How Carbon Tax Policy Affects the Carbon Emissions of Manufacturers with Green Technology Spillovers?

This study examines the effects of carbon tax policies on carbon emissions in the context of green technology spillovers among manufacturers. We develop a differential game model that incorporates both horizontal and vertical green technology spillovers, analyzing scenarios with and without a carbon tax policy. Our equilibrium analysis demonstrates that a carbon tax policy effectively promotes carbon reduction in manufacturers experiencing green technology spillovers by increasing investment in green technology. The policy also mitigates the negative effect of free-riding among competing manufacturers (horizontal spillovers) while enhancing the positive effect of free-riding among non-competitors (vertical spillovers). Additionally, we find that raising carbon tax or fostering vertical spillovers can enhance the profitability of supply chain participants by expanding the market scale. Conversely, elevating consumer environment awareness yields greater benefits for those who innovate (the spiller) rather than those who adopt (the recipient). Our findings offer novel managerial insights for manufacturers navigating green technology spillovers in a landscape shaped by carbon tax policy.