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Article

Green Paradox in the Carbon Neutrality Process: A Strategic Game About the Shipping Industry

by
Peng Xu
,
Yukun Cao
* and
Jingye Li
College of Economics and Management, Northeast Forestry University, Harbin 150040, China
*
Author to whom correspondence should be addressed.
Sustainability 2025, 17(13), 5970; https://doi.org/10.3390/su17135970
Submission received: 30 April 2025 / Revised: 19 June 2025 / Accepted: 27 June 2025 / Published: 29 June 2025
(This article belongs to the Special Issue Sustainable Maritime Logistics and Low-Carbon Transportation)
Versions Notes

Abstract

The shipping industry plays a significant role in China’s and the global pursuit of carbon neutrality, and it is essential to be cautious about the potential risks associated with the green paradox. This study incorporates Goal Setting Theory and Value Expectations Theory into the analytical framework of the green paradox and tests this framework through a strategic game research design. The study finds that, first, the green paradox of shipping companies presents hidden characteristics, and the loss caused by coping strategies is a necessary risk to be vigilant about. Second, the green paradox of shipping companies is mainly caused by the decision-makers’ goal perception of accessibility. Moreover, due to the motivation of long-term acceptance of green subsidies, decision-makers will delay the carbon neutrality process. Third, policies need to adopt a gradient increasing quota management strategy, and be accompanied by a variety of policy tools to reduce the risk of the green paradox. This study opens the theoretical “black box” of market expectations and provides a solution to reduce the risk of the green paradox.

1. Introduction

In 2020, China officially announced its carbon neutrality action plan to be achieved by 2060, which reflects the proper attitude of a responsible world power [1]. Carbon neutrality is a state achieved through the optimization of industrial and energy structures, where greenhouse gas emissions and absorption reach a balance [2]. The realization of this state is beneficial for addressing the environmental crisis caused by global climate change. For this purpose, China has taken action for more than a decade. The shipping industry is one of the main industries contributing to carbon dioxide emissions, pivotal to the achievement of carbon neutrality goals. As early as 2016, China had issued the “Emission Limits and Measurement Methods for Marine Engine Exhaust Pollutants (China Phase I and II)”, continuously promoting carbon neutrality in the shipping industry for nearly 10 years. Periodically summarizing the progress of China’s shipping industry in reducing carbon emissions can provide valuable experience for countries around the world, especially emerging economies, in participating in climate action.
The green paradox is used to describe the problem of deviation between climate action and policy expectations, and it is an important basis for observing whether carbon neutrality actions are carried out in the prescribed direction [3,4,5]. This phenomenon has been proven by data from multiple countries or regions, including the United States [6,7], Europe [8], and Japan [9], and it must be paid widespread attention. The transportation industry is a major area where the green paradox occurs. For necessary freight transportation, carbon emissions are unavoidable in the short term; for passenger transportation, the wealthy will not easily give up pleasure due to carbon emissions [9]. The fundamental cause of the green paradox is that market entities have rational expectations [3,4,5]. When increasingly stringent climate policies can be anticipated, market entities typically increase energy reserves or emissions in the short term. Since the root cause of the green paradox is strongly unobservable, no effective regulatory policies have been discovered [8,10,11,12,13,14].
Existing research has profoundly summarized and observed the phenomenon of the green paradox, yet it has not been able to form a convincing theory and solution. First, there is a lack of deep observation of scenarios and mechanisms. The explanation of the green paradox is based on the two assumptions of perfect competition in the market and rational expectations [3,4,5]. This single assumption leads researchers to be unable to capture the differences in mechanisms and to fit real decision-making scenarios. Second, there is a lack of research design that can reflect the decision-making process. The existence of the green paradox stems from the psychological activities of market entities, as well as the decisions and actions they take [3,4,5]. However, existing research mainly chooses research methods such as empirical data regression [6,8,15] or theoretical model simulation [7,16]. The former is a post-mortem test for the green paradox, and the latter substitutes the overall characteristics of market entities with the subjective knowledge of researchers, both of which are difficult to directly reflect the motivations of market entities.
In summary, this study intends to directly reveal the scenarios and mechanisms behind the formation of the “green paradox” in the shipping industry through improvements in theoretical perspective and research design. First, this paper selects goal-setting theory and the value-expectancy model as theoretical perspectives, which are used to construct a framework for analyzing the decision-making motivations of shipping companies. Secondly, this paper employs a strategic game research method, selecting 178 groups of students from relevant majors to provide behavioral motivations. The potential contributions of this work are twofold. Theoretically, by introducing management theory into the explanation of economic phenomena, it effectively expands the perspective of green paradox-related research. This provides a theoretical premise for enriching the single rational assumption and deeply revealing the motivations of shipping companies. Methodologically, it utilizes strategic games to transform empirical summaries into forward-looking judgments and eliminates credibility issues caused by subjective biases through the enrichment of data volume.

