Three-Echelon Closed-Loop Supply Chain Network Equilibrium under Cap-and-Trade Regulation

Guitao Zhang, Xiao Zhang, Hao Sun and Xinyu Zhao
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Guitao Zhang: School of Business, Qingdao University, Qingdao 266071, China
Xiao Zhang: School of Business, Qingdao University, Qingdao 266071, China
Hao Sun: School of Business, Qingdao University, Qingdao 266071, China
Xinyu Zhao: School of Business, Qingdao University, Qingdao 266071, China

Sustainability, 2021, vol. 13, issue 11, 1-26

Abstract: This paper investigates the impacts of cap-and-trade (CAT) regulation on a three-echelon closed-loop supply chain network (CLSCN) that consists of suppliers, high-emission and low-emission manufacturers, demand markets and carbon trading centers. The presented CLSCN model includes both product trading and carbon trading subnets. Combining variational inequality theory (VI) with complementary theory, we first characterize the optimal conditions for members in each tier first, and then derive that of the entire CLSCN. In addition, we focus on the effects of carbon caps and EOL collection rate target on CLSCN performances with numerical examples. The results reveal that, in some cases, there is a consistency between carbon emission reduction target of the government and the profit target of enterprises. The government should choose reasonable and moderate carbon caps for all the enterprises to balance the CLSCN members’ economic interests, carbon emissions, as well as resources utilization rate. Moreover, the government should not blindly pursue a high collection rate target. The above conclusions can provide practical guidance for governments and enterprises in a CLSCN under CAT regulation.

Keywords: closed loop supply chain network; cap-and-trade regulation; variational inequality (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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