The Choice of Carbon Labels and the Impact of Ambiguity Under Market Differences Based on a Game Framework

As a carbon reduction tool that discloses the green quality information of products, a unified standard for the evaluation and identification of carbon labeling has not yet been established. Given the diverse market environments and the different types of carbon labels, selecting an appropriate carbon label can create greater value for both the businesses and the society. This paper constructs a game model involving green and non-green firms to explore the heterogeneous firms’ carbon label choices and green decisions under two market structures. Using a numerical comparative analysis, it examines the social value of carbon labeling schemes in various scenarios. The study finds that (1) enhancing consumer environmental awareness (CEA) and competition intensity contributes to economic and social benefits, while an increased ambiguity in carbon labeling may suppress system efficiency; (2) carbon labeling schemes always generate profits for green firms but do not necessarily benefit non-green firms; (3) in a monopolistic competition market, self-certified labeling (SCL) is more beneficial for improving social welfare, whereas the opposite holds in an oligopolistic competition setting, but in both market structures, third-party certified labeling (TCL) maximizes environmental benefits; and that (4) for the same type of carbon label, environmental improvements vary significantly across market structures, whereas firms’ carbon label choices have a relatively minor impact on environmental benefits. This research provides valuable managerial insights for firms’ green decision-making and carbon label standard selection in different markets.