The Synergy Green Innovation Effect of Green Innovation Subsidies and Carbon Taxes

ABSTRACT

The economic uncertainty caused by COVID-19 has led governments around the world to attach more importance to green innovation to accomplish their carbon reduction schemes. To improve the green innovation encouraging effect of an environmental policy system, this study introduces a unit progressive carbon tax on the basis of a green innovation subsidy to discuss the synergy green innovation effect between them. We set up a dynamic evolutionary game model to analyze the respective influences of green innovation subsidies and an environmental policy system containing a unit progressive carbon tax on Low Carbon Technology (LCT) heterogeneous enterprises' endogenous green innovation strategies. The Evolutionary Stable Strategy analysis of dynamic game models demonstrate that there does exist a synergy green innovation effect between green innovation subsidies and unit carbon taxes. The numerical simulation shows that the synergy green innovation effect of green innovation subsidies and carbon taxes contains both an overlapping policy effect and a more significant green innovation stimulating effect on enterprises with high LCT. Additionally, the introduction of a carbon tax will increase enterprises' affordability on the green innovation cost coefficient. Furthermore, introducing a unit progressive carbon tax would also create additional stimulation for enterprises to pursue a larger carbon reduction amount for the carbon emission cost-saving advantage. Based on the synergy green innovation effect mentioned above, we also investigate the policy implications of varying the tax rate and subsidy proportion in different situations.