Production and carbon emission abatement decisions under different carbon policies: supply chain network equilibrium models with consumers’ low‐carbon awareness

Abstract

AbstractWith the increasing requirements for environmental protection, authorities have enacted different carbon policies to promote sustainable practices. This study considers the competition among different manufacturers and multiple demand markets in the supply chain network. We examine and compare their equilibrium decision conditions under three common carbon policies: carbon cap, carbon cap‐and‐trade, and carbon tax. Results suggest that under lower carbon caps, manufacturers greatly reduce their carbon emissions by reducing production quantities, which causes a decrease in profits. However, an appropriate carbon cap size can not only motivate manufacturers to reduce carbon emissions but also improve their profits. Under a certain price for carbon credit, the effectiveness of a carbon cap‐and‐trade policy is similar to that of a carbon cap policy, but it has more flexibility. Carbon tax is effective, but it brings more tax burden to manufacturers. We provide implications for companies to optimize their production methods to achieve sustainability.