The paradox of stringent environmental policies: the feedback between regulatory uncertainty and green technology adoption in competitive shipping

Purpose Carriers face complex green strategic decisions, which are further complicated by regulatory uncertainty, particularly when enforcement intensity is influenced by endogenous factors such as industry-wide technology adoption. This study aimed to understand the impact of the feedback between regulatory uncertainty and green strategies in the shipping market. Design/methodology/approach This article develops a two-period game-theoretic model to examine how dual regulatory uncertainty (occurrence uncertainty and stringency uncertainty) – modulated by feedback from carriers' green strategies – affects equilibrium results in a competitive freight market. Carriers choose between operational and technical compliance pathways and simultaneously set freight prices. The model captures the dynamic interplay between regulatory expectations, adoption behavior and market competition. Findings This study derives conditions under which stringent regulation can paradoxically reduce carriers' incentives for early green investment. Additionally, the results show that regulatory uncertainty can lead to asymmetric profitability outcomes among competing carriers, thereby accelerating market concentration. Originality/value The framework contributes to the literature by endogenizing regulatory evolution within a strategic decision-making model, offering generalizable insights into policy-induced market distortions and strategic underinvestment. The findings have implications for the design of adaptive environmental regulations in freight transport systems.