Pricing in competitive energy supply chains considering government interventions to support CCS under cap-and-trade regulations: A game-theoretic approach

Abstract

This paper investigates the impacts of governmental support strategies on rival bioenergy and conventional energy supply chains in the presence of cap-and-trade regulations using a game-theoretic approach. The role of government in reducing carbon emissions and increasing carbon capture and storage (CCS) is explored and compared in three scenarios: NO-Support (N), Subsidy on investment (C), and FIT subsidy (I). In the bioenergy supply chain, the bioenergy manufacturer determines the wholesale electricity price and the level of CCS efforts, and the 3 PL company specifies the level of carbon emission reduction efforts. The decision variable of the conventional energy supply chain is the wholesale electricity price. In addition to the carbon cap, the government must decide the rate of its contribution to CCS and 3 PL costs in scenario C and the Feed-In Tariff subsidy rate in the scenario I. The results show that in the presence of cap-and-trade regulations, all examined governmental support strategies, especially those in scenario C, can significantly improve the profits of bioenergy supply chain members while sustainable development goals. In addition, Scenario C is more effective in incentivizing the supply chain members to increase CCS and reduce carbon emission levels among the three scenarios.