Optimal decisions for hybrid manufacturing and remanufacturing with trade-in program and carbon tax

Abstract

With the practical implementation of carbon taxes and the adoption of trade-in programs, the decision environment for manufacturing and remanufacturing has become increasingly complicated. Taking the carbon tax and the trade-in program into consideration, this study develops manufacturing-remanufacturing models for two market scenarios (i.e., emerging market and mature market) when cores for remanufacturing are limited by used product collection, and finds that the determining factors of optimal decisions are different across the two market scenarios. In addition to the carbon tax and carbon emissions of remanufactured product, the optimal decisions are also affected by the segment size of the replacement consumer in the mature market. Furthermore, we find that carbon tax policy does not always encourage the manufacturer to work on remanufacturing, and it may prevent remanufacturing under certain circumstances. Moreover, the impacts of supply chain parameters on optimal decisions, total carbon emissions, and profits are explored. The carbon tax has similar impacts across the two market scenarios; however, the carbon emissions of remanufactured product and the remaining value of the used product show different impacts. From the social welfare perspective, the optimal carbon tax depends on the regulator’s environmental concern.