How Does Low-Carbon Subsidy for Consumer Affect Social Welfare

With consideration of consumer environmental awareness (CEA) and upstream competition, this paper discusses the joint pricing strategy of enterprises based on low-carbon subsidy and the impact of low-carbon subsidy on social welfare. Results indicate that the market demand for ordinary products is always lower than that for low-carbon products under low-carbon subsidy policy; thus policy-planners can use low-carbon subsidy to expand the market share of low-carbon products, and effectively improve the market competitiveness of low-carbon products. Low-carbon subsidy policy is beneficial to improving social welfare, especially when the competition between manufacturers is less intensive or consumers are more environmentally aware, in which case a suitable low-carbon subsidy policy can significantly improve social welfare.

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