Abstract
Cap-and-trade regulation is an effective mechanism to control carbon emissions. The optimization problem for a two-stage supply chain consisting of a manufacturer and a retailer under cap-and-trade regulation was investigated in this paper. Consumers’ low-carbon awareness level was considered in the decision models. Optimal decision policies, corresponding emissions, and profits were calculated for decentralized and centralized decision-making modes. Under a decentralized mode, the two-stage supply-chain optimization problem was formulated as a Stackelberg game model, where the manufacturer and retailer were the leader and follower, respectively. The manufacturer decides the emission-reduction levels per product unit and the retailer decides the retail price per unit product. The optimal decisions are derived using the reverse-solution method. By contrast, the two-stage supply-chain optimization problem under a decentralized mode was formulated as a single-level optimization model. The nonlinear model is handled by KKT optimality conditions. The influence of the regulation parameters (caps and carbon prices) and consumers’ low-carbon awareness on the optimal decision policies, the corresponding emissions, and profits is discussed in detail. A comparison between the two modes implies that the decentralized mode is dominated by the centralized mode in terms of profit and emissions. In order to provoke the decision makers under decentralized modes to make the decisions under the decentralized mode, a profit-sharing contract was designed. This study shows that higher consumer low-carbon awareness and carbon prices can improve the manufacturer-decision flexibility when there exists a profit-sharing contract. Finally, numerical experiments confirmed the analytical results.
Highlights
Increasing carbon emissions have become a global issue due to their serious consequences
This study focused on two-stage supply-chain optimization with carbon-emission consideration
Considering the different possible relationships between manufacturer and retailer, this study developed two mathematical models for the optimization problem under different decision-making modes
Summary
Increasing carbon emissions (emissions from greenhouse gases) have become a global issue due to their serious consequences. Liu et al [9] used literature review to discuss the evolution of the carbon-labeling concept, and different measurement methodologies and standards for carbon labels From this background, the decision makers in supply chains must take emission regulations and consumers’ low-carbon awareness into account. This study establishes two-stage supply-chain optimization models involving cap-and-trade regulation and consumers’ low-carbon awareness. Optimal decisions were derived from mathematical models under different modes On this basis, this study analyzes the influence of regulation parameters and low-carbon awareness level on profits and emissions. A comparison of the two Sustainability 2019, 11, 5727 decision-making modes illustrates the effect of coordination in low-carbon supply-chain operations, which may provide guidelines to firms and governments. The remainder of this paper is organized as follows: Section 2 reviews the relevant literature on supply-chain operations under cap-and-trade regulations and low-carbon (environmental) awareness.
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