Effects of Government Subsidies on Production and Emissions Reduction Decisions under Carbon Tax Regulation and Consumer Low-Carbon Awareness

Weiling Wang, Yongjian Wang, Xiaoqing Zhang and Dalin Zhang
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Weiling Wang: School of Law, Southeast University, Nanjing 211189, China
Yongjian Wang: Business School, Jiangsu Normal University, Xuzhou 221116, China
Xiaoqing Zhang: Business School, Jiangsu Normal University, Xuzhou 221116, China
Dalin Zhang: Department of Computer Science, Aalborg University, 9220 Aalborg Øst, Denmark

IJERPH, 2021, vol. 18, issue 20, 1-17

Abstract: To promote low-carbon production, the government simultaneously provides some subsidies under carbon tax regulations. Two government subsidies are widely adopted: one is based on emissions reduction quantity and the other is based on emissions reduction investment cost. Additionally, consumer low-carbon awareness has also been enhanced. Considering the aforementioned circumstances, this paper investigates the effects of different government subsidies on production and emissions reduction decisions under a carbon tax regulation by formulating three decision-making optimization models. The results show that (1) although the carbon tax regulation cannot guarantee further improvement of emissions reduction levels, government subsidies could make the corresponding conditions of improving emissions reduction investments wider; (2) a heavy carbon tax or stronger consumer low-carbon awareness would make the positive effect of government subsidies more apparent; and (3) subsidy policies may also be selected by the government from different perspectives, such as manufacturer development, consumer surplus, environmental damage and social welfare. Especially, from the perspective of maximizing social welfare, investment cost (IC) subsidy is not always advantageous, while emissions reduction (ER) subsidy can always bring higher social welfare compared with the case under no government subsidy.

Keywords: production decision; emissions reduction decision; government subsidies; carbon tax; low-carbon awareness (search for similar items in EconPapers)
JEL-codes: I I1 I3 Q Q5 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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