Manufacturers' product line strategies and environmental impacts under carbon cap and trade policies.

Abstract

This paper explores the impact of carbon cap-and-trade policies and consumer low-carbon preferences on the choice of manufacturers' product lines. We further investigate the optimal decisions of manufacturers under different product line strategies. Moreover, we analyze consumer surplus, environmental impact, and social welfare under different product line strategies. The results show that producing low-carbon and ordinary products is the optimal product line strategy for manufacturers. In addition, we demonstrate that when considering carbon cap-and-trade policies and consumers' low-carbon preferences, the consumer surplus, environmental impact, and social welfare when manufacturers produce low-carbon products are always better than in other scenarios. Furthermore, our research results also show that with the increase of carbon trading prices, the consumer surplus and social welfare when manufacturers choose to produce low-carbon products are always better than in other scenarios. However, we find that the environmental impact is not always outperforming when manufacturers choose a product line that produces low-carbon products than other scenarios.