Comparison of competing supply chains with different structures under cap-and-trade regulation

• Published in: R.A.I.R.O. Recherche opérationnelle Vol. 58; no. 2; pp. 1653 - 1680
• Main Authors: Chen, Yuyu, Bai, Qingguo, Xu, Jianteng
• Format: Journal Article
• Language: English
• Published: Paris EDP Sciences 01.03.2024
• Subjects: Carbon; Comparative analysis; Decision analysis; Economic impact; Emissions; Emissions trading; Environmental impact; Markets; Supply chains; Trade regulation
• ISSN: 0399-0559; 2804-7303; 1290-3868
• DOI: 10.1051/ro/2024040

To reduce carbon emissions, many countries and regions have implemented carbon cap-and-trade regulation. The main objective of this paper is to explore the economic and environmental impacts of carbon cap-and-trade regulation on two competing supply chains. This paper considers two cases: (i) in the absence of cap-and-trade regulation and (ii) with carbon cap-and-trade regulation. For each case, there are three structures: centralized-centralized (C-C) structure, decentralized-decentralized (D-D) structure, and hybrid centralized-decentralized (C-D) structure. First, this paper analyzes the optimal pricing decisions of two competing supply chains for the two cases, and then explores the impacts of cap-and-trade regulation on the sale price, market demand, economy (include enterprise profits and consumer surplus), environment ( i.e ., carbon emission) and total social welfare. Finally, numerical examples are provided to illustrate the theoretical results. By comparing the two cases, the main conclusions are as follows: (i) cap-and-trade regulation leads to the increase of unit price and the decrease of the market demand, (ii) cap-and-trade regulation leads to the reduction of both carbon emission and the consumer surplus, (iii) the impacts of cap-and-trade regulation on the profit and social welfare depend on the carbon cap.