How do carbon pricing and green subsidies shape low-carbon technology choices? An evolutionary game analysis of China’s steel sector

Carbon pricing and green subsidies are key instruments for industrial decarbonization, yet they may interact in unexpected ways. This paper examines their joint effects on technology choices in China’s steel sector using an evolutionary game model with three strategies – status quo, end-of-pipe, and breakthrough – and logit quantal response dynamics. The carbon price is endogenously determined by market clearing, generating a self-suppression effect: achieving a target price requires nominal stringency above that target. It also generates cross-crowding-out: transitional subsidies lower the carbon price, reducing breakthrough profitability. We derive three critical price thresholds governing transitions and establish monotonicity properties. Simulations show bounded rationality smooths jumps into S-shaped diffusion, and subsidy effectiveness depends on prevailing carbon prices. Carbon market structure affects policy costs. The results highlight the need to account for endogenous price feedback in policy mix design, offering insights for emissions-intensive industries.