Can carbon cap and trade mechanism be beneficial for remanufacturing?

Abstract

Remanufacturing is an environmentally friendly and profitable way to conduct production operations. For environmental protection, carbon cap and trade mechanism, which is conventionally considered a burden for manufacturers, is a viable approach to reduce carbon emissions. This paper explores the possibility of a monopolistic manufacturer involved in both manufacturing and remanufacturing to profit under carbon cap and trade mechanism in a single period. We develop a model to derive the favourable conditions under which carbon cap and trade is beneficial for the manufacturer in ordinary markets and green markets and obtain the manufacturer's optimal decisions. Furthermore, we analyse the influence of carbon emissions-related parameters on the manufacturer's optimal decisions and carbon trading quantity. The results show that carbon cap and trade can be valuable for remanufacturing in both the ordinary market and the green market. Policy makers should focus on carbon trading prices to reduce carbon emissions and improve the manufacturers' profits in both markets. In addition, the low carbon emissions characteristics of remanufactured products allow for better profits for manufacturers under carbon cap and trade, and their investments in low carbon production technology should be expanded. Finally, the proportion of green consumers has important performance implications for remanufacturing in green markets. Specifically, excessive green consumers in a monopolistic market are not always a blessing when the carbon trading price is high.