Carbon quota financing strategies for manufacturers: repurchase versus pledge

Under carbon cap-and-trade, capital-constrained manufacturers can leverage carbon quotas via carbon quota pledge financing (CQPF) and carbon quota repurchase financing (CQRF). Using a Stackelberg game model, this study analyzes the optimal financing choice. Key findings reveal: 1) From both the profit and social welfare perspectives, the optimal financing approach is primarily determined by initial capital and financing costs, with CQPF preferred only when its financing cost is lower than that of CQRF. 2) From an environment perspective, financing is avoided at moderate R&D cost coefficient but becomes attractive beyond thresholds, with preference hinging on the R&D cost coefficient and financing-cost differences. 3) Higher average technology levels boost carbon emission reduction (CER) efforts, sales, and profits across all models, while greater technological volatility improves both economic and environmental outcomes. We also examine the effects of retailer risk aversion and two-manufacturer competition, providing new insights for carbon-financing strategies and related policy design.