2. Research Hypotheses

2.1. Climate Policy and the Green Paradox

The essence of the green paradox is used to describe the effect of climate policies on the expectations and actions of market entities. Climate policies primarily adopt two types of policy tools: price and quantity. The former is represented by carbon taxes and subsidies, while the latter is represented by carbon markets [17,18]. Carbon taxes establish a clear price standard for carbon dioxide, internalizing the externalities of economic activities [19]. Subsidies are targeted at green technologies or green energy, aiming to offset the high costs incurred by low-carbon technologies [10,12,13,14]. Carbon markets adopt a cap-and-trade approach, imposing quota restrictions on enterprises. Under this tool, the price of carbon emissions is not set by the government but determined by market supply and demand [17]. The combination of price and quantity tools has become the choice for regulating high-carbon industries in countries such as Europe, Australia, and China.
China has comprehensively adopted both price-based and quantity-based policy tools for the shipping industry. On the one hand, shipping companies can receive economic subsidies from the government for actions such as retrofitting ports, vessels, power, and energy. On the other hand, the shipping industry was identified as a key industry in China’s carbon neutrality action “1+N” system in 2021. Additionally, the “Emission Limits and Measurement Methods for Marine Engine Exhaust Pollutants” clearly stipulate the emission quotas for each vessel in service. This constitutes the policy background for this study.
In an ideal state, climate policies have a positive effect on the carbon reduction actions of market entities. The implementation of carbon tax policies can increase the costs associated with carbon-emitting actions, thereby forcing market entities to adopt carbon reduction measures [19]. The mechanism of carbon markets is complex. On one hand, high-emitting enterprises must purchase carbon emission rights, leading to increased costs [20,21]. On the other hand, the carbon emission rights saved through carbon reduction actions by market entities can be sold in the market, generating direct economic income [22,23,24]. Green subsidies have a direct incentive characteristic, thus promoting carbon reduction behaviors among market entities.
The green paradox presents a contrasting viewpoint, suggesting that the actions of market entities may deviate from climate policies. The implementation of price-based policy tools provides market entities with the motivation to adapt or delay. When market entities anticipate an increase in carbon taxes, they may store energy in the short term to avoid economic losses [10,11]. Additionally, companies that adopt a delay strategy may receive long-term economic subsidies [10,12,13,14]. The implementation of quantity-based policy tools makes it possible for market entities to pursue premiums on carbon emission rights [8,25,26,27]. These two contrasting viewpoints lead to the first hypothesis of this study:
H1. 
The implementation of climate policies can influence the carbon reduction actions of shipping companies.

