Differential game model of carbon emission reduction decisions with two types of government contracts: Green funding and green technology

Abstract

In this study, two differential pollution games are constructed according to the impacts of green technology and green funding on promoting carbon emission reduction. In the game, the government provides reasonable green funds or green technologies to encourage enterprises to reduce emissions. Enterprises choose the optimal production plan that maximizes their own interests according to the incentive mechanism of the government. We compare green funding and green technology in terms of total emissions, reduction efficiency and corporate profits. The results demonstrate that: (1) government contracts are not always beneficial for enterprises reducing emissions; (2) when the coverage of green funding is greater than a certain threshold, the emission reduction efficiency brought by green funds is better than that of green technologies; (3) when the funding intensity exceeds a certain value, there exists a optimal coverage of green funding to ensure that corporate profit targets and emission reduction targets are met simultaneously. The results provide a theoretical basis for the government to formulate an emission reduction incentive mechanism.