Manufacturing/remanufacturing decisions for a capital-constrained manufacturer considering carbon emission cap and trade

Abstract

This paper examines manufacturer manufacturing/remanufacturing planning issues in which a downward substitution strategy is applied between new and remanufactured products and presents three mathematical models to determine the optimal production quantities of a new and remanufactured product that maximize the total profits when considering capital and/or carbon emission constraints. These models include sales revenues, manufacturing/remanufacturing costs and revenue from or cost of carbon credit trading. Finally, four numerical examples are provided to explore the comparison results for the optimal manufacturing/remanufacturing decisions, total profits and carbon emissions as well as to analyze the impact of parameters under different constraints, such as the initial capital, carbon cap and carbon price on the optimal production policies. The results indicate that the capital constraint can encourage the manufacturer to remanufacture used products at a higher quality level and significantly reduce carbon emissions. However, the carbon emission constraint can always encourage the capital-constrained manufacturer to produce more remanufactured products to achieve maximum profit. In addition, it is found that the manufacturer need more capital to achieve the maximum profit when the carbon emission constraint is considered. Furthermore, when the capital constraint is considered, the carbon emission constraint will have more distinct influences on the production policies of the manufacturer. Finally, the results proposed in this paper provide applicable suggestions to manufacturers and policy-makers.