Low-carbon investment supply chain decisions under manufacturer competition

Securing funding is crucial for achieving both global and regional emission reduction goals. Presently, global abatement funding comes mainly from governmental grants and low-carbon financial institution investments. To explore the allocation of emission reduction funds among competitive manufacturers, we consider a low-carbon investment supply chain consisting of a low-carbon financial institution and two manufacturers. By developing a Nash game model and a manufacturer-leader Stackelberg game model, we examine the abatement fund allocation problem under two different power structures. The results show that appropriate competition between two manufacturers encourages low-carbon financial institutions to increase their levels of abatement investment. In contrast to the MN power structure (i.e., the Nash game), both manufacturers opt for a decreased revenue allocation ratio under the MS power structure (i.e., the Stackelberg game). The low-carbon financial institution considerably curtails its investment in Manufacturer 1 under the MS power structure, while this reduction is less pronounced for Manufacturer 2. Under different power structures, the retail price serves as a pivotal element influencing the allocation of abatement funds. Interestingly, funds tend to gravitate toward the manufacturers with higher retail prices. An extended model underscores the unit abatement cost as an additional variable that impacts the competitive edge and profitability of manufacturers.