2.2. Goal Setting and Value Expectations

The Goal Setting Theory, a component of the broader Goal Setting and Value Expectancy Theory, offers a potential lens through which to understand the green paradox. It posits that moderately challenging goals can significantly boost the performance of individuals or organizations [28]. Specifically, when a goal is substantially beyond the current progress, it can lead to a sense of overwhelm and passive action among individuals or organizations [29,30,31]. The core of the green paradox arises from a misalignment between market expectations and climate policy objectives, often due to overly ambitious goals. On one front, the measurement of carbon emissions presents inherent challenges [32,33,34], paving the way for carbon emission quotas to exceed actual levels. On another, price-based climate policy tools delegate the authority to set goals to market participants without explicitly defining carbon reduction targets. Consequently, the paper presents its second hypothesis:
H2. 
Goal progress determines shipping companies’ rational expectations, which in turn affect carbon reduction actions.
The Expectancy Theory regards the motivation of individuals or organizations as a function of value and expectancy, where expectancy refers to the attainability of goals. For goals of equal value, the stronger the perceived attainability, the stronger the motivation of individuals or organizations to pursue, and the higher the performance achieved [35,36,37,38]. Another reason for the formation of the green paradox is that climate policies, regardless of the capacity of market participants, set excessively high carbon reduction targets. Such carbon reduction targets imply that market participants find it difficult to achieve, and then adopt strategies of resistance or circumvention. When shipping companies face carbon emission quotas that are significantly lower than normal business levels, or find it difficult to pay high carbon taxes, they will have a low mood towards carbon reduction targets. In addition, although the government provides green subsidies for the transformation of ports, hulls, energy, and power systems, they may be ignored due to the high transformation costs that shipping companies cannot afford. Therefore, this paper proposes the third research hypothesis:
H3. 
The perceived attainability of carbon reduction goals can moderate the carbon reduction actions taken by shipping companies.
The Goal Setting and Value Expectancy Theory makes it possible to decompose market entities’ expectations regarding carbon reduction goals. Unlike attributing expectations solely to rationality, these theories decompose the attributes of expectations, indicating that rational expectations are composed of two dimensions: goal clarity and attainability. This not only helps to understand the reasons for the green paradox at the theoretical level but also provides insights for designing effective climate policy tools.

3. Research Design

This study adopts a strategic gaming approach to attempt to decompose the expectations of market entities in the carbon neutrality process and the resulting carbon reduction actions. This research method abstracts the real environment into a gaming environment to observe the patterns of shipping companies in making carbon reduction decisions and carrying out carbon reduction actions. Compared with traditional research methods, such as econometric analysis or policy simulation modeling, this research method frees itself from the dependence on empirical data and is more in line with decision-making scenarios [39,40]. Therefore, it provides a possibility to understand the expectations of market entities that lead to the green paradox.
The participants in the strategic game were 178 student teams from the management colleges of two universities in northern China. These universities specialize in shipbuilding and construction, and cases and knowledge in these areas are widely disseminated in daily teaching. This provides a knowledge base for students to understand the carbon reduction actions of shipping companies. To ensure the robustness of decision-making results, the student teams were randomly divided into three parts to represent shipping companies from different regions. Each student team consisted of 3 members, serving as the general manager, deputy general manager, and chief financial officer of the shipping company, responsible for overall decision-making, business decision-making, and financial decision-making. As these participants come from management colleges, they are able to make decisions that align with professional content. Additionally, there are differences in the sensitivity of business decisions and financial decisions to the same climate policy. For example, financial decision-makers are more sensitive than business decision-makers to price-based decisions. This design can reflect the internal game-playing process within shipping companies.
The strategic game is designed to closely resemble real-world scenarios. Participants were provided with key climate policies from China’s central and local governments. These policies include China’s carbon neutrality action plan, as well as local regulations for the transportation industry and coastal areas. The decisions participants faced included the volume of freight and investments in port maintenance, hull improvements, energy optimization, and power system upgrades. The expected carbon reduction effects of these business decisions were recorded as indicators to measure the carbon reduction performance of shipping companies.
The strategic game took into account both price-based and quantity-based climate policy tools. The price-based policy tool chose green subsidies as a representative. Since green subsidies are directly related to the business and finance of shipping companies, the strategic game focused on this typical policy tool. Each student team was given five different levels of subsidy intensity, representing their access to financial support ranging from 10% to 50% of the cost for green technologies or energy innovations. The quantity-based climate policy considered the restrictive role of carbon emission quotas. To simulate real-world scenarios, the research set the carbon reduction quota for each company at 1×10^6 tons. At the same time, to consider the impact of historical target completion and goal attainability, participants were informed that the carbon reduction amount in the previous year was 9.2 × 105 tons, along with a randomly assigned regional carbon reduction target achievement level from 1 to 5. In addition, the research team conducted surveys and recorded the perceived attainability for each student team.

4. Results

4.1. Key Facts

The characteristic facts record the main process of the strategic game (Table 1). These processes include the following: (1) the main scenarios faced by participants, including the support level of green subsidies and the progress of carbon reduction goals in their region; (2) the achievement of carbon reduction goals through a series of decisions made by participants, namely the ratio of the expected carbon reduction amount from decisions to the prescribed carbon reduction quota (1 × 106 tons); and (3) participants’ perceived attainability of carbon reduction goals, which was provided by the participants in the strategic game. The characteristic facts show that the overall perceived attainability of carbon reduction goals among participants is low, with high internal disagreements. Additionally, participants are able to exceed the carbon reduction goals.

