Vehicles Assignment With Over-Emission Intensity Considerations: A Perspective on Integrating the Market Mechanism With Government Control

Abstract

In this paper, we consider the effect of carbon emission regulations on the vehicles assignment optimization problem. We propose a mathematical model, in which the choice of vehicles (between the traditional and new environmental-friendly ones) and the proper assignments to customers are the decision variables. We introduce a new measure, called the over-emission intensity (OEI) factor, with which the government can control the amount of carbon emission of companies. Based on this proposal, we establish a new mechanism, known as the cap-and-trade program with OEI, and incorporate it into the optimization model. This novel model is then validated and used to study the impacts of OEI, carbon emission quota, emission price, and budget, on the operational performance and optimal decision of the company. We demonstrate the usefulness of the model by illustrating the effect of market regulation and government’s macrocontrol on the reduction of carbon emission. We also show how the OEI affects the company’s total cost, total amount of carbon emission, and the optimal vehicles assignment scheme. Finally, we argue that integrating the government macrocontrol scheme with the market mechanism is an effective measure.