Toward mobility incentive: Integrating green service and carbon inclusion scheme into the ride-hailing market

Abstract

Increasing individual responsibility for reducing emissions is a potentially effective way to address mobility sustainability issues. In recent years, the carbon inclusion scheme has been widely implemented to incentivize individual low-carbon travel behaviors. Motivated by the practice, this paper examines the ride-hailing market that integrates the green service with the carbon inclusion scheme to comprehend how the government-led carbon inclusion scheme affects the operation of the ride-hailing market and the prospects of reducing carbon emissions and promoting electrification. We propose two product strategies for the ride-hailing platform: (a) One-product strategy with mixed service provided by electric vehicles (EVs) and fuel vehicles (FVs); and (b) Differentiated-product strategy with green service provided by EVs and basic service provided by FVs. We also consider the significant differences in adopting electric buses in different countries/regions when discussing the impact of carbon inclusion on the ride-hailing market. Our findings indicate that without government-led carbon inclusion, it is more appropriate for the ride-hailing platform to adopt the one-product strategy. With government-led carbon inclusion, when the electrification rate of external public transportation is not very high, and the carbon incentive is high enough, the platform can improve its profit by adopting the differentiated-product strategy. Considering the platform's profit maximization decisions, our analysis also highlights that when the electrification rate of the external option is low and the carbon incentive is high, the impact of the carbon inclusion scheme on the ride-hailing market is better in all aspects, which is a win-win outcome that the ride-hailing platform, drivers, and the government would all like (if the government wants to see better driver welfare, electrification and carbon reduction in the ride-hailing market). Additionally, increasing the potential number of EVs in the ride-hailing market and the total number of drivers makes sense both for the platform (to gain higher profits) and government (which may be concerned about increasing driver welfare, the electrification rate and total carbon reduction of the ride-hailing market). The gained managerial insights provide decision support for the platform operating differentiated services and the government implementing carbon inclusion schemes.