Effects of a Mixed Emissions Control Policy on the Manufacturer’s Production and Carbon Abatement Investment Decisions

Fei Wang and Dalin Zhang ()
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Fei Wang: National Tax Institute of STA, Yangzhou 225007, China
Dalin Zhang: Department of Computer Science, Aalborg University, 9220 Aalborg, Denmark

IJERPH, 2022, vol. 19, issue 20, 1-20

Abstract: Considering the consumers’ environmental awareness, a mixed emissions control policy with carbon tax and a dynamic reward-punishment mechanism for carbon abatements was introduced to explore the manufacturer’s low-carbon production issues. The results showed that: (1) Under a given mixed emissions control policy, a higher government pre-determined abatement target cannot positively encourage manufacturers’ carbon abatement behaviors. However, a stricter emissions control policy is environmentally beneficial only when the government pre-determined abatement target exceeds a certain threshold. (2) Reducing the carbon abatement cost and enhancing the consumers’ environmental awareness would always benefit manufacturers’ low-carbon production, but both approaches benefit the environment only when the government pre-determined abatement target is below a certain threshold. (3) Under a mixed emissions control policy of social welfare maximization, the reward-punishment coefficient positively correlates with the government’s optimal pre-determined abatement target, and the effect of the carbon tax rate on that is closely related to the carbon emissions of the unit product. More importantly, imposing a carbon tax or raising the tax rate and adopting a reward-punishment mechanism or raising the reward-punishment coefficient can effectively encourage manufacturers’ carbon abatement investment behaviors. However, they have nothing but a negative effect on manufacturers’ excessive abatement levels.

Keywords: mixed emissions control policy; carbon tax; dynamic reward-punishment mechanism; production decision; abatement investment decision (search for similar items in EconPapers)
JEL-codes: I I1 I3 Q Q5 (search for similar items in EconPapers)
Date: 2022
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