Carbon Emission Reduction with Capital Constraint under Greening Financing and Cost Sharing Contract

Juanjuan Qin, Yuhui Zhao and Liangjie Xia
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Juanjuan Qin: Business School, Tianjin University of Finance and Economics, Tianjin 300222, China
Yuhui Zhao: Business School, Tianjin University of Finance and Economics, Tianjin 300222, China
Liangjie Xia: Business School, Tianjin University of Finance and Economics, Tianjin 300222, China

IJERPH, 2018, vol. 15, issue 4, 1-32

Abstract: Motivated by the industrial practices, this work explores the carbon emission reductions for the manufacturer, while taking into account the capital constraint and the cap-and-trade regulation. To alleviate the capital constraint, two contracts are analyzed: greening financing and cost sharing. We use the Stackelberg game to model four cases as follows: (1) in Case A1, the manufacturer has no greening financing and no cost sharing; (2) in Case A2, the manufacturer has greening financing, but no cost sharing; (3) in Case B1, the manufacturer has no greening financing but has cost sharing; and, (4) in Case B2, the manufacturer has greening financing and cost sharing. Then, using the backward induction method, we derive and compare the equilibrium decisions and profits of the participants in the four cases. We find that the interest rate of green finance does not always negatively affect the carbon emission reduction of the manufacturer. Meanwhile, the cost sharing from the retailer does not always positively affect the carbon emission reduction of the manufacturer. When the cost sharing is low, both of the participants’ profits in Case B1 (under no greening finance) are not less than that in Case B2 (under greening finance). When the cost sharing is high, both of the participants’ profits in Case B1 (under no greening finance) are less than that in Case B2 (under greening finance).

Keywords: carbon emission reduction; capital constraint; greening financing; cost sharing contract (search for similar items in EconPapers)
JEL-codes: I I1 I3 Q Q5 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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