Government interventions in new technology adoption to improve product greenness

Abstract

Motivated by the increasing importance of achieving green production in a low-carbon economy, this study investigates the role of government interventions in new technology adoption to increase product greenness. The study contributes to existing research by considering the government's roles in subsidy and regulation policies and analysing how government policies affect consumer surplus, manufacturer profit, and social welfare. To achieve the study aims, we classify green products into development-intensive green products (DIGPs) and marginal-cost-intensive green products (MIGPs) and compare the effectiveness of three common government interventions designed to achieve green production: subsidising, regulating, and hybrid interventions. Results show that for DIGPs and MIGPs, consumers, manufacturers, and the government prefer hybrid intervention. That is, the hybrid intervention is a win–win–win solution for DIGPs and MIGPs. To consider the possibility of a limited government budget, we investigate whether the government's optimal choice will change when the green budget is less than the corresponding investment of the hybrid intervention in equilibrium. We confirm the necessity of considering the amount of green budget when the government establishes environmental interventions. Our results provide practical insights for the government to increase product greenness for social welfare improvement.