Carbon emission allowances purchasing decisions in supply chains under the cap-and-trade mechanism in China: an evolutionary game analysis

Abstract

PurposeThe importance of carbon reduction has become a global consensus, and more and more countries are implementing the cap-and-trade mechanism, including China. The purpose of this paper is to investigate the optimal carbon emission allowances (CEA) purchasing decisions of supply chain members under the cap-and-trade mechanism in China.Design/methodology/approachAn evolutionary game model is established to analyze the CEA purchase strategy choices of suppliers and manufacturers in the supply chain. The influence of the key parameters on the evolutionary game results is analyzed by numerical simulations.FindingsThe supply chain system always evolves towards neither supplier nor manufacturer purchasing CEA or both purchasing CEA. Illegal production behavior and excessive CEA costs are key factors that hinder parties from purchasing CEA. High revenue from purchasing CEA for production, high supply chain losses and high governmental penalties can promote parties to purchase CEA.Originality/valueThe results help supply chain members make better CEA purchasing decisions and also benefit the development of China’s carbon trading market and environmental protection.