4.2. Benchmark Regression Analysis

To observe the relationship between climate policies and the carbon reduction actions of shipping companies, and to test whether H1 holds true, a benchmark regression analysis was conducted. The benchmark regression analysis took the goal achievement as the dependent variable, the intensity of green subsidies as the independent variable, and gradually added covariates to ensure the robustness of the regression (Table 2).
The estimation results show that the intensity of green subsidies significantly improved the carbon reduction goal achievement of shipping companies. When only considering the intensity of green subsidies, the coefficient estimate was 0.8830, with a significance level below 0.01. As covariates were gradually added, the coefficient estimate of the intensity of green subsidies on the carbon reduction goal achievement of shipping companies remained significantly positive. This indicates that the estimation results are robust. The benchmark regression estimation results validate the establishment of H1 and suggest that, at least in the scenario of green subsidies as a climate policy tool, the green paradox can be broken.

4.3. Mechanism Analysis Results

To test whether H2 and H3 hold true, this paper introduced interaction terms between covariates and independent variables (Table 3). The coefficient estimation results show that although the coefficient of regional goal progress is significantly positive, its interaction term coefficient estimate is significantly negative. Similarly, the coefficient estimate of perceived goal attainability is negative, while its interaction term coefficient is significantly negative. This suggests that the expectations of shipping companies can disrupt the intervention effects of climate policies, thereby triggering the risk of the green paradox.

4.4. Exploratory Analysis Results

Based on the feedback from participants, regional goal progress is the main basis for their judgment of goal attainability. Therefore, this paper explores the relationship between these two factors and observes whether it could potentially influence the carbon reduction behavior of shipping companies. To this end, a two-stage regression analysis was conducted (Table 4).
Column (1) reports the estimation results of the first-stage regression, where the dependent variable is perceived goal attainability, and the independent variables are the intensity of green subsidies and regional goal progress. The results show that both the intensity of green subsidies and regional goal progress significantly improved participants’ perceived attainability of carbon reduction goals. Column (2) reports the estimation results of the second-stage regression, where the dependent variable is goal achievement, and the independent variables are the intensity of green subsidies, perceived goal attainability, and their interaction term. The results show that the coefficient estimate of the interaction term is significantly negative. This indicates that when carbon reduction goals can be easily achieved, shipping companies will adopt circumvention strategies, moderately reducing their carbon reduction behaviors.

5. Discussion

5.1. The Green Paradox in the Decarbonization Actions of the Shipping Industry

We conducted a strategic game in the context of the shipping industry to observe the existence of the green paradox. The green paradox describes the phenomenon where climate actions deviate from expected policy goals. Since this phenomenon leads to uncontrollable situations for carbon neutrality actions, it has received widespread attention from the academic community. The green paradox is caused by the expectations of market entities, making it non-observable. We chose a strategic game as our research design, which allows for a detailed observation and recording of the decision-making psychology and expectations of market entities.
The research results indicate that the green paradox in the shipping industry is insidious. First, overall, the green subsidy policy can promote shipping companies to take carbon reduction actions, and the coefficient estimate result is robustly significant. This is basically consistent with the real-world scenario, where the total carbon emissions of the shipping industry show a decreasing trend. According to estimates, compared to the normal operation of businesses, the carbon emissions of the shipping industry will be reduced by 92.15% by 2050 [41]. Additionally, the effectiveness of green subsidies has been confirmed once again. Green subsidies can provide timely investments for shipping companies to update their hulls and power systems, thereby ensuring the effective implementation of carbon reduction actions [42]. Second, part of the carbon reduction effect of green subsidies is “digested” in practice. We found that the coefficient estimate of the interaction term between the expectations of shipping company decision-makers and green subsidies is significantly negative. In other words, market entities will not fully and firmly take carbon reduction actions. This industry-wide result suggests that the green paradox is indeed real, albeit with varying degrees of severity.
This research finding deepens the understanding of the green paradox. Existing studies have focused on the negative effects of climate policies, that is, the increase in carbon emissions due to the resistance strategies of market entities [8]. This paper, however, shows that circumvention strategies can also lead to the loss of carbon reduction actions. Such behavior is insidious and undoubtedly delays the carbon neutrality process. Therefore, this phenomenon should be treated with profound caution.

