How does dual-credit policy regulate competitive fuel vehicle and new energy vehicle manufacturers? based on operational decision analysis under multiple scenarios

Abstract

This article investigates the remarkable impacts of the dual-credit policy (DCP) on fuel vehicle (FV) and new energy vehicle (NEV) automakers, and considers the competition for emission reduction between FVs and NEVs. We apply the game-theoretic approach to design four scenarios, i.e., no DCP, DCP to regulate NEV automakers, DCP to regulate FV automakers, and DCP to regulate dual automakers. The study reveals that increasing the credit trading price reduces the emission reduction level for FVs but not for NEVs. When the DCP regulates NEV automakers, the credit trading price positively correlates with the automaker’s profit. An increase in each NEV credit boosts the emission reduction level of NEVs and automakers’ profits. Conversely, an increase in the NEV credit ratio lowers the emission reduction level of FVs. The higher the credit trading price, each NEV credit and NEV credit ratio contribute to reducing the total carbon emission level. Meanwhile, the total carbon emission level is the lowest in the scenario of DCP regulating dual automakers, but the automakers’ profits will suffer some losses. Also, the scenario of DCP regulating NEV automakers to achieve the highest profits will result in a higher carbon emission level. Moreover, the main contribution of this study is to identify the business performance of DCP regulating single or dual automakers, while simultaneously pointing out the effective choices for DCP to promote the green operations of competing automakers. Our results suggest some novel management recommendations for automakers and governments that can contribute to enhancing the sustainability of the automotive industry.