Buyers’ Carbon Audit Strategies under Carbon Trading Compensation

Abstract

This paper focuses on a scenario in which buyers require non-compliant suppliers to compensate for emission-reduction shortfalls through carbon trading. We consider a two-echelon low-carbon supply chain consisting of two buyers sharing a common supplier. We employ a simultaneous game model to analyze equilibrium decisions on carbon purchasing, misreporting, and audit effort across four strategies: non-audit, independent audit, shared audit, and joint audit. We further explore the impact of key parameters, such as the carbon price. The findings indicate that: 1) The joint audit strategy is the most effective in suppressing supplier misreporting, whereas the non-audit strategy is the least effective. The difference in misreporting levels between shared and independent audits is moderated jointly by the greenwashing penalty coefficient and the carbon price. 2) Supplier profit is maximized under the non-audit strategy and minimized under the joint audit strategy. Buyer profit is consistently higher with auditing than without, while the profitability ranking between shared and joint audits depends on the carbon price. 3) The supplier’s emission reduction effort increases with the carbon price and the greenwashing penalty coefficient. However, the misreporting level is positively correlated with the carbon price and the greenwashing penalty coefficient, but negatively correlated with the misreporting penalty and misreporting cost. Furthermore, buyers’ audit effort increases with the carbon price but decreases as the misreporting cost rises.

Keywords

Carbon audit / carbon misreporting / low-carbon supply chain / game theory

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