The Orchestrating Role of Carbon Subsidies in a Capital-Constrained Supply Chain

Wen Song, Ai Ren, Xiaodong Li and Qi Li

Mathematical Problems in Engineering, 2021, vol. 2021, 1-13

Abstract:

In this paper, we investigate the role of carbon subsidies in a capital-constrained supply chain. We analyze two green technology investment structures in such supply chains: one where the manufacturer determines the optimal carbon emission abatement level (MI-structure) and one where the retailer determines the optimal carbon emission abatement level (RI-structure). As the leader (the powerful participant or the first mover in a supply chain), the manufacturer may choose the investment structure that is most favorable to them. Our major findings are as follows: (1) carbon subsidies can improve the performance of a centralized green supply chain; (2) there exists a threshold value of carbon subsidy that determines the manufacturer’s choice of the best carbon emission abatement investment structure, but the retailer always benefits from RI-structure; and (3) the traditional cost-sharing contract fails to achieve green supply chain coordination. However, as an orchestrator, the carbon subsidy plays a crucial role in achieving quantity coordination when implemented alongside traditional cost-sharing contracts. Furthermore, using a parameter of side-payment, we propose a new contract design that facilitates win-win coordination.

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:hin:jnlmpe:8920624

DOI: 10.1155/2021/8920624

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