Can government policies help to achieve the pollutant emissions information disclosure target in the Industry 4.0 era?

In the Industry 4.0 era, manufacturers commonly adopt digital technologies such as Internet of Things (IoT) and blockchain technology to improve information disclosure. In this paper, we focus on how the government can properly set an extended producer responsibility (EPR) policy (penalty or subsidy) and impose it on the manufacturer to entice the manufacturer to set the optimal pollutant emissions information disclosure (PEID) level which maximizes the social welfare. In the basic model, we build a simple consumer utility based stylized analytical model. We first derive from the government perspective the social welfare function and obtain the closed-form expression of the optimal level of PEID. Then, we explore the manufacturer’s problem on PEID under the EPR policy. We show how the EPR policy can be set so that the government can entice the manufacturer to set the PEID level which maximizes the social welfare. We also uncover the factors governing the EPR policy, and show the situations under which the EPR policy is in fact a subsidy scheme (i.e., the government sponsors the manufacturer). To derive more insights and check for robustness, we extend the basic model in a number of ways, namely (i) the situation when the manufacturer is risk sensitive, (ii) the case with the extended consumer responsibility (ECR) policy, (iii) the scenario when there is a per unit PEID level dependent operating cost (i.e., a variable cost), and (iv) the case when the platform is not supported by blockchain. We find that the form of EPR policy and the qualitative insights remain valid for the cases when the manufacturer is risk sensitive and there is a PEID level dependent operating cost. Interestingly, we uncover that, unlike the EPR policy, the use of ECR policy fails to help.