Impact of Green Credit Incentives on Operational Decisions of Green Supply Chain

Abstract

Financial incentives have been introduced to guide financial institutions to increase green credit allocation, strengthen environmental risk management, and enhance support for green and low-carbon development. This paper investigated the government’s support for the carbon-emission supply chain by implementing green credit incentives. Two financial incentives are explored: performance-based incentives and interest subsidies. We conduct game-theoretic models to examine the characteristics and effects of two financial incentives on the supply chain. Our results reveal that: (1) both incentives are effective in scaling up supply chain performance and stimulate investment in emission reduction, while the mechanism differs according to the direct beneficiaries; (2) performance-based incentives are more sensitive to environmental damage, while the optimal subsidy ratio is more sensitive to consumer green awareness, indicating that the bank has an instinctive aversion to the risks inherent in abatement investments; (3) it is optimal for the government to intervene in green credit financing activities when environmental advantages and costs and consumer green consciousness are recognized. Our conclusions suggest the government can determine financial incentives for green credit based on the stage of green transition development and the real, demanding requirements of transition goals.

Received: 7 September 2023 | Revised: 4 December 2023 | Accepted: 15 January 2024

Conflicts of Interest

 The authors declare that they have no conflicts of interest to this work.

Data Availability Statement

Data is available on request from the authors.