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Environmental Concerns, Environmental Policy and Green Investment

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  • Xuexian Gao

    (School of Economics & Management, China University of Petroleum (East China), Qingdao 266580, China)

  • Haidong Zheng

    (School of Economics & Management, China University of Petroleum (East China), Qingdao 266580, China)

Abstract

Environmental regulators often use environmental policy to induce green investment by firms. However, if an environmental policy fails to exert a long-run effect on regulating the economic agents’ behavior, it may be more reasonable to think of the firm as the leader in the game, since the investment in green technology is usually a strategic decision. In this paper, we consider a three-stage Stackelberg game to address the interaction between a profit-maximizing firm (Stackelberg leader) facing emission-dependent demand, and the environmental regulator (Stackelberg follower). The firm decides on the green technology level in the first stage of the game based on its understanding of the regulator’s profits function, especially an environmental concern that is introduced as an exogenous variable. In the current research, we show that high levels of the regulator’s environmental concerns do not necessarily lead to the choice of green technology by the firm, and green investment level depends on the combined effects of the market and operational factors for a given level of the regulator’s environmental concerns. The result also shows that increasing environmental awareness amongst the consumers is an effective way to drive the firm’s green investment.

Suggested Citation

  • Xuexian Gao & Haidong Zheng, 2017. "Environmental Concerns, Environmental Policy and Green Investment," IJERPH, MDPI, vol. 14(12), pages 1-13, December.
    • Handle: RePEc:gam:jijerp:v:14:y:2017:i:12:p:1570-:d:122796
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    3. Betul Can & Zahoor Ahmed & Mahmood Ahmad & Muhlis Can, 2022. "Do renewable energy consumption and green trade openness matter for human well-being? Empirical evidence from European Union countries," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 164(3), pages 1043-1059, December.
    4. Zhibo Zhou & Weiguo Zhang & Xinxin Pan & Jiangfeng Hu & Ganlin Pu, 2019. "Environmental Tax Reform and the “Double Dividend” Hypothesis in a Small Open Economy," IJERPH, MDPI, vol. 17(1), pages 1-21, December.
    5. Hung, Ngo Thai, 2023. "Green investment, financial development, digitalization and economic sustainability in Vietnam: Evidence from a quantile-on-quantile regression and wavelet coherence," Technological Forecasting and Social Change, Elsevier, vol. 186(PB).
    6. Sha Yang & Jia Wu, 2023. "The Sustainability of the Fishery Industry and Environmental Development: A Study on Factor Market Distortions," IJERPH, MDPI, vol. 20(4), pages 1-15, February.
    7. Xinyang Xu & Yang Yang, 2022. "Analysis of the Dilemma of Promoting Circular Logistics Packaging in China: A Stochastic Evolutionary Game-Based Approach," IJERPH, MDPI, vol. 19(12), pages 1-22, June.
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