Low-Carbon Supply Chain Management Considering Free Emission Allowance and Abatement Cost Sharing

Peng Wu, Yixi Yin, Shiying Li, Yulong Huang
2018 Sustainability  
As people concern themselves with environmental problems, the right to emit carbon dioxide becomes a new resource with business value that is incorporated in firms' budgets. This paper studies the optimal emission abatement decision for firms in a supply chain, considering emission costs. Four Stackelberg models are established that differ in free emission allowance allocation schemes and emission abatement cost-sharing schemes. On comparing optimal solutions in the models, the results show
more » ... regardless of which free emission allowance allocation scheme or emission abatement cost-sharing scheme is adopted, upstream firms tend to set a higher emission reduction rate. If supply chain firms aim for a higher emission reduction rate, they should advocate that upstream and downstream firms establish emission abatement cost-sharing contracts. The upstream firms should undertake larger emission reduction costs, and use free emission allowance allocation schemes based on emission intensity; the optimal emission reduction rate is related to carbon price, and the relationship may not be monotonous, affected by the difficulty of reducing emissions.
doi:10.3390/su10072110 fatcat:at5r7rkx65bjbhes6if5ixqjra