Analyzing production optimization models across various carbon pricing policies

Abstract

As the EU and the US successively proposed the carbon border adjustment mechanism (CBAM) and the Clean Competition Act (CCA), importers are now required to declare the carbon emissions of their products. Particularly, wheel companies face increasing time pressure with the gradual development of implementation paths for net-zero emissions and implementing carbon pricing policies in various countries. This research uses the production data of Taiwan wheel companies to establish a mathematical model for the activity-based cost optimisation decision-making process. It explores the impact of different carbon emission costs on a company’s product mix with pricing decisions. Further, the research proposes five mathematical programmes for single-period cost optimisation decision-making under carbon pricing. These models provide some detailed view, such as changes in profits and product mix caused by high carbon taxes or other changes for each resource. Furthermore, the production cost optimal model proposed in this research can be used by enterprises to fulfill their social responsibilities while ensuring profitability and serve as a reference for making net-zero transformation decisions.