Production choice and pricing strategies of automobile manufacturers under carbon policies

Donghua Xiao, Qing Zhang, Haoran Liu, Sheng Luo and Yi Zheng

International Review of Economics & Finance, 2025, vol. 101, issue C

Abstract: The transition of automotive manufacturers to electric power sources can significantly reduce carbon dioxide emissions, foster the green development of the automotive industry, and contribute to the global reduction of carbon emissions. Its development and promotion depend on carbon policies and consumer sensitivity to carbon emissions. Under different carbon emission policy contexts, this study first considers the production and pricing decisions of automobile manufacturers based on consumers' awareness of green consumption, including whether to produce fuel, electric, or hybrid vehicles and the pricing for each type. Second, it explores the impact of various carbon emission policies on these decisions and profits and compares carbon emissions under different policies. Results indicate that under varying carbon policies, automobile manufacturers' production decisions primarily depend on the ratio of carbon emissions to production costs. In addition, consumers' sensitivity to carbon emissions influences their choice of production types and significantly affects manufacturers' profits. Manufacturers’ profits are influenced by market share and carbon policy parameters. The emission reduction effect is most significant under the carbon cap policy, whereas cap-and-trade shows the least reduction effect. The research conclusions can assist traditional vehicle manufacturers in transitioning to new energy sources and achieving high-quality sustainable development.

Keywords: Carbon policy; Automobile manufacturer; Production choice; Pricing (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:101:y:2025:i:c:s1059056025003405

DOI: 10.1016/j.iref.2025.104177

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