Comparisons of low carbon policies in supply chain coordination

Abstract

This paper investigates the influence of low-carbon policies on channel coordination for a two-echelon supply chain consisting of one supplier and one retailer. Four different models are considered: the basic model, the carbon emission model, the carbon emission trading model and the carbon tax model. We find that the government policy on all carbon emission models is not universal among the firms as well as the customers. The carbon emission trading policy is always better than the carbon emission policy and the carbon tax policy when the allocated carbon emission quotas are greater than the carbon emissions. The carbon emission trading policy is proved to be an effective mechanism which can motivate the supply chain to reduce carbon emissions. Under certain conditions, the supply chain prefers the carbon emission trading policy with higher carbon price to other policies. In the framework of Stackelberg game with the supplier as the leader, for each carbon policy, the paper presents coordination mechanism with the all-unit wholesale quantity discount contract (AWQD). We analyze and compare the influence of low-carbon policies on channel coordination for the four low-carbon policies. Numerical experiments are conducted to examine our findings.

Keywords

Carbon emission / low-carbon policy / carbon quotas / supply chain coordination / quantity discount

References

[1] Benjaafar S, Li Y, Daskin M. Carbon footprint and the management of supply chains: insights from simple models. IEEE Transactions on Automation Science and Engineering, 2013, 10(1): 99-116.

[2] Cachon GP. Graves S, de Kok T. Supply chain coordination with contracts. Handbooks in Operations Research and Management Science: Supply Chain Management, Chap 6, 2003, Amsterdam, The Netherlands: Elsevier 229-340.

[3] Chen RR, Robinson LW. Optimal multiple-breakpoint quantity discount schedules for customers with heterogeneous demands: all-unit or incremental. IIE Transactions, 2012, 44(3): 199-214.

[4] Du S, Ma F, Fu Z, Zhang J. Game-theoretic analysis for an emission-dependent supply chain in a ‘cap-and-trade’ system. Annals of Operations Research, forthcoming, 2011

[5] Du S, Zhu L, Liang L, Ma F. Emission-dependent supply chain and environment-policy-making in the ‘cap-and-trade’ system. Energy Policy, 2013, 57: 61-67.

[6] Hoen KMR, Tan T, Fransoo JC, van Houtum GJ. Effect of carbon emission regulations on transport mode selection under stochastic demand. Flexible Services and Manufacturing Journal, 2014, 26(1–2): 170-195.

[7] Hua G, Cheng TCE, Wang S. Managing carbon footprints in inventory management. International Journal of Production Economics, 2011, 132(2): 178-185.

[8] Hu M, Pavlin J M, Shi M. When gray markets have silver linings: all-unit discounts, gray markets, and channel management. Manufacturing & Service Operations Management, 2013, 15(2): 250-262.

[9] Jeuland AP, Shugan SM. Managing channel profits. Marketing Science, 1983, 2(3): 239-272.

[10] Jones DL, Nguyen C, Finlay RD. Carbon flow in the rhizosphere: carbon trading at the soil-root interface. Plant and Soil, 2009, 321(1–2): 5-33.

[11] Kockar I, Conejo AJ, McDonald J R. Influence of the emissions trading scheme on generation scheduling. International Journal of Electrical Power & Energy Systems, 2009, 31(9): 465-473.

[12] Lariviere M, Porteus E. Selling to the newsvendor: an analysis of price-only contracts. Manufacturing Service Operation Management, 2001, 3(4): 293-305.

[13] Li J, Liu L. Supply chain coordination with quantity discount policy. International Journal of Production Economics, 2006, 101(1): 89-98.

[14] Mendoza A, Ventura JA. EOQ models with two modes of freight transportation and all-units quantity discounts. International Series in Operations Research & Management Science, 2014, 197: 139-153.

[15] Penkuhn T, Spengler T, Puchert H, Rentz O. Environmental integrated production planning for ammonia synthesis. European Journal of Operational Research, 1997, 97(2): 327-336.

[16] Qi X, Jonathan JF, Yu G. Supply chain coordination with demand disruptions. Omega, 2004, 32(4): 301-312.

[17] Sadegheih A. Optimal design methodologies under the carbon emission trading program using MIP, GA, SA, and TS. Renewable and Sustainable Energy Reviews, 2011, 15(1): 504-513.

[18] Sara G, Nilay S, Fabrizio B. A comprehensive approach to the design of ethanol supply chains including carbon trading effects. Bioresource Technology, 2012, 107: 175-185.

[19] Song J, Leng M. Analysis of the single-period problem under carbon emissions policies. International Series in Operations Research & Management Science, 2012, 176(2): 297-312.

[20] Weng ZK. Channel coordination and quantity discounts. Management Science, 1995, 41(9): 1509-1522.

[21] Xu M, Qi X, Yu G, Zhang H, Gao C. Coordinating dyadic supply chains when production costs are disrupted. IIE Transactions, 2006, 38(9): 765-775.