Low-carbon Supply Chain Research Articles

Manufacturer’s Green Financing and CER Decisions under the Carbon Tax Policy and Capital Constraints

This study constructs a two-echelon low-carbon supply chain consisting of a single manufacturer and a retailer. The manufacturer’s initial capital is zero. The study analyzes three financing modes of the manufacturer by using the Stackelberg game model: external financing (the EF mode), internal financing (the IF mode), and trade credit financing (the TC mode). We found that the IF mode is superior to the EF mode while inferior to the TC mode regarding carbon emission reduction (CER), market demand, and the manufacturer’s profit. Additionally, the IF mode is superior to the EF mode regarding the retailer and supply chain’s profits and special to the TC mode only when the loan and deposit interest rate meet the specific conditions. The best financing mode for the manufacturer is the TC mode, but he needs to give some compensation to the retailer in order to make the retailer cooperate with him. The impact of carbon tax rate changes on the equilibrium solutions in the three financing modes is not only related to the change range of the carbon tax rate itself but also closely related to the initial carbon emissions. A high carbon tax rate can help stimulate the cleaner manufacturer to reduce carbon emissions, but a moderate carbon tax rate is more applicable to the polluting manufacturer. A numerical example is given to demonstrate some of the conclusions. Finally, the study provides managerial insights based on the analytical results.

Supply chain contract design considering carbon tax policy under demand information asymmetry

AbstractOur paper constructs a low‐carbon supply chain (LSC) with a single manufacturer producing low‐carbon products and a single retailer. Assume that the retailer possesses private demand information and consider two cases: The manufacturer or the retailer determines the low‐carbon product's retail price. By constructing principal‐agent models, we obtain the optimal menu of contracts in each case. The impacts of the carbon tax rate and information asymmetry on LSC members' equilibrium solutions and expected profits are discussed. The results show that, given certain conditions, both the LSC members may obtain more expected profits under information asymmetry by introducing appropriate contracts.

Impacts of fairness concerns on financing equilibrium in a low-carbon supply chain

With the implementation of low-carbon policy, many companies begin to consider environmental issues when making decisions. This paper investigates a one-manufacturer-one-retailer supply chain under the low-carbon environment, where the retailer is capital-constrained and the manufacturer provides two credit strategies: manufacturer finance and manufacturer investment. The findings show that without fairness concerns, manufacturer investment is the financing equilibrium, and if the cost coefficient of emission reduction is small, manufacturer investment produces lower total carbon emissions and thus the environmental and profitability goals can align. However, different from the literature, when considering the fairness concerns of the retailer, manufacturer finance becomes the financing equilibrium and the high fairness concerns level would reduce the equilibrium region, which is unfavorable for firms to achieve a win–win situation. Finally, we find that fairness concerns would not always benefit the retailer profitably, but could generate higher environmental performance. Our work has the important management implications for firms by exploring impacts of fairness concerns on financing and environment.

Optimization model for low-carbon supply chain considering multi-level backup strategy under hybrid uncertainty

When constructing a supply chain, the profit, environmental impact, and hybrid uncertainties the supply chain faces should be considered. This research investigates the problem of low-carbon supply chain design under hybrid uncertainty, where demand is regarded as a stochastic variable, supply and transportation disruptions are regarded as uncertain events, and the coefficient of emission reduction capacity of suppliers is regarded as an uncertain variable. Based on the probability theory and uncertainty theory, a mixed-integer optimization model is constructed to handle the disruption risk by utilizing a multi-level backup strategy and to reduce carbon emissions by investing in suppliers. This model guarantees that manufacturers’ demand is satisfied to a given confidence level, manufacturers prefer to construct a supply chain within the acceptable supply chain risk, the emission reduction investment scheme and the supply decision to manufacturers are determined to maximize the profit of the supply chain. To facilitate the solution, we perform deterministic equivalent transformation of stochastic and uncertainty constraints, linearize the nonlinear constraints, and analyze the mathematical properties of the model. Finally, the validity of the proposed model is verified by case studies. The results show that although the larger the supply levels, that is, the more priority levels of suppliers, the more beneficial it is to improve the reliability, too large supply levels will reduce profits. The reasonable setting of the supply levels can optimize the emission reduction investment scheme. In addition, the confidence level of carbon emission should be set within a certain range to avoid the disparity between profit growth and emission reduction. Finally, the greater the belief degree of disruption or the lower the emission reduction capacity of suppliers, the more significant the effect of a multi-level backup strategy.

