How to motivate clean production transformation?—a theoretical framework by game theory approach

Zezhong Shang

Energy Economics, 2025, vol. 146, issue C

Abstract: Clean production transformation is critical for sustainable development, yet limited research has addressed how public policies can incentivize firms to voluntarily adopt such practices. This paper bridges this gap by developing a game-theoretic framework featuring a government and two symmetric firms engaged in sequential strategy selection. The analysis reveals that a strategically designed minimum investment threshold is critical: while the government can induce voluntary CPT adoption via this mechanism, excessively high thresholds will deter firms from participating altogether. Sensitivity analyses further demonstrate distinct policy implications: 27% stricter minimum investment thresholds and 44% less subsidies are sufficient to effectively motivate CPT investments for labor-intensive firms, whereas capital-intensive firms are less responsive to such measures. In addition, tax exemptions and reduced supervision costs have minimal impact on firms’ optimal choices. However, tax incentives allow governments to set stricter thresholds, a doubled tax exemption triggers 67.9% subsidy cuts and 46.3% investment threshold increase. Lower supervision costs alleviate financing burdens without compromising policy efficacy.

Keywords: Clean production transformation; Game theory; Shadow price of government policy (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:146:y:2025:i:c:s0140988325002981

DOI: 10.1016/j.eneco.2025.108474

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