5.2. The Causes of the Green Paradox and the Expectations of Shipping Companies

We have conducted a detailed decomposition of market entity expectations. The expectations of market entities are the fundamental cause of the green paradox. Due to their psychological attributes, they are often regarded as a “black box.” By incorporating Goal Setting Theory and expectancy theory into the analytical framework, this paper has made it possible to decompose market expectations.
The research finds that the expectations of shipping companies regarding carbon reduction goals are composed of at least two parts. The first part is the progress of carbon reduction goals. When a region or company has achieved good carbon reduction goals in previous years, it will maintain a positive expectation, which in turn promotes future carbon reduction actions. The second part is the subjective judgment of market entities, which is a potential cause of the green paradox. The research results indicate that the decision-makers of shipping companies may reduce possible carbon reduction actions in the short term in order to obtain long-term green subsidies. Additionally, there is a connection between these two parts, namely, the perceived attainability of carbon reduction goals by the decision-makers of shipping companies is derived through comparing goal progress.
This research result provides a basis for the government to set carbon reduction goals. The setting of carbon reduction goals includes two main modes: goal-oriented and capacity-oriented [43]. The former is based on the principle of pursuing anticipated goals, such as achieving carbon neutrality by 2060. The latter is based on what is currently achievable. In fact, an increasing number of scholars are calling for carbon reduction goals and supporting climate policies to be comprehensive and synergistic [44,45].

5.3. How to Reduce the Risk of the Green Paradox

Our research findings provide some insights for the government to manage the carbon reduction actions of the shipping industry.
First, the quota management for shipping companies should adopt a strategy of gradual increase. Based on past experience data, the government needs to gradually tighten the annual emission limits on a basis that can be achieved. This strategy can compress the space for shipping companies to circumvent while ensuring their acceptance, thereby reducing the risk of hidden green paradoxes.
Second, the green subsidies should be aligned with the investment cycles of shipping companies. The results of the strategic game show that green subsidies have the significance of offsetting financing pressures, which creates the possibility of encouraging shipping companies to take carbon reduction actions. Through the design of matching investment cycles, this incentive effect can be further amplified.
Third, give status to the performance of carbon reduction actions. The market expectations of shipping companies are a function of value and attainability. Emphasizing the performance status of carbon reduction actions can promote market entities’ pursuit of goals by enhancing value. This requires the improvement of the ESG system for enterprises.

5.4. Research Limitations and Future Directions

We decomposed the expectations of market entities for carbon reduction actions through a strategic game. Although this research design took into account the professional backgrounds of the participants and tried to closely resemble the real decision-making environment, it still could not fully replicate reality. In fact, this research design is similar to a “laboratory” in that it can focus on core factors to the greatest extent. However, real-world scenarios are undoubtedly more complex and require more detailed data and processing methods.
Future research may deepen insights by enriching data sources and enhancing research design. On one hand, this scientific issue involves data from both governments and enterprises, and must integrate both quantitative and qualitative data. Multisource and heterogeneous data undoubtedly pose strict requirements on data collection capabilities. On the other hand, accompanying research designs are needed to deepen the analysis of data. This includes techniques for matching government and enterprise data, as well as methods for mutual verification between quantitative and qualitative materials.

6. Conclusions

We have enriched the theoretical framework of the green paradox through the Goal Setting and Value Expectancy Theory, and observed this framework through a strategic game. The research findings are as follows: First, the green paradox in shipping enterprises exhibits insidious characteristics, and the loss caused by circumvention strategies is a risk that must be guarded against. Second, the green paradox in shipping companies is primarily triggered by decision-makers’ perceived attainability of goals. Moreover, motivated by the prospect of long-term green subsidies, decision-makers may delay the carbon neutrality process. Third, policies need to adopt a gradient increase in quota management strategies and be supported by a variety of policy tools to mitigate the risk of the green paradox. These research conclusions provide a new perspective and tools for understanding and managing the green paradox.

