Abstract
In this paper, we investigate the role of carbon subsidies in a capital-constrained supply chain. We analyze two green technology investment structures in such supply chains: one where the manufacturer determines the optimal carbon emission abatement level (MI-structure) and one where the retailer determines the optimal carbon emission abatement level (RI-structure). As the leader (the powerful participant or the first mover in a supply chain), the manufacturer may choose the investment structure that is most favorable to them. Our major findings are as follows: (1) carbon subsidies can improve the performance of a centralized green supply chain; (2) there exists a threshold value of carbon subsidy that determines the manufacturer’s choice of the best carbon emission abatement investment structure, but the retailer always benefits from RI-structure; and (3) the traditional cost-sharing contract fails to achieve green supply chain coordination. However, as an orchestrator, the carbon subsidy plays a crucial role in achieving quantity coordination when implemented alongside traditional cost-sharing contracts. Furthermore, using a parameter of side-payment, we propose a new contract design that facilitates win-win coordination.
Highlights
In the past decade, the Earth has been experiencing critical and significant environmental challenges [1], and these serious environmental problems have drawn much attention in many countries [2]
The UK has launched a Carbon Reduction Commitment (CRC) to achieve carbon emissions goals [3]. e Chinese government clearly stated an emissions reduction goal at the Climate Change Conference held in Paris in 2015 [4] and has recently set an even more ambitious carbon reduction target
From Proposition 5, we find that the cost-sharing contract fails to achieve quantity coordination or supply chain coordination. e reason is that the supply chain cannot achieve coordination by manipulating one parameter, φMI
Summary
The Earth has been experiencing critical and significant environmental challenges [1], and these serious environmental problems have drawn much attention in many countries [2]. Carbon subsidies are recognized as an important tool for improving environmental performance, few scholars investigate the role of these subsidies in supply chain coordination. 2. Literature Review is study investigates the orchestrating role of carbon subsidy in a capital-constrained supply chain. In a newsvendor-like model, Cohen et al [41] study a manufacturing industry’s response to the adoption of green technology with government subsidies, quantifying the impact of demand uncertainty on each player in the supply chain. The above-mentioned studies fail to consider the impact of cash flow on the performance of a supply chain given the high cost of green technology investment. Cong et al [19] consider carbon subsidies in a green supply chain, but they fail to consider the impact of different investment structures. Our paper is distinguished from prior work as follows. (1) We deduce optimal decisions in a capital-constrained supply chain with carbon subsidies. (2) We investigate the impact of different green investment options (i.e., MI-structure and RI-structure) on the performance of a supply chain. (3) We propose new contracts to achieve two types of supply chain coordination, i.e., quantity coordination and win-win coordination
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
