Carbon reduction decisions under progressive carbon tax regulations: A new dual-channel supply chain network equilibrium model

Abstract

Since the production process in manufacturing industry is one of the main sources of carbon emissions, most governments have enacted relevant carbon policies to encourage manufacturers to invest in green production technology and reduce carbon emissions. However, the effectiveness of the carbon policy deserves further investigation because the manufacturers focus more on economic profits in actual operations. For this purpose, this paper proposes a dual-channel supply chain network (DCSCN) equilibrium model based on variational inequality theory to examine progressive carbon tax mechanism design of the government and its impacts on the production/pricing and abatement level decisions of the manufacturers in the DCSCN. In addition, this paper also examines the influences of the online channel introduction on supply chain network equilibrium decisions, carbon emissions and profits. We employ the modified projection and contraction algorithm to obtain the numerical solutions for several examples, and analyze the impacts of the key parameters on the equilibrium decisions and derive several managerial insights. The results show that if the government sets the high-level carbon tax and the cut-off value in progressive carbon tax policy appropriately, it can induce the manufacturers to improve abatement level actively; meanwhile the profit maximization goal of the manufacturer and the whole DCSCN can be consistent with the government's low-carbon emission target. Moreover, the introduction of online channel may depress the economic activities and lead to profit loss for the supply chain network but contributes to reducing the carbon emissions under progressive carbon tax policy. The conclusions may be useful for reference in the study of the low-carbon supply chain and the design of carbon emission reduction policy for government.