Utilization of Free Trade Agreements to Minimize Costs and Carbon Emissions in the Global Supply Chain for Sustainable Logistics

Yuki Kinoshita, Takaki Nagao, Hiromasa Ijuin, Keisuke Nagasawa, Tetsuo Yamada () and Surendra M. Gupta
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Yuki Kinoshita: Department of Informatics, Faculty of Engineering, Kindai University, 1 Takaya Umenobe, Higashi-Hiroshima 739-2116, Japan
Takaki Nagao: Department of Informatics, The University of Electro-Communications, 1-5-1 Chofugaoka, Tokyo 182-8585, Japan
Hiromasa Ijuin: Department of Informatics, The University of Electro-Communications, 1-5-1 Chofugaoka, Tokyo 182-8585, Japan
Keisuke Nagasawa: Graduate School of Advanced Science and Engineering, Hiroshima University, 1-4-1 Kagamiyama, Higashi-Hiroshima 739-8511, Japan
Tetsuo Yamada: Department of Informatics, The University of Electro-Communications, 1-5-1 Chofugaoka, Tokyo 182-8585, Japan
Surendra M. Gupta: Department of Mechanical and Industrial Engineering, Northeastern University, Boston, MA 02115, USA

Logistics, 2023, vol. 7, issue 2, 1-21

Abstract: Background : Since global warming is a crucial worldwide issue, carbon tax has been introduced in the global supply chain as an environmental regulation for the reduction of greenhouse gas (GHG) emissions. Costs, GHG emissions, and carbon tax prices differ in each country due to economic conditions, energy mixes, and government policies. Additionally, multiple countries have signed a Free Trade Agreement (FTA). While FTAs result in their economic benefit, they also increase the risk of carbon leakage, which increases GHG emissions in the global supply chain due to relocation production sites from a country with stricter emission constraints to others with laxer ones. Method : This study proposes a mathematical model for decision support to minimize total costs involving carbon taxes with FTAs. Results : Our model determines suppliers, factory locations, and the number of transported parts and products with costs, FTAs, carbon taxes, and material-based GHG emissions estimated using the Life Cycle Inventory (LCI) database. The FTA utilization on the global low-carbon supply chain is examined by comparing the constructed supply chains with and without FTAs, and by conducting sensitivity analysis of carbon tax prices. Conclusions : We found that FTAs would not cause carbon leakage directly and would be effective for reducing GHG emissions economically.

Keywords: low carbon emission; global supply chain; custom duty; Asian life cycle inventory (LCI) database; mathematical modeling (search for similar items in EconPapers)
JEL-codes: L8 L80 L81 L86 L87 L9 L90 L91 L92 L93 L98 L99 M1 M10 M11 M16 M19 R4 R40 R41 R49 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jlogis:v:7:y:2023:i:2:p:32-:d:1161916

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