhang & Shiwei Chai, 2019. "What Drives Green Innovation? A Game Theoretic Analysis of Government Subsidy and Cooperation Contract," Sustainability, MDPI, vol. 11(20), pages 1-24, October.
    5. Daron Acemoglu, 2002. "Directed Technical Change," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(4), pages 781-809.
    6. Xu, Changyan & Wang, Chuanxu & Huang, Rongbing, 2020. "Impacts of horizontal integration on social welfare under the interaction of carbon tax and green subsidies," International Journal of Production Economics, Elsevier, vol. 222(C).
    7. Philippe Aghion & Antoine Dechezleprêtre & David Hémous & Ralf Martin & John Van Reenen, 2016. "Carbon Taxes, Path Dependency, and Directed Technical Change: Evidence from the Auto Industry," Journal of Political Economy, University of Chicago Press, vol. 124(1), pages 1-51.
    8. Roger Fouquet, 2016. "Path dependence in energy systems and economic development," Nature Energy, Nature, vol. 1(8), pages 1-5, August.
    9. Baker, Erin & Shittu, Ekundayo, 2006. "Profit-maximizing R&D in response to a random carbon tax," Resource and Energy Economics, Elsevier, vol. 28(2), pages 160-180, May.
    10. Daron Acemoglu & Ufuk Akcigit & Douglas Hanley & William Kerr, 2016. "Transition to Clean Technology," Journal of Political Economy, University of Chicago Press, vol. 124(1), pages 52-104.
    11. Stucki, Tobias & Woerter, Martin & Arvanitis, Spyros & Peneder, Michael & Rammer, Christian, 2018. "How different policy instruments affect green product innovation: A differentiated perspective," Energy Policy, Elsevier, vol. 114(C), pages 245-261.
    12. Karydas, Christos & Zhang, Lin, 2019. "Green tax reform, endogenous innovation and the growth dividend," Journal of Environmental Economics and Management, Elsevier, vol. 97(C), pages 158-181.
    13. Garrone, Paola & Grilli, Luca, 2010. "Is there a relationship between public expenditures in energy R&D and carbon emissions per GDP? An empirical investigation," Energy Policy, Elsevier, vol. 38(10), pages 5600-5613, October.
    14. Rob Hart, 2019. "To Everything There Is a Season: Carbon Pricing, Research Subsidies, and the Transition to Fossil-Free Energy," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 6(2), pages 349-389.
    15. Xiao Yu & Yingdong Xu & Meng Sun & Yanzhe Zhang, 2021. "The Green-Innovation-Inducing Effect of a Unit Progressive Carbon Tax," Sustainability, MDPI, vol. 13(21), pages 1-18, October.
    16. Friedman, Daniel, 1991. "Evolutionary Games in Economics," Econometrica, Econometric Society, vol. 59(3), pages 637-666, May.
    17. Liu, Yu & Lu, Yingying, 2015. "The Economic impact of different carbon tax revenue recycling schemes in China: A model-based scenario analysis," Applied Energy, Elsevier, vol. 141(C), pages 96-105.
    18. Nick Johnstone & Ivan Haščič & David Popp, 2010. "Renewable Energy Policies and Technological Innovation: Evidence Based on Patent Counts," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 45(1), pages 133-155, January.
    19. Murray, Brian & Rivers, Nicholas, 2015. "British Columbia’s revenue-neutral carbon tax: A review of the latest “grand experiment” in environmental policy," Energy Policy, Elsevier, vol. 86(C), pages 674-683.
    20. J. van den Bergh & J. Castro & S. Drews & F. Exadaktylos & J. Foramitti & F. Klein & T. Konc & I. Savin, 2021. "Designing an effective climate-policy mix: accounting for instrument synergy," Climate Policy, Taylor & Francis Journals, vol. 21(6), pages 745-764, July.
    21. Stephie Fried, 2018. "Climate Policy and Innovation: A Quantitative Macroeconomic Analysis," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(1), pages 90-118, January.
    22. Fischer, Carolyn & Newell, Richard G., 2008. "Environmental and technology policies for climate mitigation," Journal of Environmental Economics and Management, Elsevier, vol. 55(2), pages 142-162, March.
    23. Hattori, Keisuke, 2017. "Optimal combination of innovation and environmental policies under technology licensing," Economic Modelling, Elsevier, vol. 64(C), pages 601-609.
    24. Costa-Campi, M.T. & García-Quevedo, J. & Martínez-Ros, E., 2017. "What are the determinants of investment in environmental R&D?," Energy Policy, Elsevier, vol. 104(C), pages 455-465.
    25. Goulder, Lawrence H. & Mathai, Koshy, 2000. "Optimal CO2 Abatement in the Presence of Induced Technological Change," Journal of Environmental Economics and Management, Elsevier, vol. 39(1), pages 1-38, January.
    26. Lee, Sang-Ho & Park, Chul-Hi, 2021. "Environmental regulations in private and mixed duopolies: Taxes on emissions versus green R&D subsidies," Economic Systems, Elsevier, vol. 45(1).
