The Impact of Government Intervention and Cap-and-Trade on Green Innovation in Supply Chains: A Social Welfare Perspective

Abstract

This paper discusses the impact of government intervention (greenness threshold limit) and cap-and-trade policy on green investment, stakeholder profits and social welfare under different power structure scenarios in the green supply chain. First, a two-level green supply chain system is constructed: a manufacturer that produces green products and complies with cap-and-trade policies and a retailer that sells green products. Based on the Stackelberg game and Cournot game, we compare the optimal solutions under the government intervention mechanism and cap-and-trade mechanism with manufacturer leadership, retailer leadership and equal power. The results are as follows: (1) both government intervention and the cap-and-trade mechanism are conducive to an increase in green technology innovation and profit, but excessive control will lead to a decline in social welfare. (2) The results in the concentrated scenario were better than those in the dispersed scenario. In the decentralized state, the result of equal power is the best, the result of retailer leadership is next, and the result of manufacturer leadership is the worst. (3) The lower cost of green investment will cause enterprises to give up purchasing carbon emission permits from the carbon market.