Impact of three emission reduction decisions on authorized remanufacturing under carbon trading

Abstract

Under carbon trading, our aim is to investigate how emission reduction decisions made by manufacturers influence authorized remanufacturing. In particular, based on three emission reduction modes, i.e., independent emission reduction by the original equipment manufacturer (N mode), independent emission reduction by the authorized remanufacturer (R mode), and joint emission reduction by both of them (NR mode), we build a supply chain game model, consisting of an original equipment manufacturer (OEM) and an authorized remanufacturer (AR). Further, in the process of solving manufacturers’ optimal decisions in three emission reduction modes, we probe the effects of emission reduction levels on per unit retail price, sales, authorized fees, revenues, and the environment, etc. Besides, we not only compare the consequences of different emission reduction strategies in the authorized remanufacturing mode, but also investigate the influence of carbon trading prices on manufacturers’ emission reduction decisions. Four major conclusions emerge as follows. 1) All these three emission reduction modes facilitate the increase of supply chain total sales. Amongst them, the total sales reach maximum in the joint emission reduction mode (NR mode), while only the sales of each manufacturer could be enhanced by the independent emission reduction mode (N mode or R mode). More crucially, emission reduction investments are beneficial to reducing retail prices of per unit product, further achieving small profits but quick turnover. 2) In the process of emission reduction, once an AR participated, the authorized fees of the OEM would increase, and such licensing fees are positively associated with the emission reduction level of the AR. 3) Manufacturers’ emission reduction investments do not always facilitate carbon emission mitigation, and their environmental impact is related to own output. 4) Carbon trading prices and consumer preferences are also the antecedents of emission reduction decisions made by manufacturers. To be specific, there is an optimal carbon trading price that makes the OEM’s emission reduction reach maximum, while the AR’s emission reduction is positively associated with carbon trading prices.