Abstract:Differential pricing strategy of a two-echelon supply chain is studied under carbon trading mechanism, subsidy mechanism and carbon trading and subsidy mechanism. Ordinary products compete with low-carbon products in the supply chain. By solving the Stackelberg Game Model, it is concluded that a single subsidy policy can not encourage manufacturers to save energy and reduce emissions, but should be used in combination with carbon trading mechanism. And it is superior to the single carbon trading mechanism. Finally, the effectiveness of carbon trading and subsidy mechanism is verified by a numerical example. The research shows that when the price of carbon trading rises to a certain level, retail and wholesale prices of ordinary products will increase, the prices of low-carbon products will decrease, the demand of ordinary products will decrease, the demand of low-carbon products will increase and the total carbon emissions will decrease; with the increase of low-carbon subsidies, retail prices of ordinary products and the wholesale and retail prices of low-carbon products will decrease, the demand of ordinary products will decrease, the demand of low-carbon products will increase, and the price and demand of low-carbon products are more sensitive to the low-carbon subsidies. Higher low-carbon subsidies will reduce carbon emissions and increase the profits of manufacturers and retailers.