Greenwashing and Blockchain Adoption Strategies in a Competitive Market Under Cap-and-Trade Scheme

As abatement investments become more widespread, the growing prevalence of greenwashing has diminished consumer trust in environmental claims and posed reputational risks to firms genuinely engaging in abatement efforts. This study develops a duopoly competition model to examine firms’ strategic choices among abatement investment, greenwashing, and blockchain adoption considering consumer skepticism under cap-and-trade scheme. Equilibrium analysis reveals how blockchain adoption affects greenwashing behavior and identifies the conditions for effective mitigation. The results show that blockchain technology does not always mitigate greenwashing. Strong carbon reduction incentives combined with moderate consumer trust enable blockchain adoption to reduce greenwashing and carbon emissions. Strong carbon incentives combined with low consumer trust in environmental claims can motivate honest firms to pursue genuine high-abatement strategies with blockchain adoption, thereby improving overall environmental performance. Notably, weak carbon reduction incentives and strong consumer skepticism may lead to unintended increases in carbon emissions. Practice-based numerical analysis shows that blockchain increases the honest firm's market share by 16.0% and profit by 27.0%, while reducing total carbon emissions by 17.7%. Finally, further analysis suggests that stricter regulation of falsified on-chain information can curb greenwashing enabled by such falsification under weak abatement incentives. Our study provides theoretical foundations and policy implications for strengthening greenwashing regulation and promoting the application of blockchain under cap-and-trade scheme.