    27. Edward Olale & Emmanuel K. Yiridoe & Thomas O. Ochuodho & Van Lantz, 2019. "The Effect of Carbon Tax on Farm Income: Evidence from a Canadian Province," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(2), pages 605-623, October.
    28. Rengs, Bernhard & Scholz-Wäckerle, Manuel & van den Bergh, Jeroen, 2020. "Evolutionary macroeconomic assessment of employment and innovation impacts of climate policy packages," Journal of Economic Behavior & Organization, Elsevier, vol. 169(C), pages 332-368.
    29. Xie, Xuemei & Huo, Jiage & Zou, Hailiang, 2019. "Green process innovation, green product innovation, and corporate financial performance: A content analysis method," Journal of Business Research, Elsevier, vol. 101(C), pages 697-706.
    30. Juan Tang & Shihu Zhong & Guocheng Xiang, 2019. "Environmental Regulation, Directed Technical Change, and Economic Growth: Theoretic Model and Evidence from China," International Regional Science Review, , vol. 42(5-6), pages 519-549, September.
    31. Alton, Theresa & Arndt, Channing & Davies, Rob & Hartley, Faaiqa & Makrelov, Konstantin & Thurlow, James & Ubogu, Dumebi, 2014. "Introducing carbon taxes in South Africa," Applied Energy, Elsevier, vol. 116(C), pages 344-354.
    32. Kuen‐Hung Tsai & Yi‐Chuan Liao, 2017. "Innovation Capacity and the Implementation of Eco‐innovation: Toward a Contingency Perspective," Business Strategy and the Environment, Wiley Blackwell, vol. 26(7), pages 1000-1013, November.
    33. Mikhail Golosov & John Hassler & Per Krusell & Aleh Tsyvinski, 2014. "Optimal Taxes on Fossil Fuel in General Equilibrium," Econometrica, Econometric Society, vol. 82(1), pages 41-88, January.
    34. Torani, Kiran & Rausser, Gordon & Zilberman, David, 2016. "Innovation subsidies versus consumer subsidies: A real options analysis of solar energy," Energy Policy, Elsevier, vol. 92(C), pages 255-269.
    35. John M. Reilly & Y.-H. Henry Chen & Henry D. Jacoby, 2021. "The COVID-19 effect on the Paris agreement," Palgrave Communications, Palgrave Macmillan, vol. 8(1), pages 1-4, December.
    36. Hart, Rob, 2008. "The timing of taxes on CO2 emissions when technological change is endogenous," Journal of Environmental Economics and Management, Elsevier, vol. 55(2), pages 194-212, March.
    37. Shafiei, Ehsan & Davidsdottir, Brynhildur & Stefansson, Hlynur & Asgeirsson, Eyjolfur Ingi & Fazeli, Reza & Gestsson, Marías Halldór & Leaver, Jonathan, 2019. "Simulation-based appraisal of tax-induced electro-mobility promotion in Iceland and prospects for energy-economic development," Energy Policy, Elsevier, vol. 133(C).
    38. 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.
    39. Timilsina, Govinda R. & Csordás, Stefan & Mevel, Simon, 2011. "When does a carbon tax on fossil fuels stimulate biofuels?," Ecological Economics, Elsevier, vol. 70(12), pages 2400-2415.
    40. Golombek Rolf & Greaker Mads & Hoel Michael, 2010. "Carbon Taxes and Innovation without Commitment," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-21, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Paulius Šūmakaris & Kristina Kovaitė & Renata Korsakienė, 2023. "An Integrated Approach to Evaluating Eco-Innovation Strategies from the Perspective of Strategic Green Transformation: A Case of the Lithuanian Furniture Industry," Sustainability, MDPI, vol. 15(11), pages 1-33, June.
    2. Lee, Chien-Chiang & Wang, Fuhao & Chang, Yu-Fang, 2023. "Towards net-zero emissions: Can green bond policy promote green innovation and green space?," Energy Economics, Elsevier, vol. 121(C).
    3. Jin, Minghui & Chen, Yang, 2024. "Has green innovation been improved by intelligent manufacturing?—Evidence from listed Chinese manufacturing enterprises," Technological Forecasting and Social Change, Elsevier, vol. 205(C).
    4. Minxin Zuo & Tao Wu, 2022. "Does Environmental Credit Rating Promote Green Innovation in Enterprises? Evidence from Heavy Polluting Listed Companies in China," IJERPH, MDPI, vol. 19(20), pages 1-15, October.
    5. Msefula, Griffin & Hou, Tony Chieh-Tse & Lemesi, Tina, 2024. "Dynamics of legal structure and geopolitical influence on carbon tax in response to green transportation," Applied Energy, Elsevier, vol. 371(C).
    6. Chien-Hsiang Huang & Chih-Wen Ting & Tai-Wei Chang & Yue-Shi Lee & Show-Jane Yen, 2023. "The Impact of Ethical Leadership on Financial Performance: The Mediating Role of Environmentally Proactive Strategy and the Moderating Role of Institutional Pressure," Sustainability, MDPI, vol. 15(13), pages 1-12, July.
