Emission reduction incentives in vehicle repair: The role of emission-based differentiation and eco-network effects

Despite global commitments to mitigating greenhouse gas emissions, mandatory and voluntary restrictions remain insufficient across many sectors, particularly in vehicle-repair services. Accelerating the net-zero transition requires a deeper understanding of the roles played by market forces, consumer preferences, and intermediaries. Focusing on vehicle-repair services – a critical yet understudied segment of the carbon-intensive automotive sector – this study investigates the conditions under which emission-linked differentiation can create meaningful incentives for emission reduction. We develop a price-quality competition model to examine how consumer demand for cleaner operations, perceived eco-network benefits, and pressures from intermediaries can catalyze emission abatement efforts in the repair industry. Our theoretical findings reveal that expectations of abatement costs, particularly their diminishing scale, and the perceived small size of the eco-conscious consumer base discourage repair shops from transitioning. Although fostering eco-network effects can facilitate the transition, this option is only effective when demand for eco-services is substantial. Furthermore, through analytical results and numerical simulations, we show how, even in the absence of regulatory penalties, intermediary-imposed incentives can promote the industry-wide transition. We discuss practical implications, emphasizing the importance of involving all relevant stakeholders and addressing emissions across Scope 1, 2, and 3 to drive the financially sustainable change.