Manufacturers’ integrated strategies for emission reduction and recycling: The role of government regulations

Abstract

The growing problem of environmental degradation has increased the government’s awareness of issuing stricter regulatory policies including cap-and-trade, strict carbon cap and carbon tax. In response to government regulations, the manufacturer has invested in green technologies to reduce emissions, and considered whether to engage in recycling. Motivated by these issues, this paper investigates how each type of government regulation to curb emissions differs systematically, and the manufacturer’s recycling decision. Our results show that (i) whether the manufacturer engages in recycling depends on technological innovation and carbon cap; (ii) the manufacturer is inclined to carbon tax or cap-and-trade, but never prefers strict carbon cap; (iii) under fewer carbon quotas, the government would issue cap-and-trade or carbon tax based on carbon trading price and tax rate, on the contrary, strict carbon cap is the best choice.