Signaling strategies in a low-carbon supply chain with platform encroachment

Information asymmetry and e-commerce platform encroachment affect the production and sales strategies of manufacturers, wherein sales information is an effective signal to realize information disclosure. Meanwhile, the low-carbon characteristics of products provide manufacturers with an alternative signal option. We establish a dynamic signaling game model in which a manufacturer sells green products through a platform and the sales potential of the product is unknown to the platform in the first stage. The platform encroaches on the manufacturer with high sales potential (HM) in the second stage. This encroachment behavior prompts the HM to disguise itself as a manufacturer with low sales potential (LM) to evade platform encroachment, thereby aggravating information asymmetry. We explore the signals that the LM should use to separate itself from the HM more efficiently and the optimal low-carbon production strategies under three signaling strategies (i.e., sales, carbon, and dual signals). We reveal that the carbon signal gives the HM a stronger motivation to disguise itself than the sales signal, thereby increasing the LM’s separating costs but decreasing the environmental impact. In addition, the LM should choose the sales signal in a high-quality market; in contrast, the dual (carbon) signal is optimal in a general (low-quality) market. Our results offer insights for green manufacturing and signal selection under information asymmetry and platform encroachment.

Emission Reduction of Low-Carbon Supply Chain Based on Uncertain Differential Game

Emission Reduction of Low-Carbon Supply Chain Based on Uncertain Differential Game

Carbon intensity of global crude oil trading and market policy implications

The energy mix transition has accelerated the need for more accurate emissions reporting throughout the petroleum supply chain. Despite increasing environmental regulations and pressure for emissions disclosure, the low resolution of existing carbon footprint assessment does not account for the complexity of crude oil trading. The lack of source crude traceability has led to poor visibility into the “well-to-refinery-entrance” carbon intensities at the level of granular pathways between producers and destination markets. Using high-fidelity datasets, optimization algorithms to facilitate supply chain traceability and bottom-up, physics-based emission estimators, we show that the variability in global “well-to-refinery-entrance” carbon intensities at the level of crude trade pathways is significant: 4.2–214.1 kg-CO2-equivalent/barrel with a volume-weighted average of 50.5 kg-CO2-equivalent/barrel. Coupled with oil supply forecasts under 1.5 °C scenarios up to 2050, this variability translates to additional CO2-equivalent savings of 1.5–6.1 Gigatons that could be realized solely by prioritizing low-carbon supply chain pathways without other capital-intensive mitigation measures.

Decision-making in a low-carbon supply chain considering consumers’ fairness concerns

The purpose of our study is to discuss the impact of consumers’ market distribution and consumers’ fairness concerns on the decisions of supply chain participants. Based on utility theory, we innovatively incorporate consumers’ fairness concerns as a significant factor into the game model and focus on the impact of the utility gap between products on consumers’ purchasing willingness. In this paper, we establish a two-echelon supply chain consisting of one traditional manufacturer, one low-carbon manufacturer, and one retailer, and comparatively analyze the equilibrium results under the initial state and consumers’ fairness concerns. The results show that the presence of consumers’ fairness concerns results in the higher wholesale price, higher retail price, and larger profit of low-carbon products yet leads to a decline in traditional products’ pricing and profit, and the impacts on the low-carbon manufacturer are more significant than on the traditional manufacturer. A reduction appears in the retailer’s profit since consumers’ fairness concerns decrease the retailer’s ability to differential pricing. Additionally, the impacts of consumers’ fairness concerns on the game equilibrium are also affected by consumers’ market distribution and low-carbon manufacturers’ technical efficiency, and the impacts are more pronounced in an environment where low-carbon manufacturers’ R&D investments are more efficient. Furthermore, in a market dominated by low-carbon preferred consumers, low-carbon manufacturers are always more profitable than traditional manufacturers, while in a market dominated by traditionally preferred consumers, low-carbon manufacturers are only able to achieve higher profits than traditional manufacturers when R&D is quite efficient and consumers’ fairness concerns are relatively strong.

