Production decisions in a hybrid manufacturing–remanufacturing system with carbon cap and trade mechanism

Abstract

We study a monopolist manufacturer who makes new products in the first period and makes new and remanufactured products simultaneously in the second period. The manufacturing and remanufacturing activities in the two-period planning horizon are limited by carbon cap and trade mechanism (CCT-mechanism), and the manufacturer has to determine the optimal production quantities for each period. With the consideration of CCT-mechanism, we propose two profit-maximization models for the independent demand market (ID-market) and the substitutable demand market (SD-market), respectively, and characterize the corresponding optimal production decisions. Based on the theoretical and numerical studies, we analyze the impacts of the CCT-mechanism and carbon related parameters. The results show that the CCT-mechanism has a great influence on firm׳s production decisions of manufacturing and remanufacturing. In specific, the carbon price is more effective in controlling productions and emissions compared with the carbon cap in both types of market. In the ID-market, the CCT-mechanism cannot induce the firm to choose the low-carbon remanufacturing technology, while in the SD-market, it may induce the firm to choose the low-carbon remanufacturing technology.