Trade-Old-for-Remanufactured Closed-Loop Supply Chains with Carbon Tax and Government Subsidies

Tong Shu, Chunfen Huang, Shou Chen, Shouyang Wang and Kin Keung Lai
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Tong Shu: Business School, Hunan University, Changsha 410082, China
Chunfen Huang: Business School, Hunan University, Changsha 410082, China
Shou Chen: Business School, Hunan University, Changsha 410082, China
Shouyang Wang: Academy of Mathematics and System Science, Chinese Academy of Sciences, Beijing 100190, China
Kin Keung Lai: International Business School, Shaanxi Normal University, Xi’an 710062, China

Sustainability, 2018, vol. 10, issue 11, 1-25

Abstract: The constantly increasing CO 2 emissions are threatening the environment tremendously. Facing the pressure of environmental activists and public opinion, businesses and governments are taking action to reduce carbon emissions. Among these endeavors, carbon tax and subsidy policies proposed by governments are widely adopted. Remanufacturing is believed to save manufacturing costs and reduce carbon emissions from the process of enterprise operation, and it is increasingly being accepted by enterprises. However, different consumers’ willingness to pay for remanufactured products and the durability of new products will also affect consumers’ willingness to buy remanufactured products. Therefore, considering the discrepancy between consumer willingness to pay and product durability, we established the trade-old-for-remanufactured (TOR) model for a scenario of carbon tax and government subsidies. Through the analysis of the model, we obtained the optimal pricing and production decisions of manufacturers (remanufacturers) in the case of carbon tax and government subsidies. Our results show that, when there is no carbon tax constraint, the increase in consumer willingness to pay and the adjustment in product durability can stimulate consumers to participate in TOR projects and augment enterprises’ profits. However, it can also lead to a carbon rebound that increases corporate carbon emissions. When there is a carbon tax constraint, the introduction of carbon tax contributes to a reduction in carbon emissions, while enterprises tend to lose profits. In order to achieve a “win-win” between corporate profits and carbon emissions, we considered government subsidy policies. Our numerical examples illustrate that appropriate carbon tax and government subsidies can curb carbon emissions and also increase profits for enterprises.

Keywords: trade-old-for-remanufactured; consumer willingness to pay; product durability; carbon tax; government subsidies (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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