Carbon allowance approach for capital-constrained supply chain under carbon emission allowance repurchase strategy

Yuyan Wang, Fei Lin, T. C.E. Cheng, Fu Jia, Yulin Sun

Research output: Journal article publicationJournal articleAcademic researchpeer-review

2 Citations (Scopus)

Abstract

Purpose: The purpose of this study is to investigate which of the two carbon allowance allocation methods (CAAMs), i.e. grandfathered system carbon allowance allocation (GCAA) and baseline system carbon allowance allocation (BCAA), is more beneficial to capital-constrained supply chains under the carbon emission allowance repurchase strategy (CEARS). Design/methodology/approach: Adopting CEARS to ease the capital-constrained supply chains, this study develops two-period game models with manufacturers as leaders and retailers as followers from the perspective of profit and social welfare maximization under two CAAMs (GCAA and BCAA), where the first period produces normal products, and the second period produces low-carbon products. Findings: First, higher carbon-saving can better use CEARS and achieve a higher supply chain profit under the two CAAMs. However, the higher the end-of-period carbon price is, the lower the social welfare is. Second, when carbon-saving is small, GCAA achieves both economic and environmental benefits; BCAA reduces carbon emissions at the expense of economic benefit. Third, the supply chain members gain higher profits and social welfare under GCAA, so the government and supply chain members are more inclined to choose GCAA. Originality/value: By analyzing the profits and total carbon emissions of capital-constrained supply chains under GCAA and BCAA, this study provides theoretical references for retailers and capital-constrained manufacturers. In addition, by comparing the difference in social welfare under GCAA and BCAA, it provides a basis for the government to choose a reasonable CAAM.

Original languageEnglish
Pages (from-to)2488-2521
Number of pages34
JournalIndustrial Management and Data Systems
Volume123
Issue number10
DOIs
Publication statusPublished - 24 Nov 2023

Keywords

  • Capital-constrained supply chain
  • Carbon allowance allocation methods
  • Carbon emissions allowance repurchase strategy
  • Carbon trading mechanism
  • Supply chain management

ASJC Scopus subject areas

  • Management Information Systems
  • Industrial relations
  • Computer Science Applications
  • Strategy and Management
  • Industrial and Manufacturing Engineering

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