Abstract: Subsidy policy for energy saving and emission reduction has been widely used in our country, but the high-cost expenditures promote the existence of gaming between enterprise and the government in the process of advancing energy saving and emission reduction. Considering the subsidy policy for energy saving and emission reduction, a signaling game model of enterprise and government on subsidies is constructed in this paper. Owing to information asymmetry and imperfection, three kinds of equilibrium including complete success, partial success and complete failure come to existence, and efficiency of market equilibrium will be influenced by the disguised cost and expected risk cost, therefore, the key to achieve completely successful balance is to improve the camouflage cost of enterprise fraud and the expected cost of risk, and thus appropriate policies should be focused on fields such as refining policies &standards, increasing the efficiency of checks and setting penalties in large. By a simple analysis of collusion between government and enterprises it suggests that building a more comprehensive and multi-dimensional assessment indicators, giving play to inquiry and supervision raised by third parties such as the public and media can constrain the collusion between government and enterprises effectively.

Key words: energy saving and emission reduction, subsidy policy, signaling game