Effects of trade credit insurance on remanufacturing decisions under carbon tax and emissions abatement

This study examines the impacts of trade credit insurance on the optimal decisions of the firm that remanufactures used products and implements emissions abatement strategy under carbon tax policy. In the presence of revenue loss risks generated by uncertain factors in the trading process with channel partners, a remanufacturing production decision-making model without trade credit insurance is firstly proposed as a benchmark, and then the trade credit insurance is integrated into the model to alleviate risk. Subsequently, the optimal decisions for the two models are derived and the optimal emissions abatement rates for different objectives are characterised. Through analysis and numerical examples, the results show that the firm has an incentive to increase remanufacturing quantity and is better off with the use of trade credit insurance, regardless of whether the firm conducts emissions abatement strategy. The emissions abatement strategy is unable to maximise the production quantity, the insurance coverage quantity and the firm's expected profit simultaneously. Additionally, although a high carbon tax decreases the firm's profit, it motivates the firm to direct increasing efforts toward reducing emissions. [Submitted: 2 December 2020; Accepted: 20 September 2021]