Pollution Control, Technology, and Trees

This study presents a three-stage game demonstrating how consumer demands for products and trees and net-zero emission requirements can affect a firm's incentive to undertake carbon capture, utilization, and storage technology (CCUS) efforts. On the policy front, the regulator sets a combination of carbon footprint tax for products and carbon offset subsidy for CCUS projects. On the demand side, in addition to enjoying positive economic values from the product and trees, consumers incur taxes from consuming the polluting product. A not-for-profit organization provides trees on the supply side, and a single firm offers products. While the firm incurs taxes during production, investing in CCUS projects reduces its environmental costs. Analyzing the subgame perfect Nash equilibria of the game, we determine the net-zero emission policy that produces the highest welfare in the ecosystem. Our results highlight the contributions of innovative technologies, preferences for trees, and strategic planning in achieving an economy-wide net-zero emissions target