IDEAS home Printed from https://ideas.repec.org/a/eee/eneeco/v141y2025ics014098832400820x.html
   My bibliography  Save this article

Emission reduction levels of manufacturers under carbon trading policies

Author

Listed:
  • Xia, Xiqiang
  • Li, Jiangwen
  • Wei, Wei
  • Benkraiem, Ramzi
  • Abedin, Mohammad Zoynul

Abstract

Considering the policies surrounding carbon trading, decarbonization plans have been regarded as imperative choices for the manufacturing industry. However, there has been little research into combining the concrete carbon quota allocation methods with the low-carbon supply chain. Still, the distinction between ordinary and low-carbon manufacturers has been scarcely investigated. To fill these gaps, drawing on two quota allocation methods—grandfathering and benchmarking, we model the supply chains under two production modes, which consists of an ordinary manufacturer, a low-carbon manufacturer and a hybrid manufacturer. Our primary conclusions are listed here. The carbon emission reduction level (CERL) shall fluctuate within an acceptable scope to prevent adverse consequences on total social welfare. Additionally, independent of the production mode, manufacturers' profits will peak when the gross carbon quotas meet certain values under grandfathering. Meanwhile, under benchmarking, the environmental performance and consumer surpluses are better when the benchmark quota reaches a certain value.

