Analysis of recycling and emission reduction models under carbon taxes and government subsidies

Yuan Li, Zhao Jia, Chuan Qin, Zhaoqi Li and Jinhuika Ying

International Review of Economics & Finance, 2025, vol. 99, issue C

Abstract: This study constructs a recycling and emission reduction model where a third party is responsible for recycling, and the manufacturer is responsible for remanufacturing. We compare three scenarios: no government subsidy, government subsidies to recyclers for recycling volumes, and government subsidies to manufacturers for emission reductions. The results show that while carbon tax can effectively reduce carbon emissions, it also increases product prices and reduces market demand. In contrast, government subsidies significantly improve product recycling and reduce carbon emissions, enhancing corporate profits and government efficiency. Specifically, government subsidies are found to be more effective than carbon taxes in promoting recycling and emission reduction. The subsidy intensity is proportional to the basic recycling amount of old products and inversely proportional to the unit recycling cost and carbon tax. This study provides valuable insights for policymakers and businesses on how to design and implement effective subsidy policies to promote low-carbon supply chain management.

Keywords: Carbon tax; Subsidy strategy; Low-carbon supply chain; Stackelberg game (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:99:y:2025:i:c:s1059056025002151

DOI: 10.1016/j.iref.2025.104052

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