Green credit incentive mechanisms: considering reputation, industry competition, and externalities of environmental behavior

Green credit is a key policy tool for guiding high-polluting enterprises toward green transformation, but its effectiveness is often weakened by symbolic compliance and banks’ short-term profit pressures. To address these challenges, we develop a tripartite evolutionary game involving the government, banks, and high-polluting enterprises. Unlike existing studies that mainly adopt bilateral frameworks or treat corporate behavior as simple compliance, we distinguish between true green behavior and greenwashing and jointly incorporate reputational mechanisms, industry competition, and environmental externalities into the incentive structure. The results indicate that, under the baseline incentive-constraint setting, the system converges to the stable state of “true green behavior, green credit, and strict regulation.” Reputation mainly shortens the initial waiting period and accelerates the coordinated adjustment of the three parties, whereas stronger industry competition significantly delays convergence without changing the final equilibrium by weakening the relative return to substantive green investment. Environmental externalities mainly reinforce the government’s persistence in strict regulation and shorten the transition period for enterprise and bank adjustment. The simulations also reveal asymmetric penalty effects. Government penalties on enterprise greenwashing exhibit a threshold effect. When penalties are insufficient, the system remains locked in the undesirable equilibrium of “greenwashing, no green credit, and strict regulation,” whereas penalties above the threshold shift the system to the target equilibrium. Excessive penalties on banks for non-compliant green credit slow the early diffusion of green credit, whereas penalties on banks for not providing green credit more effectively accelerate coordinated convergence toward the desired equilibrium. These findings clarify how green credit governance depends on coordinated incentives, reputation effects, and appropriate penalties.