The effect of governmental policies of carbon taxes and energy-saving subsidies on enterprise decisions in a two-echelon supply chain

Abstract

Abstract Many countries have implemented carbon taxes to reduce carbon emissions, and provided subsidies for products that consume less energy. These governmental policies force manufacturing enterprises to emit less carbon during production and develop more energy-saving products. To examine how carbon taxes and energy-saving products subsidies affect enterprises' operational decisions, this study considers a manufacturer–retailer channel in which the manufacturer has the options to design a product to emit less carbon during production and use less energy when the product is consumed by customers. It is showed that governments’ energy-saving products subsidies stimulate reduction of carbon emissions and energy consumption, but this is not always true for carbon taxes, government should levy carbon taxes against manufacturers according to their pollution levels. Both carbon tax and subsidy policies can promote energy conservation and emission reduction if the initial carbon emission level of a manufacturer is low, but they have different promotional effects. Finally, in order to ensure the supply chain members cooperate and realise larger energy savings and emissions reductions, we propose a carbon-cost-sharing contract.