Selling More Products or Carbon Emissions Permits? Blockchain Adoption and Emissions Information Sharing

Abstract

Emissions reduction estimation has a great deal of uncertainty and is hard to quantify if we process it traditionally. Governments and firms (e.g., new-energy vehicle (NEV) manufacturers) are increasingly advocating adopting blockchain to enhance the transparency and traceability of carbon footprint, which however discloses information to rivals and affects NEV manufacturers’ profit coordination of selling products and selling carbon emissions permits. We build a game-theoretic model to investigate an NEV manufacturer’s blockchain adoption decision in the presence of duopoly competition where its rival has adopted blockchain before. We find that manufacturers’ preferences for blockchain adoption and their operational decisions are influenced by quantity distortions and the tradeoff between profitability of profit sources, i.e., selling products and selling carbon emissions permits, depending on the carbon trading price and total information value gain. Interestingly, when the carbon trading price is high, blockchain adoption may be beneficial for the rival but hurts the incumbent manufacturer itself. We also show that blockchain adoption could lead to a win-win situation for manufacturers.

Keywords: blockchain adoption; information sharing; technology investment; emissions reduction