Abstract: Aiming at investigating whether consumer′s environmental awareness could be used as a policy instrument of carbon emission reduction on the demand side of supply chain, this paper establishes one two-stage dynamic game model, which consists of a manufacturer and a retailer, to compare the impacts of consumer′s environmental awareness, carbon emission reduction policies and product′s initial carbon footprint on supply chain′s carbon emission reduction and profit under policy scenarios of carbon tax, emission amount control, carbon cap and trade, and discuss the separate and common environmental effects and economic effects of environmental regulation policies (“stick”) and environmental awareness (“carrot”) on carbon emission reduction in supply chain. Theoretical analysis and numerical simulation demonstrate that although consumer′s environmental awareness can achieve at the same carbon emission reduction goal and has overlapping effect with an environmental regulation policy, both are different in environmental and economic effect, it can′t substitute any environmental regulation policy; if one would use environmental initiative or regulation policy as an instrument of carbon emission reduction target, the government must pay attention to the comprehensive impacts of consumer environmental awareness, product or industry′ initial carbon footprint and environmental regulation policy′s stringency.

Key words: game theory, carbon emission reduction instrument, overlapping effect, consumer environmental awareness