An Integrated Interval Type-2 Fuzzy Set Model for Evaluating Circular Low Carbon Suppliers in a Developing Country

Increasing carbon emissions and environmental degradation have led to rapid depletion of resources. This requires circular low carbon (CLC) supply chains which extend the lifecycle of resources as much as possible. The aim of this study is to propose an integrated model for CLC supplier selection. First, economic, environmental and social responsibilities related to carbon management are identified. Then, DANP (Dematel-Analytic Network Process) and COPRAS (Complex Proportional Assessment) model with interval type-2 (IT-2) fuzzy sets are applied to evaluate the suppliers of a case energy company in Turkey. In this study, the ranking of dimensions from the most important to the least yielded the following order: environmental, social, and economic. In turn, carbon policy, carbon emission risks and low carbon supplier collaboration are found to be the most important environmental criteria. The current study has been used for the first time for a CLC supplier selection problem. Further, the study innovatively employs IT-2 fuzzy sets to better address differences and uncertainties that may come into play with a group of experts’ linguistic judgments. The validity of the proposed method is determined through sensitivity and comparative analysis.

Exploration on the scientific rationality of low-carbon investment projects from the perspective of supply chain: a case study of CS thermal power plant

Climate warming has gradually become a major problem threatening human survival, and countries have begun to pay attention to carbon emissions. Energy conservation and emission reduction has become a central task in China’s economic development since the 14th Five-Year Plan. As the main force of carbon emissions in China, thermal power industry is bound to become the focus of attention in China’s low-carbon development strategy and energy conservation and emission reduction. Moreover, with the marketization of the power industry, the state has joined the market competition at the power generation sectors and the power sale sectors, and implemented the “opening the middle of the two pipes.” Therefore, the coverage of influence of carbon emissions and carbon investment behavior of power generation companies is not limited to itself, but will also be extended to the supply chain level. Based on the above background, this paper evaluates the scientific rationality of low-carbon investment projects of thermal power enterprises from the perspective of low-carbon supply chain, which not only can help enterprises achieve a win–win situation of economic and environmental benefits, but also contribute to the carbon emission reduction of the entire supply chain, thereby promoting China’s entire social and economic energy conservation and emission reduction work.

A Bi-Objective Optimization Model for a Low-Carbon Supply Chain Network with Risk of Uncertain Disruptions

Disruption risks exacerbate the complexity of low-carbon supply chain network design in an uncertain supply chain environment. Considering the low frequency and non-repeatability of these disruption events makes it impossible to collect data to obtain their probabilities. In this study, supply disruptions were regarded as uncertain events; supply chain uncertain disruption risk is defined and quantified based on the uncertainty theory, in which uncertain disruptions are characterized by the belief degree on account of expert estimation with duality, i.e., symmetry. Optimization models were constructed with the objective of minimizing expected carbon emissions and costs, which optimizes the selection of suppliers with uncertain disruptions, and the assignment of manufacturers and customers. The properties of the model were analyzed, and the models were solved separately using different methods according to different decision criteria. Finally, the validity of the proposed models and algorithm were verified using a real case study of a glass manufacturing company. The findings exhibit promising insights for designing a sustainable and resilient supply chain network in an uncertain environment.

Grandfathering or benchmarking? The performance of implementing blockchain technology in a low-carbon supply chain

Blockchain can make the production process transparent and increase consumer recognition. With regard to the grandfathering and benchmarking, which are two widely implemented carbon regulation schemes in the industrial field, how will the use of blockchain perform asymmetric cost effects and emission reduction driving effects on these two carbon policies? From the perspective of carbon reduction and supply chain stakeholders, which regulation scheme should be adopted is an important issue that deserves attention. By analyzing the performances of two carbon allocation mechanisms with and without blockchain, we have the following findings: The implementation of benchmarking mechanism can better stimulate the manufacturer's enthusiasm for emission reduction, and the retailer also prefers benchmarking, regardless of whether the blockchain employed or not; There exists a situation where a higher unit blockchain cost leads to a lower total carbon emission, and unit improvement in environmental performance may not necessarily improve overall environmental performance; We define the Pareto regions in which the interests of supply chain stakeholders and the environmental performance of the supply chain can be improved simultaneously by adopting blockchain. We also investigate the impacts of consumer sensitivity to blockchain technology, carbon reduction cost and carbon trading price on the Pareto regions.

Low-Carbon Supply Chain Operation Decisions and Coordination Strategies Considering the Consumers’ Preferences

Implementing the low-carbon transformation strategy has become an inevitable choice for manufacturing enterprises. However, suppliers often overlook the impact of consumers’ preferences for low-carbon products (LCPs) on their own low-carbon strategies. Based on this idea, this study uses game theory models to analyze how consumer preferences affect suppliers’ decision-making and coordination strategies in low-carbon supply chains (LCSCs). Results show that (1) manufacturers and retailers are more likely to produce and promote LCPs as consumers become more sensitive to carbon emission reduction (CER); (2) manufacturers are less likely to produce LCPs but retailers are more likely to promote them as consumers become more sensitive to promotional rates; and (3) manufacturers are less likely to produce LCPs but retailers are more likely to promote them as consumers become more sensitive to retail prices. This study concludes that consumer preferences play a crucial role in determining suppliers’ decisions and coordination strategies in LCSCs.

