Deceptive greenwashing by retail electricity providers under renewable portfolio standards: The impact of market transparency

Qian Liu and Debin Fang

Energy Policy, 2025, vol. 202, issue C

Abstract: Retail electricity providers (REPs) are attempting to leverage the growing environmental concerns to promote themselves as “more renewable” to support climate change mitigation. Critics argue that they often intentionally exaggerate renewable energy proportions in electricity contracts as a marketing gimmick, known as greenwashing. This paper develops a signaling game model of duopoly competition to investigate the occurrence mechanism of greenwashing under information asymmetry in the context of Renewable portfolio standards (RPS), with a primary focus on market transparency, penalties for failing to meet quota, environmental consciousness, and renewable energy premiums. Furthermore, the effects of greenwashing are examined based on the perfect Bayesian Nash equilibrium outcomes. The conclusions indicate that greenwashing is more likely to occur in environments with weak penalties for failing to meet quota and low transparency. Counterintuitively, greenwashing may increase competitors’ profits and reduce carbon emissions in some cases. However, what can be established is that greenwashing will certainly undermine the achievement of decarbonization goals, reduce consumer surplus, and negatively impact overall social welfare when renewable energy consumption is profitable. This research contributes to the formulation of more effective strategies and policies for stakeholders in the power industry and policymakers aiming to advance renewable energy consumption.

Keywords: Renewable energy consumption; Retail electricity providers (REPs); Renewable portfolio standards (RPS); Greenwashing; Signaling theory; Information asymmetry (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0301421525000989
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:202:y:2025:i:c:s0301421525000989

DOI: 10.1016/j.enpol.2025.114591

Access Statistics for this article

Energy Policy is currently edited by N. France

More articles in Energy Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().