Optimization model of trade credit and asset-based securitization financing in carbon emission reduction supply chain

Guoshu Dong (), Ling Liang (), Lihong Wei (), Jiaping Xie () and Guang Yang ()
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Guoshu Dong: Zhejiang Shuren University
Ling Liang: Shanghai University of International Business and Economics
Lihong Wei: Shanghai University of Finance and Economics
Jiaping Xie: Shanghai University of Finance and Economics
Guang Yang: Shanghai University of Finance and Economics

Annals of Operations Research, 2023, vol. 331, issue 1, No 2, 35-84

Abstract: Abstract As low-carbon products increasingly become popular among consumers, the manufacturers have begun to advocate low-carbon supply chain to meet consumers’ low-carbon preferences. However, low-carbon investments inevitably bring financing constraints to the supply chain. To provide a potential solution to relieve the financial constrain, we established a two-echelon supply chain consisting of a low-carbon product manufacturer and a retailer. Supply chain members can effectively solve their financing constraints by utilizing portfolio financing consisting of the bank loan (BL), trade credit (TC), and asset-based securitization (ABS). We found that under the financial mode of BL and DC (Dual credit refers to the combination of bank loan and trade credit), only when consumers are highly price-sensitive to low-carbon products can tax preference incentivize the manufacturer to reduce carbon emissions. Under DC mode, consumer’s strong low-carbon preference will push up the retail price level of low-cost products; Under portfolio financing with ABS & DC, consumers’ strong low-carbon preference will force up the retail price level of low-carbon products with low price sensitivity. Compared with pure BL and DC, the cash flow under portfolio financing is the tightest. Besides, we took capital demand of the multi-stage scenario into consideration. Moreover, we found that the tax rate and tax deduction ratio of carbon emissions reduction will affect the retail price, wholesale price, and financing decision in the three financial modes when satisfying certain conditions.

Keywords: Supply chain finance; Carbon emission reduction; Trade credit; Asset-based securitization (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10479-021-04011-5

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