Retailer-Led Low-Carbon Supply Chain Coordination Considering Sales Effort

This paper develops a Stackelberg game model for a retailer-led secondary low-carbon supply chain (L-CSC) comprising a manufacturer and a retailer. Then, a two-part pricing contract is designed to investigate the product pricing, carbon reduction, and sales effort decision problems, and relevant management insights are obtained through numerical analysis. The study shows an efficiency loss in decentralized decision making compared to centralized decision making. Considering the sales effort improves the efficiency of the supply chain, retail price, carbon emission reduction (CER), sales effort level, and supply chain profit positively relate to product low carbon preference and sales sensitivity coefficients. The designed two-part pricing contract can increase the profit of the entire L-CSC and optimize the decision level under centralized decision making.

Optimal financing strategy and contract design of supply chain with yield uncertainty under cap-and-trade regulation

PurposeThe purpose of the study is to investigate the financing channels and carbon emission abatement preferences of supply chain members, and further examine the optimal contract design of the retailer.Design/methodology/approachThis paper develops a low-carbon supply chain composed of one retailer and one manufacturer, in which the retailer provides trade credit to the manufacturer. Considering the cap-and-trade regulation, the manufacturer with uncertain yield makes decision on whether to invest in emission abatement. There are bank loan and trade credit to finance production for the manufacturer and green credit to finance emission abatement investment. Meanwhile, the retailer may provide the manufacturer with three kinds of contracts to improve emission abatement efficiency, namely, revenue sharing, cost sharing or both sharing.FindingsThe results show that the retailer prefers to offer financing service at lower interest rate, but trade (and green) credit financing is always optimal for manufacturer and supply chain. The investment in emission abatement is value-added to all players. The sharing contracts offered by the retailer at lower sharing ratios can realize Pareto improvement of the system regardless of the financing scheme. However, comparing with the revenue or cost sharing contract, the existence of optimal sharing ratios makes the both sharing contract more favorable to the retailer.Practical implicationsThe findings provide guidance for the emission-dependent manufacturer in financing and emission abatement decisions, as well as recommendations for the retailer to offer loan service and sharing contract.Originality/valueThis paper integrates green credit into bank loan or trade credit to analyze the financing decision of the manufacturer with uncertain yield and further considers the influence of three kinds of sharing contracts introduced by the retailer on improving operational performance.

Allocation of the Carbon Emission Abatement Target in Low Carbon Supply Chain Considering Power Structure

The proposal of China’s dual carbon strategy is not only a kind of pressure but also an opportunity for enterprises. Both upstream and downstream enterprises in the supply chain pay more attention to carbon emission reduction, and consumers are gradually turning to a low-carbon preference. How carbon reduction targets are allocated among supply chain members with different technical efficiency and market opportunities will directly affect supply chain performance and social welfare. Power structure is an important factor that dominates the decision-making of the supply chain, so we establish the low-carbon supply chain model under three different power structures: manufacturer-led, retailer-led, and power pairs between two parties. We study the government distribution decisions of carbon emissions reduction targets under different supply chain power structures and discuss the influence of supply chain power structures on carbon emissions reduction distribution decisions and social welfare. The study found that if the carbon emissions reduction target increases, the government will adjust the allocation strategy to increase the proportion of enterprises whose emissions cuts have less impact on market demand. The study also found that the government will allocate more emissions reduction to enterprises with higher emissions reduction efficiency, and enterprises whose emissions reductions have a greater impact on market demand. When supply chain enterprises have equal power, the supply chain will have greater social welfare and market demand, but not necessarily greater supply chain profits.

Decision models of pricing and carbon emission reduction for low-carbon supply chain under cap-and-trade regulation

All carbon emissions generated by supply chain (SC) members should be taken seriously. This paper constructs low-carbon SC models consisting of one supplier and one manufacturer under three power structures: supplier-led power structure, manufacturer-led power structure, and Nash competition power structure. Based on differential game theory, we explore SC members' optimal pricing and carbon emission reduction decisions by considering the impacts of consumers' low-carbon preference, cap-and-trade regulation, and power structure from a long-term perspective. The results indicate that consumers' low-carbon preference always benefits the environment and low-carbon SC performance. However, whether cap-and-trade regulation can improve the environment and low-carbon SC performance depends on the cap and the carbon trading price. Under three power structures, we provide the government with two important threshold caps: one threshold cap ensures that SC members can benefit from cap-and-trade regulation; another threshold cap ensures that SC members can obtain positive profits under cap-and-trade regulation. This paper also reveals that the decision-making priority is not a necessary condition for SC members to maximize profits.

