Green technology adoption in textiles and apparel supply chains with environmental taxes

Abstract

Sustainability is crucially important in the textiles and apparel (TA) supply chains. In this paper, we evaluate the impact of clean technology adoption and environmental taxes on the TA supply chains. First, we consider a monopoly case, where a two-echelon supply chain consists of one buyer and one manufacturer. We find that raising the environmental tax rate motivates the manufacturer to invest in green technologies. We then extend our model to examine the duopoly case. We find that in the duopoly case, if the buyer's market share is sufficiently small (large), the optimal greenness level for this buyer's product decreases (increases) in the environmental tax rate; whereas if the two products market shares are relatively equal, the optimal greenness levels for both products buyers increase in the environmental tax rate. The existence of the spillover effect reduces the cost and improves the product greenness. Consumer welfare can be improved if the efficiency of green technology adoption and the coefficient of greenness level on market demand are sufficiently high. This result implies that if the government cares about consumers, the manufacturer should be encouraged to enhance the cost reduction ability in terms of green technology, and consumer education about sustainability consciousness should be enhanced.