Carbon Emission Reduction in Green Supply Chain: The Impact of Two Financial Subsidy Policies

Financial subsidies provided by the government have been validated as an effective means to stimulate carbon emission reductions among manufacturers. This paper examines the impact of two types of financial subsidies-namely, one-off subsidies and quantity-based price subsidies-on the bank’s optimal interest rate, the manufacturer’s optimal emission reduction level and wholesale price, and the retailer’s optimal retail price. The benefits of these two subsidy policies are compared from both economic and environmental perspectives. Our findings reveal the following insights: Both subsidy policies effectively enhance market demand and improve the economic performance of the green supply chain. However, when subsidies are below certain thresholds, total carbon emissions increase, leading to reduced environmental benefits. Under a fixed subsidy amount, one-off subsidies result in less environmental harm compared to quantity-based price subsidies. Conversely, at a given level of carbon reduction, quantity-based price subsidies yield higher economic benefits due to greater government expenditure, albeit with lower environmental benefits. These results provide valuable guidance for policymakers: quantity-based price subsidies are preferable when prioritizing economic benefits, whereas one-off subsidies are more suitable for enhancing environmental outcomes.