Emission Reduction Strategies of a Low-Carbon Supply Chain Considering Product Substitution and Government Subsidy

Abstract

Under the background of the low-carbon economy, considering that manufacturers produce common products and low-carbon products simultaneously and the two products are substituting, three models are set up, namely, no government subsidy, subsidy based on the research and development (R&D) cost, and subsidy based on the production volume of low-carbon products. The Stackelberg game theory is used to analyze the optimal decision of the supply chain under the three methods of government subsidy, the influence of the correlation coefficient on optimal decision-making is discussed, and the effects of different government subsidy methods on the equilibrium solutions are compared and analyzed. Finally, the results are verified and illustrated by example analysis. The study found that the government subsidy reduces the sales volume of common products but increases the sales volume of low-carbon products, the emission reduction of unit low-carbon products, total emission reductions, and manufacturer’s profit. The unit emission reduction and total emission reductions are the highest when the government subsidies are according to the R&D cost, and the manufacturer’s profit is the highest when the government subsidies are according to the production volume of low-carbon products. Total emission reduction and supply members’ profit have a positive relationship with the subsidy coefficient and the sensitivity of consumers toward price difference and have a negative relationship with the R&D cost coefficient.