Platform financing versus bank financing: “When to choose which” for green production systems

Abstract

With the widespread implementation of the carbon trading system, carbon permits are used as pledged assets for manufacturers to obtain extra financing due to the asset attributes of carbon permits. We consider a supply chain where a manufacturer with limited capital sells goods via a platform employing the agency mode. The manufacturer obtains finance either from a bank or the platform. Facing a carbon trading system, remanufacturing or green technology is used by the manufacturer to cut down carbon emissions. We analytically derive the following research conclusions via conducting a Stackelberg game analysis: First, the optimal interest rates with remanufacturing and green technology in two financing modes decrease with the correlation coefficient between the potential market size and the price of carbon permits (CMC), and the initial emissions intensity. Second, with remanufacturing, the manufacturer adopts bank financing if CMC is polarized (i.e., low or high); otherwise, it adopts platform financing. However, with green technology, the manufacturer should adopt platform (bank) financing if CMC is low (high). Third, in the platform financing mode, the manufacturer should switch to remanufacturing (green technology) if the green consciousness is low (high). In the bank financing mode, the manufacturer should turn to remanufacturing (green technology) if CMC is high (low). In addition, we explore the scenario where the collection rate is endogenous. This paper reveals the role played by many critical factors such as CMC in affecting the optimal financing model in green manufacturing.