A REVIEW OF MANAGING CARBON EMISSIONS FOR SUSTAINABLE SUPPLY CHAIN MANAGEMENT

Carbon emissions were one of the most critical contributors to climate change, and the recent climate agreement had agreed for all participating countries to reduce their emissions. Malaysia has pledged to reduce 45 per cent of its carbon emissions by 2025. However, reducing carbon emissions from the industry was still limited due to voluntary reporting, particularly among manufacturers. Thus, it is ambitious for the Malaysian government to achieve its target by 2025. A complete review is performed to go through the literature and determine the review's research path. This review aims to investigate the low carbon performance based on the manufacturing industry's low carbon supply chain practices. The findings show that low carbon production was insignificant in reducing overall carbon emissions. In contrast, the rest of the low carbon supply chain practices were by the Natural Resource-Based-View (NRBV) theory. It helps to identify companies' low carbon supply chain practices to reduce carbon emissions and meet environmental regulations. Additionally, the review also provided new insight into mediating effect that contributes to the organizational theory of NRBV. The theoretical hypotheses were tested with bias-corrected and accelerated (BCA) bootstrap confidence intervals. The instrument used in this review is a questionnaire, and the questionnaire consists of five (5) scales which tapped on (LCSCM), energy management, and low carbon performance. Responses from the respondent were collected via an online survey between Malaysian manufacturing industries. SmartPLS was used to perform the model and structural analyses. The result shows that LCSCM influence carbon performance directly and indirectly, so the hypotheses are supported. This review is one of the earliest attempts to record empirical evidence regarding companies’ low carbon supply chain practices and performance. Thus, the review shows results can be used and extended to develop low-carbon supply chain frameworks.

Utilization of Free Trade Agreements to Minimize Costs and Carbon Emissions in the Global Supply Chain for Sustainable Logistics

Background: Since global warming is a crucial worldwide issue, carbon tax has been introduced in the global supply chain as an environmental regulation for the reduction of greenhouse gas (GHG) emissions. Costs, GHG emissions, and carbon tax prices differ in each country due to economic conditions, energy mixes, and government policies. Additionally, multiple countries have signed a Free Trade Agreement (FTA). While FTAs result in their economic benefit, they also increase the risk of carbon leakage, which increases GHG emissions in the global supply chain due to relocation production sites from a country with stricter emission constraints to others with laxer ones. Method: This study proposes a mathematical model for decision support to minimize total costs involving carbon taxes with FTAs. Results: Our model determines suppliers, factory locations, and the number of transported parts and products with costs, FTAs, carbon taxes, and material-based GHG emissions estimated using the Life Cycle Inventory (LCI) database. The FTA utilization on the global low-carbon supply chain is examined by comparing the constructed supply chains with and without FTAs, and by conducting sensitivity analysis of carbon tax prices. Conclusions: We found that FTAs would not cause carbon leakage directly and would be effective for reducing GHG emissions economically.

Dynamic strategies of horizontal low-carbon supply chains under double carbon policies: A bounded rationality perspective

Under double carbon policies, this study proposes a horizontal low-carbon supply chain involving a traditional manufacturer and a low-carbon manufacturer. On this basis, we develop two scenarios, which differ in whether the traditional manufacturer adopts green technology or not. Considering bounded rationality, we explore the dynamic production and emission reduction strategies in the two scenarios by using game theory and chaos theory. The results show that manufacturers’ adjustment speeds have great effects on equilibrium strategies, with chaos and other complex phenomena emerging in certain cases. For both manufacturers, the increase of the emission reduction adjustment speed shrinks stable regions of their production strategies, and an excessive adjustment strategy always harms its own profit but brings benefits to the competitor. By comparing the results of the two scenarios, the conditions for the traditional manufacturer to adopt green technology can be concluded as a relatively low unit emission reduction cost and a suitable low-carbon competitive intensity. When these conditions are satisfied, the production, emission reduction, and profit of the low-carbon manufacturer will all decrease. Finally, we provide useful guidance in promoting low-carbon development.