    7. Li, Ruiqian & Ramanathan, Ramakrishnan, 2024. "The interactive effect of environmental penalties and environmental subsidies on corporate environmental innovation: Is more better or worse?," Technological Forecasting and Social Change, Elsevier, vol. 200(C).
    8. Qianqian Gu & Lei Hang, 2022. "A Game Analysis-Based Behavioral Interaction Framework between Governments and Innovative Enterprises for Intellectual Property Regulation Policies," Sustainability, MDPI, vol. 14(11), pages 1-20, May.
    9. Shengzhe Ruan & Yi Song & Jinhua Cheng & Cheng Zhan, 2023. "Green Eco-Innovation and Supply of Critical Metals: Evidence from China," Sustainability, MDPI, vol. 15(17), pages 1-24, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Xiao Yu & Yingdong Xu & Meng Sun & Yanzhe Zhang, 2021. "The Green-Innovation-Inducing Effect of a Unit Progressive Carbon Tax," Sustainability, MDPI, vol. 13(21), pages 1-18, October.
    2. Gregory Casey, 2024. "Energy Efficiency and Directed Technical Change: Implications for Climate Change Mitigation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 91(1), pages 192-228.
    3. Yang, Jun & Yang, Dingjian & Cheng, Jixin, 2024. "The non-rivalry of data, directed technical change and the environment: A theoretical study incorporating data as a production factor," Economic Analysis and Policy, Elsevier, vol. 82(C), pages 417-448.
    4. Oscar Afonso & Ana Catarina Afonso, 2015. "Endogenous Growth Effects of Environmental Policies," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 62(5), pages 607-629, December.
    5. David Popp, 2019. "Environmental policy and innovation: a decade of research," CESifo Working Paper Series 7544, CESifo.
    6. Zhangsheng Liu & Liuqingqing Yang & Liqin Fan, 2021. "Induced Effect of Environmental Regulation on Green Innovation: Evidence from the Increasing-Block Pricing Scheme," IJERPH, MDPI, vol. 18(5), pages 1-15, March.
    7. Xu, Qi & Liu, Kui, 2024. "Hero or Devil: A comparison of different carbon tax policies for China," Energy, Elsevier, vol. 306(C).
    8. Aalbers, Rob & Shestalova, Victoria & Kocsis, Viktória, 2013. "Innovation policy for directing technical change in the power sector," Energy Policy, Elsevier, vol. 63(C), pages 1240-1250.
    9. Elizabeth Baldwin, Yongyang Cai, Karlygash Kuralbayeva, 2018. "To build or not to build? Capital stocks and climate policy," GRI Working Papers 290, Grantham Research Institute on Climate Change and the Environment.
    10. Rik L. Rozendaal & Herman R. J. Vollebergh, 2021. "Policy-Induced Innovation in Clean Technologies: Evidence from the Car Market," CESifo Working Paper Series 9422, CESifo.
    11. Campiglio, Emanuele & Spiganti, Alessandro & Wiskich, Anthony, 2024. "Clean innovation, heterogeneous financing costs, and the optimal climate policy mix," Journal of Environmental Economics and Management, Elsevier, vol. 128(C).
    12. Emanuele Campiglio & Alessandro Spiganti & Anthony Wiskich, 2023. "Clean innovation and heterogeneous financing costs," Working Papers 2023: 07, Department of Economics, University of Venice "Ca' Foscari".
    13. Eriksson, Clas, 2018. "Phasing out a polluting input in a growth model with directed technological change," Economic Modelling, Elsevier, vol. 68(C), pages 461-474.
    14. Baldwin, Elizabeth & Cai, Yongyang & Kuralbayeva, Karlygash, 2020. "To build or not to build? Capital stocks and climate policy∗," Journal of Environmental Economics and Management, Elsevier, vol. 100(C).
    15. Ahlvik, Lassi & van den Bijgaart, Inge, 2024. "Screening green innovation through carbon pricing," Journal of Environmental Economics and Management, Elsevier, vol. 124(C).
    16. Zhu, Zhishuang & Liao, Hua & Liu, Li, 2021. "The role of public energy R&D in energy conservation and transition: Experiences from IEA countries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 143(C).
    17. Carraro, Carlo & De Cian, Enrica & Nicita, Lea & Massetti, Emanuele & Verdolini, Elena, 2010. "Environmental Policy and Technical Change: A Survey," International Review of Environmental and Resource Economics, now publishers, vol. 4(2), pages 163-219, October.
    18. Dobkowitz, Sonja, 2024. "Meeting Climate Targets: The role of fossil research subsidies," VfS Annual Conference 2024 (Berlin): Upcoming Labor Market Challenges 302410, Verein für Socialpolitik / German Economic Association.
    19. Wiskich, Anthony, 2024. "A carbon tax versus clean subsidies: Optimal and suboptimal policies for the clean transition," Energy Economics, Elsevier, vol. 132(C).
    20. Li, Kai & Yan, Yaxue & Zhang, Xiaoling, 2021. "Carbon-abatement policies, investment preferences, and directed technological change: Evidence from China," Technological Forecasting and Social Change, Elsevier, vol. 172(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:14:y:2022:i:6:p:3453-:d:771897. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.