Carbon tax vs. carbon trading in China: which is better for promoting sustainable development of remanufacturing companies?

Abstract

To accelerate achieving carbon neutrality, the promotion of low-carbon development in the manufacturing industry has been facilitated by the government's implementation of policies such as carbon taxation and carbon emissions trading. These measures have been put in place to reduce carbon emissions and enhance sustainability within the manufacturing sector. Remanufacturing is an important direction for the low-carbon transformation of enterprises, and improving remanufactured product quality is crucial to the sustainability of remanufacturing enterprises. To elucidate the influence of policies aimed at reducing carbon emissions on the quality of remanufactured products, we developed a game model involving three key players: the original equipment manufacturer (OEM), the remanufacturer (IR), and retailers. This model was constructed based on the heterogeneous consumer demand for both new and remanufactured products. The study delved into the effects of various governmental policies aimed at reducing carbon emissions on the quality-related decisions made by remanufacturing enterprises. Our primary focus was on the implementation of two specific policies: a high-level carbon taxation policy and a carbon trading policy characterized by elevated carbon pricing. These policies create a favorable environment for remanufacturers (IR) to enhance the quality of their products. The sales of remanufactured products are influenced by the purchasing preferences of consumers, and carbon reduction policies can be effective in reducing the total environmental impact of manufacturing. Carbon trading policy is most conducive to environmental protection and achieves a win-win situation for economic and environmental benefits for OEMs and IRs when the carbon tax per unit is compared with the carbon trading price. Hence, this situation is favorable for the sustainable growth of existing remanufacturing businesses. Consequently, the government's requirement for subsidies to enhance the quality of remanufactured products and boost the competitiveness of IRs in the market becomes less pronounced.