Author Contributions

Y.C. conceived the idea of this study. J.L. collected and analyzed relevant data. P.X. prepared an initial draft of the paper. All authors have read and agreed to the published version of the manuscript.

Funding

This research received no external funding.

Institutional Review Board Statement

Ethical review and approval were waived for this study, due to in 2023, the Ministry of Science and Technology of the People’s Republic of China, along with 10 other departments, jointly released the “Interim Measures for the Review of Science and Technology Ethics”. Non-interventional studies of human behavior or intentions are not included among these.

Informed Consent Statement

Informed consent was obtained from all subjects involved in the study.

Data Availability Statement

The data presented in this study are available on request from the corresponding author due to privacy.

Conflicts of Interest

The authors declare no conflicts of interest.

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Table 1. Key acts about the strategy games.
Table 1. Key acts about the strategy games.
Variable TypesVariable Name MeanStandard Deviation
Dependent VariableTarget Completion Performance (TCP)2.39810.8207
Independent VariableGreen Subsidy Intensity (GSI)3.07440.7203
CovariateRegional Goal Progress (RGP)3.02480.7514
Target Accessibility and Awareness (TAA)2.89891.2309
Table 2. Benchmark regression estimation results.
Table 2. Benchmark regression estimation results.
(1)(2)(3)
GSI0.8830 ***
(0.0206)		0.2331 ***
(0.0630)		0.2005 ***
(0.0633)
RGP—0.5491 ***
(0.0638)		0.4558 ***
(0.0722)
TAA——0.1320 ***
(0.0505)
Sample size178178178
R20.88300.91760.9207
F-value1336.02 ***980.19 ***677.44 ***
The model is in the form of no intercept term. The values in parentheses are standard deviations. *** indicates a significance level of 0.01.
Table 3. Mechanism analysis estimation results.
Table 3. Mechanism analysis estimation results.
(1)(2)(3)
GSI0.2425 ***
(0.0742)		0.1986 ***
(0.0734)		0.2326 ***
(0.0734)
RGP0.5103 ***
(0.0880)		0.4575 ***
(0.0793)		0.9026 ***
(0.1910)
TAA0.1318 **
(0.0504)		0.1276
(0.0985)		−0.2974
(0.1927)
RGP × GSI−0.0299
(0.0276)		—−0.1559 **
(0.0611)
TAA × GSI—0.0015
(0.0275)		0.1397 **
(0.0605)
Sample size178178178
R20.9212 0.9236
F-value508.86 *** 418.26 ***
The model intentionally excludes an intercept term. The values in parentheses represent standard errors. ** and *** indicate statistical significance at the 0.1 and 0.01 levels, respectively.
Table 4. Exploratory analysis estimation results.
Table 4. Exploratory analysis estimation results.
(1)(2)
Dependent VariableTAATCP
GSI0.2471 ***
(0.0926)		0.4571 ***
(0.0874)
RGP0.7070 ***
(0.0939)		—
TAA—0.5264 ***
(0.0505)
TAA × GSI—−0.0630 **
(0.0274)
Sample size178178
R20.88470.9055
F-value675.50 ***559.24 ***
The model intentionally excludes an intercept term. The values in parentheses represent standard errors. ** and *** indicate statistical significance at the 0.1 and 0.01 levels, respectively.
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Xu, P.; Cao, Y.; Li, J. Green Paradox in the Carbon Neutrality Process: A Strategic Game About the Shipping Industry. Sustainability 2025, 17, 5970. https://doi.org/10.3390/su17135970

AMA Style

Xu P, Cao Y, Li J. Green Paradox in the Carbon Neutrality Process: A Strategic Game About the Shipping Industry. Sustainability. 2025; 17(13):5970. https://doi.org/10.3390/su17135970

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Xu, Peng, Yukun Cao, and Jingye Li. 2025. "Green Paradox in the Carbon Neutrality Process: A Strategic Game About the Shipping Industry" Sustainability 17, no. 13: 5970. https://doi.org/10.3390/su17135970

APA Style

Xu, P., Cao, Y., & Li, J. (2025). Green Paradox in the Carbon Neutrality Process: A Strategic Game About the Shipping Industry. Sustainability, 17(13), 5970. https://doi.org/10.3390/su17135970

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