IDEAS home Printed from https://ideas.repec.org/a/gam/jijerp/v14y2017i12p1570-d122796.html
   My bibliography  Save this article

Environmental Concerns, Environmental Policy and Green Investment

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1660-4601/14/12/1570/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1660-4601/14/12/1570/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Cathy A. Roheim & Frank Asche & Julie Insignares Santos, 2011. "The Elusive Price Premium for Ecolabelled Products: Evidence from Seafood in the UK Market," Journal of Agricultural Economics, Wiley Blackwell, vol. 62(3), pages 655-668, September.
    2. Barnett, A H, 1980. "The Pigouvian Tax Rule under Monopoly," American Economic Review, American Economic Association, vol. 70(5), pages 1037-1041, December.
    3. Requate, Till, 2005. "Environmental Policy under Imperfect Competition: A Survey," Economics Working Papers 2005-12, Christian-Albrechts-University of Kiel, Department of Economics.
    4. Ahmad Rezaee & Farzad Dehghanian & Behnam Fahimnia & Benita Beamon, 2017. "Green supply chain network design with stochastic demand and carbon price," Annals of Operations Research, Springer, vol. 250(2), pages 463-485, March.
    5. Gerda Dewit & Dermot Leahy, 2015. "Tax Uniformity: A Commitment Device for Restraining Opportunistic Behavior," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(5), pages 641-672, October.
    6. Gsottbauer, Elisabeth & van den Bergh, Jeroen C.J.M., 2014. "Environmental policy when pollutive consumption is sensitive to advertising: Norms versus status," Ecological Economics, Elsevier, vol. 107(C), pages 39-50.
    7. Kangzhou Wang & Yingxue Zhao & Yonghong Cheng & Tsan-Ming Choi, 2014. "Cooperation or Competition? Channel Choice for a Remanufacturing Fashion Supply Chain with Government Subsidy," Sustainability, MDPI, vol. 6(10), pages 1-19, October.
    8. James D. Abbey & Margaret G. Meloy & V. Daniel R. Guide Jr. & Selin Atalay, 2015. "Remanufactured Products in Closed-Loop Supply Chains for Consumer Goods," Production and Operations Management, Production and Operations Management Society, vol. 24(3), pages 488-503, March.
    9. Ciwei Dong & Bin Shen & Pui-Sze Chow & Liu Yang & Chi To Ng, 2016. "Sustainability investment under cap-and-trade regulation," Annals of Operations Research, Springer, vol. 240(2), pages 509-531, May.
    10. Gökçe Esenduran & Eda Kemahlıoğlu-Ziya, 2015. "A Comparison of Product Take-Back Compliance Schemes," Production and Operations Management, Production and Operations Management Society, vol. 24(1), pages 71-88, January.
    11. Roy Jones & Haim Mendelson, 2011. "Information Goods vs. Industrial Goods: Cost Structure and Competition," Management Science, INFORMS, vol. 57(1), pages 164-176, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ning Zhang & Zaiwu Gong & Kedong Yin & Yuhong Wang, 2018. "Special Issue “Decision Models in Green Growth and Sustainable Development”," IJERPH, MDPI, vol. 15(6), pages 1-8, May.
    2. Inmaculada Aznar-Díaz & Francisco-Javier Hinojo-Lucena & María-Pilar Cáceres-Reche & Juan-Manuel Trujillo-Torres & José-María Romero-Rodríguez, 2019. "Environmental Attitudes in Trainee Teachers in Primary Education. The Future of Biodiversity Preservation and Environmental Pollution," IJERPH, MDPI, vol. 16(3), pages 1-11, January.
    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. Hao, Xiaoli & Li, Ke & Ren, Siyu & Sun, Qingyu & Hu, Weitao & Xue, Yan, 2024. "How green investment significantly relieves resource curse? A new perspective from fiscal decentralization," Resources Policy, Elsevier, vol. 94(C).
    8. 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.
    9. Nabajyoti Bhattacharjee & Nabendu Sen, 2023. "A Sustainable Inventory Model to Study the Mixing and Bottling Plant of Single Item for Cost Minimization," SN Operations Research Forum, Springer, vol. 4(4), pages 1-18, December.

