This article uses the concept of embodied exergy as metrics in designing incentive policy instruments to tackle the inefficiency of energy operations. Based on the second law of thermodynamics and energy's economic properties as both a private commodity and a public good, it maintains that energy can be measured by separating the useful exergy embodied in a manufactured product from its waste exergy (anergy) as emissions and sunk wastes in a production process. It is rational to benchmark the content of useful exergy embodied in products for any incentive policy design to encourage green production. This article uses trade data between China, Japan and the EU countries to compare the embodied exergy and waste exergy embodied in traded manufactured products. It proposes using a negative value-added tax as an incentive instrument instead of full-scale carbon tariffs to encourage green production and to fence against carbon evasion behaviour.

An analytical framework for conceptualizing the issue of international competitiveness at the firm level is presented taking into account that the firms are increasingly being exposed to international competition. The model identifies three interdependent innovative capability dimensions, which offer insight into the sources of sustainable international competitive advantages over time: Technological capability, managerial capability and resource exploiting capability. The paper presents the challenges of these three components of innovative capability in an international context, and describes how a firm can develop and sustain competitiveness through the operation in the environment of globalization. Finally, based on data from 213 firms in the Beijing area, the paper proves that these three innovative capability components are closely related to international competitiveness. The study reinforces the importance of innovative capability composition in internationalization decision-making and suggests further research in this context.

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