IDEAS home Printed from https://ideas.repec.org/a/eee/eneeco/v146y2025ics0140988325002981.html
   My bibliography  Save this article

How to motivate clean production transformation?—a theoretical framework by game theory approach

Author

Listed:
  • Shang, Zezhong

Abstract

Clean production transformation is critical for sustainable development, yet limited research has addressed how public policies can incentivize firms to voluntarily adopt such practices. This paper bridges this gap by developing a game-theoretic framework featuring a government and two symmetric firms engaged in sequential strategy selection. The analysis reveals that a strategically designed minimum investment threshold is critical: while the government can induce voluntary CPT adoption via this mechanism, excessively high thresholds will deter firms from participating altogether. Sensitivity analyses further demonstrate distinct policy implications: 27% stricter minimum investment thresholds and 44% less subsidies are sufficient to effectively motivate CPT investments for labor-intensive firms, whereas capital-intensive firms are less responsive to such measures. In addition, tax exemptions and reduced supervision costs have minimal impact on firms’ optimal choices. However, tax incentives allow governments to set stricter thresholds, a doubled tax exemption triggers 67.9% subsidy cuts and 46.3% investment threshold increase. Lower supervision costs alleviate financing burdens without compromising policy efficacy.

Suggested Citation

  • Shang, Zezhong, 2025. "How to motivate clean production transformation?—a theoretical framework by game theory approach," Energy Economics, Elsevier, vol. 146(C).
    • Handle: RePEc:eee:eneeco:v:146:y:2025:i:c:s0140988325002981
    DOI: 10.1016/j.eneco.2025.108474
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0140988325002981
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eneco.2025.108474?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Chao Wang & Yue‐Jun Zhang, 2020. "Does environmental regulation policy help improve green production performance? Evidence from China's industry," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(2), pages 937-951, March.
    2. Viktor Koval & Olga Laktionova & Dzintra Atstāja & Janis Grasis & Iryna Lomachynska & Roman Shchur, 2022. "Green Financial Instruments of Cleaner Production Technologies," Sustainability, MDPI, vol. 14(17), pages 1-17, August.
    3. Kei-Mu Yi & Jing Zhang, 2017. "Understanding Global Trends in Long-run Real Interest Rates," Economic Perspectives, Federal Reserve Bank of Chicago, issue 2, pages 1-20.
    4. Xu, Xiaofeng & Cui, Xiaodan & Chen, Xiangyu & Zhou, Yichen, 2022. "Impact of government subsidies on the innovation performance of the photovoltaic industry: Based on the moderating effect of carbon trading prices," Energy Policy, Elsevier, vol. 170(C).
    5. Tek Maraseni & Kathryn Reardon-Smith, 2019. "Meeting National Emissions Reduction Obligations: A Case Study of Australia," Energies, MDPI, vol. 12(3), pages 1-13, January.
    6. El-Kassar, Abdul-Nasser & Singh, Sanjay Kumar, 2019. "Green innovation and organizational performance: The influence of big data and the moderating role of management commitment and HR practices," Technological Forecasting and Social Change, Elsevier, vol. 144(C), pages 483-498.
    7. Alexey Mikhaylov & Nikita Moiseev & Kirill Aleshin & Thomas Burkhardt, 2020. "Global climate change and greenhouse effect," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 7(4), pages 2897-2913, June.
    8. Zhang, Dan & Zheng, Mingbo & Feng, Gen-Fu & Chang, Chun-Ping, 2022. "Does an environmental policy bring to green innovation in renewable energy?," Renewable Energy, Elsevier, vol. 195(C), pages 1113-1124.
    9. Piotr F. Borowski & Barbara Karlikowska, 2023. "Clean Hydrogen Is a Challenge for Enterprises in the Era of Low-Emission and Zero-Emission Economy," Energies, MDPI, vol. 16(3), pages 1-15, January.
    10. Xu, Lei & Su, Jun, 2016. "From government to market and from producer to consumer: Transition of policy mix towards clean mobility in China," Energy Policy, Elsevier, vol. 96(C), pages 328-340.
    11. Veugelers, Reinhilde, 2012. "Which policy instruments to induce clean innovating?," Research Policy, Elsevier, vol. 41(10), pages 1770-1778.
    12. Irfan, Muhammad & Razzaq, Asif & Sharif, Arshian & Yang, Xiaodong, 2022. "Influence mechanism between green finance and green innovation: Exploring regional policy intervention effects in China," Technological Forecasting and Social Change, Elsevier, vol. 182(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chen, Hong & Hu, Shangui & Cai, Yuqing, 2024. "Driving effect of fintech on firm green innovation in China's strategic emerging industries: The mediating role of digital transformation," International Review of Economics & Finance, Elsevier, vol. 96(PA).
