The research on the game between enterprise and local government in the environmental financial applications

Static game and repeated game model are used in this paper to analyze the game relations on enterprises and local governments in the applications of environmental financial products, within three cases. In penalty mechanism, the higher the cost of environmental finance, the greater the probability of environmental protection production enterprises to develop, but it is necessary to introduce the social benefits of government environmental regulation to force companies to carry out a greater probability of environmental management. In incentive mechanism, the greater intensity of environment financial incentives by local government, and then the smaller probability of environmental management which enterprise has carried out. But in the long-term analysis, when the incentive effects given by local government to businesses is greater than or equal the difference between long-term gains and short-term gains, the firm will always choose to carry out environmental management strategy. If the penalties and incentives are introduced at the same time, the local government will give incentive at first, and then give the punishment. And the local government can make up the stimulate spending through the future more tax revenue.