Managing life-cycle pollution through green development and government intervention: A dynamic model

•Green process development and green product development may have a backfiring effect on environment.•Government intervention is crucial to avoid the backfiring effect.•This paper combines optimal control theory and game theory to study pollution problem from a product’s life-cycle perspective. Taking life-cycle pollution and government intervention into consideration, this paper examines whether green process development and green product development benefit the environment (under what conditions) from a dynamic model perspective. Using an optimal control model approach, we analyze profitability and life-cycle environmental performance under three scenarios: no green development; green process development aiming at reducing carbon dioxide emissions in the production phase; green product development aiming at reducing pollution in the product’s use and disposal phases. We find there exists a green development paradox: under certain government interventions and market conditions, green process and product development may help to increase profitability while failing to improve environmental performance, from the perspective not only of the single supply chain but also of the whole of society. Fortunately, properly designed carbon tax or green product subsidy schemes as powerful market-based interventions can avoid this green development paradox. Our findings have practical implications for both policymakers and practitioners making environmental policy decisions and devising green development strategies.