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Diverse Schemes of Cost Pooling for Carbon-Reduction Outsourcing in Low-Carbon Supply Chains

Qinpeng Wang (), Longfei He (), Daozhi Zhao () and Michele Lundy ()
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Qinpeng Wang: School of Management Science and Engineering, Hebei University of Economics and Business, Shijiazhuang 050061, China
Longfei He: College of Management and Economics, Tianjin University, Tianjin 300072, China
Daozhi Zhao: College of Management and Economics, Tianjin University, Tianjin 300072, China
Michele Lundy: Portsmouth Business School, Portsmouth University, Portsmouth PO1 2UP, UK

Energies, 2018, vol. 11, issue 11, 1-17

Abstract: Among responses to governmental regulations for curbing carbon emissions, outsourcing carbon reduction to a specialized third-party is an important means to satisfy a variety of carbon-emission restraints. In this situation, however, designing efficient contracts for emission reducing while retaining appropriate supply-chain profit is a substantial but challenging problem. We therefore refine this from practice and consider a low-carbon supply chain consisting of one manufacturer and one retailer to analyze in which conditions the system should outsource its carbon reduction efforts to an external expert firm under the assumption that consumers with a sense of social responsibility prefer low carbon products. In the decarbonization expert firm embedded supply chain, we examine the respective impacts of three cost-pooling schemes for emission reduction on supply chain performances. We find that the manufacturer-undertaking contract is the worst in terms of profit and carbon reduction level among the contracts being studied, while the retailer-undertaking contract yields the best outcome in terms of the profit and performs well in carbon reduction when the contractor has cost efficiency in carbon reduction, which is even better than the joint-undertaking contract in carbon reduction when the contractor is inefficient. The study shows the diversity of contracts on outsourcing carbon reduction significantly impacts the supply chain profitability, carbon reduction efficiency and sustainability of operations.

Keywords: low-carbon supply chain; outsourcing; carbon emission reduction; green operations; cost pooling schemes; sustainability (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2018
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