Optimal Carbon Pricing and Carbon Footprint in a Two-Stage Production System Under Cap-and-Trade Regulation

Huo-Yen Tseng, Yung-Fu Huang, Chung-Jen Fu and Ming-Wei Weng ()
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Huo-Yen Tseng: Department of Business Administration, Chaoyang University of Technology, Taichung 413310, Taiwan
Yung-Fu Huang: Department of Marketing and Logistics Management, Chaoyang University of Technology, Taichung 413310, Taiwan
Chung-Jen Fu: Department of Business Administration, Chaoyang University of Technology, Taichung 413310, Taiwan
Ming-Wei Weng: Department of Marketing and Logistics Management, Chaoyang University of Technology, Taichung 413310, Taiwan

Mathematics, 2024, vol. 12, issue 22, 1-21

Abstract: Integrating low-carbon design into products is crucial for reducing carbon emissions throughout their life cycle and promoting sustainable development. Addressing the uncertainty in the carbon footprint resulting from the unknown choice of product material solutions. This paper considers ABC (activity-based costing) along with the components’ carbon footprint and scrap return issues to illustrate the above challenge in a two-stage production-inventory system with imperfect processes. We determine the optimal production and sales strategies that maximize total profit per unit time. An algorithm is developed to identify these optimal solutions. To illustrate the effectiveness of the proposed model and algorithm, two numerical examples from the Taiwan die casting industry are presented. Additionally, a sensitivity analysis is conducted to provide valuable managerial insights.

Keywords: sustainable supply chain; carbon footprint; activity-based costing; carbon price; EPQ (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2024
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