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Strategic analysis of green technology unilateral licensing under carbon cap‐and‐trade policy

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Managerial and Decision Economics
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Gui‐Hua Lin
Gui‐Hua Lin
Gui‐Hua Lin
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Yang‐Ping Liu
Yang‐Ping Liu
Yang‐Ping Liu
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Qi Zhang at Shanghai University
Qi Zhang
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We investigate green technology unilateral licensing strategies between two competing manufacturers under carbon cap‐and‐trade policy. We construct Nash game models and compare the optimal strategies in the unilateral licensing situation with the no‐licensing situation. Comprehensive numerical experiments are taken to investigate the influence of some key parameters on optimal decisions. Our findings show that the green technology unilateral licensing strategy may benefit consumers; when green technology improvement is high, manufacturers tend to take the unilateral licensing strategy to obtain more profits; when initial unit carbon emission difference is moderate or large, the optimal strategy is that the manufacturer with lower level of green technology acts as the licensor; green technology unilateral licensing strategy may not necessarily reduce all manufacturers' total carbon emissions; only when green technology improvement is high, the unilateral licensing strategy is beneficial to environmental protection.
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RESEARCH ARTICLE
Strategic analysis of green technology unilateral licensing
under carbon cap-and-trade policy
Gui-Hua Lin | Yang-Ping Liu | Qi Zhang
School of Management, Shanghai University,
Shanghai, China
Correspondence
Qi Zhang, School of Management, Shanghai
University, Shanghai, China.
Email: qizhang9669@shu.edu.cn
Funding information
This research was funded by the National
Natural Science Foundation of China, grant
number no. 12071280.
Abstract
We investigate green technology unilateral licensing strategies between two compet-
ing manufacturers under carbon cap-and-trade policy. We construct Nash game
models and compare the optimal strategies in the unilateral licensing situation with
the no-licensing situation. Comprehensive numerical experiments are taken to inves-
tigate the influence of some key parameters on optimal decisions. Our findings show
that the green technology unilateral licensing strategy may benefit consumers; when
green technology improvement is high, manufacturers tend to take the unilateral
licensing strategy to obtain more profits; when initial unit carbon emission difference
is moderate or large, the optimal strategy is that the manufacturer with lower level of
green technology acts as the licensor; green technology unilateral licensing strategy
may not necessarily reduce all manufacturers' total carbon emissions; only when
green technology improvement is high, the unilateral licensing strategy is beneficial
to environmental protection.
1|INTRODUCTION
The environmental crisis caused by global climate change is intensify-
ing and global carbon emissions are still rising gradually in recent
years, which makes the environmental issue become a major problem.
The global CO
2
emissions from human activities are still at a high level
in history (Global Carbon Project, 2022). Global energy-related CO
2
emissions grew by 0.9% or 321 Mt in 2022 to reach a new high of
over 36.8 Gt (IEA, 2023). In response to this increasingly urgent cli-
mate crisis, many countries have set new climate targets and made
commitments to reduce carbon emissions. For instance, the
United Kingdom proposed to achieve carbon neutrality by 2050 in
2019. China issued a “30 •60”dual carbon target in 2020. Japan com-
mitted to achieving carbon neutrality as early as possible in the sec-
ond half of this century. Canada announced a target to achieve
carbon neutrality by 2050. In 2021, the United States announced a
new target for reducing emissions, that is, the United States plans to
reduce greenhouse gas emissions by 50% to 52% from 2005 level by
2030 and to achieve carbon neutrality by 2050. In 2022, Australia
updated its National Autonomous Contribution (NDC) target by com-
mitting to net-zero emissions by 2050 and passed climate target
legislation. Chile passed a climate framework law with net-zero emis-
sions commitments and policies. India updated its NDC target and
committed to a net-zero emissions goal by 2070 (World Bank, 2023).
More and more countries have undertaken several specific emissions
reduction policies to achieve their carbon reduction targets. For exam-
ple, China is adopting strong policies to meet its NDC target on cli-
mate issues, including policies to promote the construction of a
national carbon emissions trading market, vigorously develop solar
and wind energy, and limit the growth of coal consumption (United
Nations Environment Programme, 2022). In particular, carbon cap-
and-trade policy is one of the core tools for national carbon emission
reduction.
The carbon cap-and-trade policy is an effective policy for reduc-
ing greenhouse gas emissions (World Bank, 2022). Generally, the gov-
ernment or other designated agency determines a cap on greenhouse
gas emissions for carbon market participants during a specific period
and allocates it to individual firms. Carbon market participants with
excess emissions can buy quotas that they need to emit in carbon
markets, while the ones with surplus emissions quotas can sell their
remaining quotas in carbon markets. Carbon cap-and-trade policy pro-
vides an effective incentive for manufacturers to reduce their carbon
Received: 12 October 2023 Revised: 20 January 2024 Accepted: 30 January 2024
DOI: 10.1002/mde.4148
2646 © 2024 John Wiley & Sons Ltd. Manage Decis Econ. 2024;45:2646–2665.wileyonlinelibrary.com/journal/mde
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