Influence of government subsidies on carbon reduction technology investment decisions in the supply chain

Abstract

In this paper, the purchase preference of consumers is considered to construct a three-stage game model for investigating the influence of different types of subsidy on the carbon reduction and optimal decisions of supply chain members under the condition of an exogenously given emission tax. Results show that regardless of whether subsidies are given based on the carbon reduction level or on output, they will not only increase the benefits of the supply chain members, but will also promote social welfare. The government can provide subsidies based on the carbon reduction level when carbon tax is low and based on enterprise production when carbon tax is high. Furthermore, we determine that equilibrium product quantity, carbon emission, retailer profit, and social welfare decline with the increase in the consumer preference coefficient, regardless of whether the government is providing a subsidy. Our results provide significant guidelines for the government to subsidize the carbon reduction activities of enterprises and to encourage enterprises to reduce their carbon emissions..