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Integrated impact of the carbon quota constraints on enterprises within supply chain: Direct cost and indirect cost

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  • Wang, Chen
  • Wang, Zhaohua
  • Ke, Ruo-Yu
  • Wang, Jiancai

Abstract

Emission Trading Scheme (ETS) has become one of the most popular ways to meet CO2 reduction targets owing to its flexibility and cost effectiveness. This paper applies game theory to analyze the impacts of direct and indirect costs derived from ETS on enterprise's competitiveness and supply partnership. By emphasizing the role of carbon intensity, the results illustrate that an enterprise with lower carbon intensity will have stronger capability to ease the pressures of both direct and indirect costs. From the perspective of direct cost, when reducing carbon intensity to a certain extent, the enterprise will take the advantage of carbon competitiveness to further expand the market share. The enterprise with low carbon intensity can even increase its product output amount instead of damaging it. From the perspective of indirect cost, a downstream manufacturer with lower carbon intensity is more likely to obtain the favor of suppliers. If choosing a downstream partner with high carbon intensity, the supplier may need to reduce the price of its product to ensure the product's demand and profits. Therefore, the implementation of ETS will drive suppliers to choose low-carbon partners, resulting in low-carbon supply partnerships replacing the original one. Based on a numerical example combing with the investigation in Hubei ETS pilot, this research argues for the enlightenment, and implications, of carbon quota constraints as a part of China's emission reduction policies.

Suggested Citation

  • Wang, Chen & Wang, Zhaohua & Ke, Ruo-Yu & Wang, Jiancai, 2018. "Integrated impact of the carbon quota constraints on enterprises within supply chain: Direct cost and indirect cost," Renewable and Sustainable Energy Reviews, Elsevier, vol. 92(C), pages 774-783.
    • Handle: RePEc:eee:rensus:v:92:y:2018:i:c:p:774-783
    DOI: 10.1016/j.rser.2018.04.104
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    Cited by:

    1. Wang, Wei & Zhang, Yue-Jun, 2022. "Does China's carbon emissions trading scheme affect the market power of high-carbon enterprises?," Energy Economics, Elsevier, vol. 108(C).
    2. Xiang, Yue & Wu, Gang & Shen, Xiaodong & Ma, Yuhang & Gou, Jing & Xu, Weiting & Liu, Junyong, 2021. "Low-carbon economic dispatch of electricity-gas systems," Energy, Elsevier, vol. 226(C).
    3. Wu, Qingyang & Tan, Chang & Wang, Daoping & Wu, Yongtao & Meng, Jing & Zheng, Heran, 2023. "How carbon emission prices accelerate net zero: Evidence from China's coal-fired power plants," Energy Policy, Elsevier, vol. 177(C).
    4. Tang, Ling & Wang, Haohan & Li, Ling & Yang, Kaitong & Mi, Zhifu, 2020. "Quantitative models in emission trading system research: A literature review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 132(C).
    5. Dai, Shufen & Qian, Yawen & He, Weijun & Wang, Chen & Shi, Tianyu, 2022. "The spatial spillover effect of China's carbon emissions trading policy on industrial carbon intensity: Evidence from a spatial difference-in-difference method," Structural Change and Economic Dynamics, Elsevier, vol. 63(C), pages 139-149.
    6. Song, Yazhi & Liu, Tiansen & Li, Yin & Zhu, Yue & Ye, Bin, 2022. "Paths and policy adjustments for improving carbon-market liquidity in China," Energy Economics, Elsevier, vol. 115(C).
    7. Chen Wang & Qingyan Yang & Shufen Dai, 2019. "Supplier Selection and Order Allocation under a Carbon Emission Trading Scheme: A Case Study from China," IJERPH, MDPI, vol. 17(1), pages 1-19, December.
    8. Ji, Shou-feng & Zhao, Dan & Luo, Rong-juan, 2019. "Evolutionary game analysis on local governments and manufacturers' behavioral strategies: Impact of phasing out subsidies for new energy vehicles," Energy, Elsevier, vol. 189(C).

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