The impact of supply chain competition on the introduction of clean development mechanisms

Abstract

An increasing number of manufacturers are introducing voluntary carbon emission reduction (VCER) mechanisms, such as clean development mechanisms (CDMs), to reduce environmental pollution and fulfill their social responsibility goals. In this paper, we build and compare two types of competitive supply chain models, specifically, a model with a monopoly manufacturer and two competing retailers (OT model) and a model with two competing manufacturers and two competing retailers (TT model), and we then explore the impacts of supply chain competition on manufacturers’ CDM introduction strategies. The results show that in the OT model, it is optimal for the manufacturer to introduce a CDM. However, in the TT model, the manufacturers’ optimal decisions on introducing CDMs are dependent on the trading price of the certified emission reductions (CERs). In particular, manufacturers should introduce CDMs if the CER trading price is low. Otherwise, they should not introduce CDMs. In addition, we study the impacts of the degree of retailer competition on the CDM introduction strategies of manufacturers and the impacts of the CER trading price on all partners’ operational decisions, profits, and environmental performance. Finally, we provide managerial insights for manufacturers to reasonably operate CDMs with supply chain competition considerations.