Who should invest in clean technologies in a supply chain with competition?

The adoption of clean technology is crucial for sustainably achieving the carbon emission reduction. Investing in clean technology projects yields tax reduction and additional market demands. Previous attempts at undertaking such projects have shown that both the manufacturer and retailer receive incentives for investing in such projects during the manufacturing process. In this study, we investigate clean technology investment in a competitive environment for a supply chain consisting of one manufacturer and two retailers. We consider three investment scenarios, i.e., the investment is made by the manufacturer, both the retailers, or only one retailer. By investigating these scenarios, we find that the manufacturer prefers to have both the retailers make the investment. However, the retailers may prefer not to let their supply chain partner, i.e., the manufacturer, make the investment. In addition, because of the spillover effect from the competitor's investment, a free rider can improve its profit, though the improvement is insignificant. Moreover, we find that it is possible to simultaneously achieve economic and environmental optimality in the scenario in which both the retailers make the investment, whereby all supply chain members' profits and the emission reduction are higher than those in other scenarios. Furthermore, analyzing the effects of the investment on consumers, we find that in most cases, the more eco-friendly the product is, the higher retail price the consumers must pay.