Effects of a generalized dual-credit system on green technology investments and pricing decisions in a supply chain

Abstract

China recently implemented a corporate average fuel consumption regulation and new-energy vehicle credit program (dual-credit system) to prompt the transition to new-energy vehicles. This study generalizes the dual-credit system (energy credit and green credit) and investigates its effects on the green technology investments (GTI) and pricing decisions in a two-echelon supply chain consisting of three possible scenarios, Case O (conventional product only), Case B (both conventional and green products), and Case G (green product only). The obtained results show that the GTI made by manufacturers follow high threshold and low threshold. The generalized dual-credit system increases both thresholds and promotes the transition from Case O to Case B and Case B to Case G. The transition is sensitive to standard energy consumption per-unit (SECP), green credit quota (GCQ), and price of green credit (PGC). The generalized dual-credit system benefits the manufacturers who exceed the low threshold, vice versa, especially for whose conventional product with lower initial energy consumption per unit. The generalized dual-credit system contributes to GTI and environment effects in all cases. But, the impacts on GTI, environment effects, and profit differ in sensitivity to SECP, GCQ, and PGC in different cases. Numerical simulation is given and all the proofs are shown in appendix.

Keywords: Consumer environmental awareness; Dual-credit system; Environment effects; Green technology investment; Two-echelon supply chain.