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The increasing amount of carbon emissions has caused global warming and challenged the sustainable development of environment. Governments around the world have implemented carbon policies including carbon cap-and-trade policy. In this paper, we focus on how a two-echelon supply chain manages its carbon footprints in production and inventory under carbon cap-and-trade policy. We extend the classical EOQ (economic order quantity) model and study decisions on production-inventory, carbon trading and emission reduction investment in the decentralized and centralized situations. The results show that emission permit sharing can effectively reduce the total cost and total carbon emissions of the supply chain. Moreover, the manufacturer’s emission reduction effort rises with the increase of the buying and selling prices of emission permits under centralized decision-making. In addition, a compensation mechanism is proposed for the centralized supply chain with emission permit sharing. It is observed that the buying and selling prices of emission permits have a positive influence on the permit sharing price in the compensation mechanism. Meanwhile, the retailer pays less for using the emission permits if it has a higher carbon cap, while the manufacturer with a higher carbon cap is more capable to provide a high compensation for the retailer.
Fan, Yuyao 1 ; Wang, Min 1 ; Zhao, Lindu 1
@article{RO_2018__52_4-5_1043_0,
author = {Fan, Yuyao and Wang, Min and Zhao, Lindu},
title = {Production-inventory and emission reduction investment decision under carbon cap-and-trade policy},
journal = {RAIRO - Operations Research - Recherche Op\'erationnelle},
pages = {1043--1067},
publisher = {EDP-Sciences},
volume = {52},
number = {4-5},
year = {2018},
doi = {10.1051/ro/2018033},
mrnumber = {3878618},
zbl = {1411.91440},
language = {en},
url = {http://geodesic.mathdoc.fr/articles/10.1051/ro/2018033/}
}
TY - JOUR AU - Fan, Yuyao AU - Wang, Min AU - Zhao, Lindu TI - Production-inventory and emission reduction investment decision under carbon cap-and-trade policy JO - RAIRO - Operations Research - Recherche Opérationnelle PY - 2018 SP - 1043 EP - 1067 VL - 52 IS - 4-5 PB - EDP-Sciences UR - http://geodesic.mathdoc.fr/articles/10.1051/ro/2018033/ DO - 10.1051/ro/2018033 LA - en ID - RO_2018__52_4-5_1043_0 ER -
%0 Journal Article %A Fan, Yuyao %A Wang, Min %A Zhao, Lindu %T Production-inventory and emission reduction investment decision under carbon cap-and-trade policy %J RAIRO - Operations Research - Recherche Opérationnelle %D 2018 %P 1043-1067 %V 52 %N 4-5 %I EDP-Sciences %U http://geodesic.mathdoc.fr/articles/10.1051/ro/2018033/ %R 10.1051/ro/2018033 %G en %F RO_2018__52_4-5_1043_0
Fan, Yuyao; Wang, Min; Zhao, Lindu. Production-inventory and emission reduction investment decision under carbon cap-and-trade policy. RAIRO - Operations Research - Recherche Opérationnelle, Tome 52 (2018) no. 4-5, pp. 1043-1067. doi: 10.1051/ro/2018033
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