    2. Islam, Md. Monirul & Shahbaz, Muhammad & Sohag, Kazi, 2025. "Financial innovation and clean energy technology development: Policy vs. geopolitics," Renewable Energy, Elsevier, vol. 246(C).
    3. Xiaohua Li & Lina Ma & Salahuddin Khan & Xin Zhao, 2023. "The Role of Education and Green Innovation in Green Transition: Advancing the United Nations Agenda on Sustainable Development," Sustainability, MDPI, vol. 15(16), pages 1-20, August.
    4. Helveston, John P. & Wang, Yanmin & Karplus, Valerie J. & Fuchs, Erica R.H., 2019. "Institutional complementarities: The origins of experimentation in China’s plug-in electric vehicle industry," Research Policy, Elsevier, vol. 48(1), pages 206-222.
    5. Matos, Stelvia & Viardot, Eric & Sovacool, Benjamin K. & Geels, Frank W. & Xiong, Yu, 2022. "Innovation and climate change: A review and introduction to the special issue," Technovation, Elsevier, vol. 117(C).
    6. Wenqing Zhang & Jingrong Dong, 2023. "The Polarization Effect and Mechanism of China’s Green Finance Policy on Green Technology Innovation," Sustainability, MDPI, vol. 15(13), pages 1-26, June.
    7. Wang, Zhongcheng & Li, Xinyue & Xue, Xinhong & Liu, Yahuan, 2022. "More government subsidies, more green innovation? The evidence from Chinese new energy vehicle enterprises," Renewable Energy, Elsevier, vol. 197(C), pages 11-21.
    8. Ke Mao & Junxin Huang, 2022. "How Does Climate Policy Uncertainty Affect Green Innovation? Evidence from China," IJERPH, MDPI, vol. 19(23), pages 1-14, November.
    9. Li, Haichao & Su, Yuqi & Ding, Chante Jian & Tian, Gary Gang & Wu, Zhan, 2024. "Unveiling the green innovation paradox: Exploring the impact of carbon emission reduction on corporate green technology innovation," Technological Forecasting and Social Change, Elsevier, vol. 207(C).
    10. Zhang, Pengyang & Zhang, Shuo & Liu, Yu & Peng, Rui & Feng, Kuo, 2024. "China's Low-carbon city policy and manufacturing firms' servitization: Do environmental regulations matterʔ," Journal of Asian Economics, Elsevier, vol. 94(C).
    11. Zhang, Yue & Akram, Rabia & Ren, Siyu & Rehman, Mubeen Abdur & Abbas, Shujaat, 2023. "Determinants of sustainable energy in OECD countries: Role of technology and financial resources," Resources Policy, Elsevier, vol. 87(PB).
    12. Azam Sazvar & Mahmood Yahyazadehfar & Meisam Shirkhodaei, 2020. "Understanding the Policy Instruments Mix in Higher Education R&D: A Policy Scale Development," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 305-317.
    13. Li, Kai & Qi, Shouzhou & Shi, Xunpeng, 2023. "Environmental policies and low-carbon industrial upgrading: Heterogenous effects among policies, sectors, and technologies in China," Technological Forecasting and Social Change, Elsevier, vol. 191(C).
    14. Omri, Henda & Jarraya, Bilel & Kahia, Montassar, 2025. "Green finance for achieving environmental sustainability in G7 countries: Effects and transmission channels," Research in International Business and Finance, Elsevier, vol. 74(C).
    15. Zhou, Xiaoxiao & Dai, Mengsi & Liu, Li, 2024. "Green credit, carbon emission trading and corporate green innovation: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 86(C).
    16. Zhao, Qiuhan & Fan, Liangxian & Chen, Honglin & Yang, Yixing & Wang, Zifu, 2025. "Green innovation and carbon emission reduction: Empirical insights from spatial durbin and dynamic threshold models," International Review of Financial Analysis, Elsevier, vol. 101(C).
    17. Kong, Wei, 2025. "Does financial risk exacerbate the risk of low-quality green innovation?," Pacific-Basin Finance Journal, Elsevier, vol. 90(C).
    18. Hu, Hui & Qi, Shaozhou & Chen, Yuanzhi, 2023. "Using green technology for a better tomorrow: How enterprises and government utilize the carbon trading system and incentive policies," China Economic Review, Elsevier, vol. 78(C).
    19. Febi Jensen & Hans Lööf & Andreas Stephan, 2020. "New ventures in Cleantech: Opportunities, capabilities and innovation outcomes," Business Strategy and the Environment, Wiley Blackwell, vol. 29(3), pages 902-917, March.
    20. Stojčić, Nebojša, 2021. "Social and private outcomes of green innovation incentives in European advancing economies," Technovation, Elsevier, vol. 104(C).

    More about this item

    Keywords

    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:146:y:2025:i:c:s0140988325002981. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eneco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.