A game theoretic approach to contract-based enviro-economic coordination of wood pellet supply chains for bioenergy production

Abstract

Wood pellets have gained global attention due to their economic availability and increasing demand for bioenergy as part of sustainable energy solutions. Management of the wood pellet supply chains, from feedstock harvesting to bioenergy conversion, is critical to ensure competitiveness in the energy markets. In this regard, wood pellets supply chain coordination can play a strategic role in enhancing the efficiency and reliability of bioenergy generation. This study proposes a contract-based coordination mechanism for wood pellet supply chains and compares its performance in alternative centralized and decentralized decision-making structures. A bi-level nonlinear game-theoretic approach with two economic and environmental objective functions is developed. It utilizes the concept of life cycle assessment in a Stackelberg leader–follower game to obtain the bioenergy equilibrium solutions. Further, this study examines the case of wood pellet supply chains in three remote Canadian communities. The aim is to showcase the practicality and significance of the proposed approach and interpret the findings. By focusing on these communities, the crucial role of supply chain coordination in fostering sustainable development, particularly, in the context of bioenergy generation is emphasized. The study colludes by advocating a number of avenues for future research.