Optimizing the emission control policies and trade-in program effects: A carbon-constrained closed-loop supply chain network model

Abstract

Economic development and human activities affect the natural environment severely. The government has promogulated several policies such as carbon caps and trading scheme, government subsidies, and green credit to control emissions. Accordingly, enterprises should profit on the premise of undertaking social responsibilities, green technology and trade-in programs are two ways to benefit the environment. However, the interaction between regulations and emission abatement measures is largely unknown. A carbon-constrained closed-loop supply chain network model is proposed to discuss the joint effect of the policies and operational measures. The model is constructed under two scenarios, i.e., Manufacturer-led mode and Retailer-led mode. Sensitivity analysis is conducted to compare the scenarios. The results show that although the retailer-led mode promotes resource recovery and supply chain performance, it weakens manufacturers’ profit. We find that the carbon caps and trading scheme is effective in emission reduction when the initial carbon quota is relatively less, which indicates the importance of carbon caps allocation method. The government subsidies stimulate green manufacturers to do more emission reduction efforts enhancing sustainability. The subsidy on green products has more obvious effect on coordinating economic and environmental targets. We also reveal environmental awareness positively affects the emission abatement level. Finally, we extend our models to two special cases with (i) generalization of customers and (ii) different production cost function forms. The main conclusions remain valid in the special cases. The theoretically derived conclusions contribute to the operational research literature and will guide policymakers and enterprises in the manufacturing industry.