    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. Xuexian Gao & Haidong Zheng & Yan Zhang & Naser Golsanami, 2019. "Tax Policy, Environmental Concern and Level of Emission Reduction," Sustainability, MDPI, vol. 11(4), pages 1-17, February.
    2. Clemens Heuson, 2008. "Weitzman revisited: Emission standards vs. taxes with uncertain control costs and market power of polluting firms," Discussion Paper Series 299, Universitaet Augsburg, Institute for Economics.
    3. Liangjie Xia & Tingting Guo & Juanjuan Qin & Xiaohang Yue & Ning Zhu, 2018. "Carbon emission reduction and pricing policies of a supply chain considering reciprocal preferences in cap-and-trade system," Annals of Operations Research, Springer, vol. 268(1), pages 149-175, September.
    4. Denis Claude & Mabel Tidball, 2010. "Efficiency inducing taxation for polluting oligopolists: the irrelevance of privatization," Economics Bulletin, AccessEcon, vol. 30(4), pages 2946-2954.
    5. Clemens Heuson, 2008. "Emission standards vs. taxes: The case of asymmetric Cournot duopoly and uncertain control costs," Working Papers 045, Bavarian Graduate Program in Economics (BGPE).
    6. Clemens Heuson, 2010. "Weitzman Revisited: Emission Standards Versus Taxes with Uncertain Abatement Costs and Market Power of Polluting Firms," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 47(3), pages 349-369, November.
    7. Florian Baumann & Tim Friehe, 2017. "Design standards and technology adoption: welfare effects of increasing environmental fines when the number of firms is endogenous," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 19(2), pages 427-450, April.
    8. Ze-Bin Wang & Yao-Yu Wang & Jian-Cai Wang, 2016. "Optimal distribution channel strategy for new and remanufactured products," Electronic Commerce Research, Springer, vol. 16(2), pages 269-295, June.
    9. Maria Chistyakova & Philippe Mahenc, 2015. "Free-Riding on Environmental Taxation," CEEES Paper Series CE3S-02/15, European University at St. Petersburg, Department of Economics.
    10. Afzal S. SIDDIQUI & TANAKA Makoto & Yihsu CHEN, 2017. "Sustainable Transmission Planning in Imperfectly Competitive Electricity Industries: Balancing economic efficiency and environmental outcomes," Discussion papers 17024, Research Institute of Economy, Trade and Industry (RIETI).
    11. MAHENC Philippe, 2008. "Optimal environmental taxation when green alternative is available," LERNA Working Papers 08.04.248, LERNA, University of Toulouse.
    12. Zhou, Xiaoyang & Wei, Xiaoya & Lin, Jun & Tian, Xin & Lev, Benjamin & Wang, Shouyang, 2021. "Supply chain management under carbon taxes: A review and bibliometric analysis," Omega, Elsevier, vol. 98(C).
    13. Shaofu Du & Jun Qian & Tianzhuo Liu & Li Hu, 2020. "Emission allowance allocation mechanism design: a low-carbon operations perspective," Annals of Operations Research, Springer, vol. 291(1), pages 247-280, August.
    14. Baozhuang Niu & Lei Chen & Jie Zhang, 2017. "Sustainability Analysis of Supply Chains with Fashion Products under Alternative Power Structures and Loss-Averse Supplier," Sustainability, MDPI, vol. 9(6), pages 1-19, June.
    15. Ralf Löschel, 2007. "Optimal Allocation of EU Emission Allowances under Imperfect Competition," Energy and Environmental Modeling 2007 24000033, EcoMod.
    16. Malin Jonell & Beatrice Crona & Kelsey Brown & Patrik Rönnbäck & Max Troell, 2016. "Eco-Labeled Seafood: Determinants for (Blue) Green Consumption," Sustainability, MDPI, vol. 8(9), pages 1-19, September.
    17. Etienne Billette de Villemeur & Kevin Guittet, 2004. "Optimal structure of air transport services when environnemental costs are taken into account," Post-Print hal-01022242, HAL.
    18. Yue, Shen & Munir, Irfan Ullah & Hyder, Shabir & Nassani, Abdelmohsen A. & Qazi Abro, Muhammad Moinuddin & Zaman, Khalid, 2020. "Sustainable food production, forest biodiversity and mineral pricing: Interconnected global issues," Resources Policy, Elsevier, vol. 65(C).
    19. Don Fullerton & Gilbert E. Metcalf, 2002. "Environmental Controls, Scarcity Rents, and Pre-existing Distortions," Chapters, in: Lawrence H. Goulder (ed.), Environmental Policy Making in Economies with Prior Tax Distortions, chapter 26, pages 504-522, Edward Elgar Publishing.
    20. Huihui Liu & Xiaohang Yue & Hui Ding & G. Keong Leong, 2017. "Optimal Remanufacturing Certification Contracts in the Electrical and Electronic Industry," Sustainability, MDPI, vol. 9(4), pages 1-17, March.

    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:gam:jijerp:v:14:y:2017:i:12:p:1570-:d:122796. 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: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    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.