Evaluating the impact of carbon tax policy on manufacturing and remanufacturing decisions in a closed-loop supply chain

Abstract

This paper develops four game-theoretic models to evaluate the impact of carbon tax policy on manufacturing and remanufacturing decisions in a closed-loop supply chain (CLSC) consisting of a manufacturer and a retailer. To maximize profits, the decisions are made based on two scenarios, namely, no investment in carbon reduction technology and with investment, in the centralized and decentralized CLSC, respectively. The used products are collected for remanufacturing under three strategies, that is, no collection, partial collection, and full collection. The manufacturing and remanufacturing decisions are compared and analyzed. The results show: (1) Carbon tax can effectively promote manufacturers to invest in carbon reduction technology or remanufacture to reduce carbon emissions. However, it may demotivate manufacturers to remanufacture if a reasonable carbon tax is not designed. (2) Although a centralized model can achieve a higher total profit than a decentralized model, the carbon emission of the centralized CLSC will be higher than that of the decentralized CLSC when carbon tax is low. (3) Under the decentralized CLSC, the ‘no collection’ or ‘full collection’ decision depends only on the wholesale price between manufacturer and retailer rather than on the unit carbon saving of remanufactured products. Hence, policymakers should tailor carbon tax policy designs to different industries to promote remanufacturing such as tax reliefs, tax returns, and emissions reduction agreements. Furthermore, the government can advocate low-carbon consumptions and cultivate low-carbon preference among consumers by imposing taxes or subsidies for remanufactured products.