Strategies of property developers in the context of carbon tax

Qingzhen Yao, Liangshan Shao, Zimin Yin, Zhen Wang and Zhen Chen

PLOS ONE, 2023, vol. 18, issue 5, 1-24

Abstract: China needs to guide property developers in actively reducing emissions to reach carbon emission reduction targets and respond to global climate change. A carbon tax is an important policy tool. Still, to establish successful rules to steer property developers’ reasonable carbon emission reduction behavior, we must first explore property developers’ decision-making mechanisms. This study develops an emission reduction and price game model for property developers under the constraint of a carbon tax. It then applies reverse order induction and optimization methods to identify the game equilibrium solution for property developers. Using the game equilibria, we explore the carbon tax mechanism on emission reduction and property developer pricing strategies. We can derive the following conclusions if the carbon tax policy is not implemented: 1.House prices are related to the substitutability of the two types of competitive property developers. 2.The greater the substitutability, the greater the cost of emission reduction paid by consumers. 3.The game equilibrium carbon emission intensity is the average carbon emission intensity of the housing business. In the situation of enacting a carbon tax, we arrive at the following conclusions: 1.The profits of real estate developers who do not have the advantage of emission reduction continue to decline with the increase of carbon tax. 2. For real estate developers who have the advantage of decreasing emissions, profits declined initially and then increased as the carbon tax rate increased, and only when the carbon tax rate reaches Tm1* can they fully leverage the cost advantage and obtain ever-increasing profits. 3.Low tax rates should be adopted by the government at the start of the implementation of the carbon tax policy to provide a buffer time for real estate developers who do not have the advantage of emission reduction costs.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:plo:pone00:0283527

DOI: 10.1371/journal.pone.0283527

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