Abstract
The paper considers the sustainable trade credit and inventory policies with demand related to credit period and the environmental sensitivity of consumers under the carbon cap-and-trade and carbon tax regulations. First, the decision models are constructed under three cases: without regulation, carbon cap-and-trade regulation, and carbon tax regulation. The optimal solutions of the retailer in the three cases are then discussed under the exogenous and endogenous credit periods. Finally, numerical analysis is conducted to obtain conclusions. The retailer shortens the trade credit period as the environmental sensitivity of the consumer is enhanced. The cap has no effects on the credit period decisions under the carbon cap-and-trade regulation. Carbon trade price and carbon tax have negative effects on the credit period. The retailer under carbon cap-and-trade regulation is more motivated to obey regulations than that under carbon tax regulation when carbon trade price equals carbon tax. Carbon regulations have better effects on carbon emission reduction than with exogenous credit term when the retailer has the power to decide with regards credit policies.
Highlights
Sustainable development is the main focus of an economy
The effect of carbon taxes on the profit of the retailer is greater than that under carbon cap and trade regulation, indicating that carbon cap lessens the effect of carbon price on profit
The cap under the carbon cap-and-trade regulation has no effect on credit period decisions
Summary
Sustainable development is the main focus of an economy. The Intergovernmental Panel on Climate Change reports that global warming is likely caused by carbon emissions [1]. Considering the environmental awareness of consumers regarding low carbon emissions, high carbon emissions would have a negative effect on the market demand [12]. Revisiting the trade-off between revenue and cost of trade credit, while considering the environmental sensitivity of consumers and helping enterprises make reasonable credit and operational decisions to improve the performance and sustainability of the supply chain operation are practical management problems under the constraints of carbon emissions regulations. The analyses rarely considered the demand related to the environmental awareness of the consumers and the effects of carbon emissions regulations on the cost structure of the trade credit. The literature on the inventory model with carbon emissions regulations mostly focused on logistics optimization and has rarely discussed the effect of trade credit on cash flow. The current paper comprehensively considers the effects of carbon emission regulations on the decisions of retailers when demand depends on credit period and carbon emissions, with the aim of exploring the optimal order and credit decisions of retailers under endogenous and exogenous trade credit periods
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