Fixed rebate subsidy vs. unit price subsidy: Incentive effect on the biomass power supply chain

Subsidy policies have increasingly been introduced by regulators to bloom biomass energy, where the unit price and fixed rebate subsidies are particularly used at different stages of a biomass supply chain. However, the effectiveness and appropriateness of these policies have not been investigated systematically. In this study, a game theory model is proposed according to a three-stage biomass power supply chain consisting of farmers, intermediaries, and power plants to explore the tripartite equilibrium decision-making results under different subsidy policies. This is followed by a stepped subsidy proposed according to the existing fixed rebate subsidy policy for the power plants. The results show that government subsidies are not always beneficial. Unit price subsidies are undesirable for intermediaries but for power plants can significantly improve the profits of the biomass power supply chain and social welfare. In addition, fixed rebate subsidies are more effective at motivating the members of a supply chain to increase biomass energy utilization especially the power plants, but also intermediaries and farmers. Finally, the stepped subsidy proposed in this study is a more effective and practicable policy. This research sheds light on ways to promote the development of biomass energy for both policymakers and researchers.