Optimal Green Technology Choice for Firms under an Emission Trading Scheme: End-of-Pipe vs. Cleaner Production

Abstract

Green technology innovation helps to improve both economic and environmental performance simultaneously. How to invest in green technology innovation under emission trading policy is a current issue worthy of attention. However, existing research has not delved into the choices of different green technology innovation models, namely cleaner production technology and end-of-pipe technology, available to firms and governments under the joint implementation of other policies. Thus, this paper studies the optimal model of green technology innovation under emission trading policy and emission tax policy by constructing a two-stage game model suitable for complex decision analysis. The results show that regardless of the value of emission trading price, the optimal green technology innovation choice of the firms is cleaner production technology. Furthermore, the results show that neither conflict nor consistency always exists between governments’ and firms’ choices. When the emission trading price is high, the choice of governments and firms is in conflict; when the emission trading price is low, the choice of the two is consistent, both prefer cleaner production. This study not only enriches the existing research in theory but also provides support for governments to guide the choice of firms and achieve a win–win situation in practice.