Government Subsidy for Remanufacturing or Carbon Tax Rebate: Which Is Better for Firms and a Low-Carbon Economy

Shu Tong, Zhizhen Peng, Shou Chen, Shouyang Wang, Kin Keung Lai and Honglin Yang
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Zhizhen Peng: Business School, Hunan University, Changsha 410082, China
Shou Chen: Business School, Hunan University, Changsha 410082, China
Shouyang Wang: Business School, Hunan University, Changsha 410082, China
Kin Keung Lai: International Business School, Shaanxi Normal University, Xi’an 710062, China
Honglin Yang: Business School, Hunan University, Changsha 410082, China

Sustainability, 2017, vol. 9, issue 1, 1-22

Abstract: The government as a policy maker wishing to promote remanufacturing and proper disposal of hazardous old products which are harmful to environment has taken many actions, ranging from carbon regulation and financial incentives such as trade-in subsidy. However, carbon tax can result in loss of profit for firms to some degree, so the government has to give other subsidy to balance the profits and carbon emission. Thus, this article investigates two subsidy mechanisms: remanufacturing subsidy or tax rebate. The optimal pricing and production decision under these policies are examined. Our results show that carbon tax has a great impact on pricing strategies. Trade-in subsidy can encourage customers to replace their existing products with new and remanufactured products. Both remanufacture subsidy and tax rebate are beneficial to manufacturer and can further promote remanufacturing development.

Keywords: remanufacturing; government subsidies; trade-in; carbon regulation (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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