Suggested Citation

  • Xia, Xiqiang & Li, Jiangwen & Wei, Wei & Benkraiem, Ramzi & Abedin, Mohammad Zoynul, 2025. "Emission reduction levels of manufacturers under carbon trading policies," Energy Economics, Elsevier, vol. 141(C).
    • Handle: RePEc:eee:eneeco:v:141:y:2025:i:c:s014098832400820x
    DOI: 10.1016/j.eneco.2024.108111
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S014098832400820X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eneco.2024.108111?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Zou, Zong-Bao & Wang, Jian-Jun & Deng, Gui-Shi & Chen, Haozhe, 2016. "Third-party remanufacturing mode selection: Outsourcing or authorization?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 87(C), pages 1-19.
    2. Cai, Jianhu & Jiang, Feiying, 2023. "Decision models of pricing and carbon emission reduction for low-carbon supply chain under cap-and-trade regulation," International Journal of Production Economics, Elsevier, vol. 264(C).
    3. Brojeswar Pal & Shib Sankar Sana, 2022. "Game-theoretic analysis in an environment-friendly competitive closed-loop dual-channel supply chain with recycling," Operations Management Research, Springer, vol. 15(3), pages 627-646, December.
    4. Dovern, Jonas & Frank, Johannes & Glas, Alexander & Müller, Lena Sophia & Perico Ortiz, Daniel, 2023. "Estimating pass-through rates for the 2022 tax reduction on fuel prices in Germany," Energy Economics, Elsevier, vol. 126(C).
    5. Chen, Junlong & Sun, Chaoqun & Shi, Jiayan & Liu, Jiali, 2022. "Technology R&D and sharing in carbon emission reduction in a duopoly," Technological Forecasting and Social Change, Elsevier, vol. 183(C).
    6. Manu Sharma & Anil Kumar & Sunil Luthra & Sudhanshu Joshi & Arvind Upadhyay, 2022. "The impact of environmental dynamism on low‐carbon practices and digital supply chain networks to enhance sustainable performance: An empirical analysis," Business Strategy and the Environment, Wiley Blackwell, vol. 31(4), pages 1776-1788, May.
    7. Xu, Xiaoping & Zhang, Mengying & Chen, Lai & Yu, Yugang, 2022. "The region-cap allocation and delivery time decision in the marketplace mode under the cap-and-trade regulation," International Journal of Production Economics, Elsevier, vol. 247(C).
    8. Schrader, Simon Elias & Benth, Fred Espen, 2022. "A stochastic study of carbon emission reduction from electrification and interconnecting cable utilization. The Norway and Germany case," Energy Economics, Elsevier, vol. 114(C).
    9. Fraser, Alastair & Fiedler, Tanya, 2023. "Net-zero targets for investment portfolios: An analysis of financed emissions metrics," Energy Economics, Elsevier, vol. 126(C).
    10. Yi, Yongxi & Fu, Ao & Zhang, Sheng & Li, Yuqiong, 2024. "Dynamic pricing and joint carbon reduction strategies at the production and consumption end in a dual-channel fuel vehicle supply chain," Energy Economics, Elsevier, vol. 131(C).
    11. Dardati, Evangelina & Saygili, Meryem, 2020. "Aggregate impacts of cap-and-trade programs with heterogeneous firms," Energy Economics, Elsevier, vol. 92(C).
    12. Ji, Jingna & Li, Tao & Yang, Lei, 2023. "Pricing and carbon reduction strategies for vertically differentiated firms under Cap-and-Trade regulation," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 171(C).
    13. Wang, M. & Zhou, P., 2017. "Does emission permit allocation affect CO2 cost pass-through? A theoretical analysis," Energy Economics, Elsevier, vol. 66(C), pages 140-146.
    14. Ali, Uzair & Guo, Qingbin & Nurgazina, Zhanar & Sharif, Arshian & Kartal, Mustafa Tevfik & Kılıç Depren, Serpil & Khan, Aftab, 2023. "Heterogeneous impact of industrialization, foreign direct investments, and technological innovation on carbon emissions intensity: Evidence from Kingdom of Saudi Arabia," Applied Energy, Elsevier, vol. 336(C).
    15. Mao, Huiying & Wang, Wenbin & Liu, Conghu & Xu, Yi & Zhao, Shuiying, 2023. "Effects of the carbon emission quota policy on the quality and sales of manufactured and remanufactured products," International Journal of Production Economics, Elsevier, vol. 266(C).
    16. Kumar, Anil & Luthra, Sunil & Mangla, Sachin Kumar & Garza-Reyes, Jose Arturo & Kazancoglu, Yigit, 2023. "Analysing the adoption barriers of low-carbon operations: A step forward for achieving net-zero emissions," Resources Policy, Elsevier, vol. 80(C).
    17. Trinh, Hai Hong & Sharma, Gagan Deep & Tiwari, Aviral Kumar & Vo, Diem Thi Hong, 2022. "Examining the heterogeneity of financial development in the energy-environment nexus in the era of climate change: Novel evidence around the world," Energy Economics, Elsevier, vol. 116(C).
    18. Li, Xuelian & Zhou, Wei & Lo, Tang-Yun & Lin, Jyh-Horng, 2024. "International climate policy dilemmas: Examining effective carbon tariff and cap-and-trade regulation from a sustainable insurance perspective," Energy Economics, Elsevier, vol. 134(C).
    19. Ma, Junhai & Tian, Yi & Xu, Tiantong & Koivumäki, Timo & Xu, Yueqiang, 2022. "Dynamic game study of multi-channel supply chain under cap-and-trade regulation," Chaos, Solitons & Fractals, Elsevier, vol. 160(C).
    20. Yao, Liming & He, Linhuan & Chen, Xudong & Yang, Ling, 2021. "A study on the profit distribution mechanism of the resource - Based supply chain considering low-carbon constraints and ecological restoration," Resources Policy, Elsevier, vol. 74(C).
    21. Yang, Wen & Pan, Yanchun & Ma, Jianhua & Yang, Tianyue & Ke, Xiao, 2020. "Effects of allowance allocation rules on green technology investment and product pricing under the cap-and-trade mechanism," Energy Policy, Elsevier, vol. 139(C).
    22. Chai, Qiangfei & Xiao, Zhongdong & Lai, Kee-hung & Zhou, Guanghui, 2018. "Can carbon cap and trade mechanism be beneficial for remanufacturing?," International Journal of Production Economics, Elsevier, vol. 203(C), pages 311-321.
    23. Haider Mahmood, 2023. "The Determinants of Carbon Intensities of Different Sources of Carbon Emissions in Saudi Arabia: The Asymmetric Role of Natural Resource Rent," Economies, MDPI, vol. 11(11), pages 1-20, November.
    24. Zhao‐Yong Sun & Yu‐Jue Wang & Dongdong Li, 2023. "Carbon allowance allocation rules under emission intensity regulation: Grandfathering versus benchmarking," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(6), pages 3185-3198, September.
    25. Gavard, Claire & Voigt, Sebastian & Genty, Aurélien, 2022. "Using emissions trading schemes to reduce heterogeneous distortionary taxes: The case of recycling carbon auction revenues to support renewable energy," Energy Policy, Elsevier, vol. 168(C).
    26. Yan, Juan & Haroon, Muhammad, 2023. "Financing efficiency in natural resource markets mobilizing private and public capital for a green recovery," Resources Policy, Elsevier, vol. 85(PB).
    27. Maeno, Keitaro, 2023. "Identifying critical sectors in the restructuring of low-carbon global supply chains," Energy Economics, Elsevier, vol. 127(PA).
    28. Zhang, Xuefeng & Li, Zhe & Li, Guo, 2024. "Grandfather-based or benchmark-based: Strategy choice for carbon quota allocation methods in the carbon neutrality era," Renewable and Sustainable Energy Reviews, Elsevier, vol. 192(C).
    29. Eftichios S. Sartzetakis, 2021. "Green bonds as an instrument to finance low carbon transition," Economic Change and Restructuring, Springer, vol. 54(3), pages 755-779, August.
    30. Peng, Wei & Xin, Baogui & Xie, Lei, 2023. "Optimal strategies for production plan and carbon emission reduction in a hydrogen supply chain under cap-and-trade policy," Renewable Energy, Elsevier, vol. 215(C).
    31. Mitoma, Haruka, 2023. "Carbon footprint analysis considering production activities of informal sector: The case of manufacturing industries of India," Energy Economics, Elsevier, vol. 125(C).
    32. Rouhani, Mohammad Matin & Namin, Farhad Samimi, 2023. "Investigate the potential of using fuzzy similarity in decision making under uncertainty for mining projects," Resources Policy, Elsevier, vol. 86(PA).
    33. Dazhi Linghu & Xinli Wu & Kee-Hung Lai & Fei Ye & Ajay Kumar & Kim Hua Tan, 2022. "Implementation strategy and emission reduction effectiveness of carbon cap-and-trade in heterogeneous enterprises," Post-Print hal-04325560, HAL.
    34. Wen, Wen & Zhou, P. & Zhang, Fuqiang, 2018. "Carbon emissions abatement: Emissions trading vs consumer awareness," Energy Economics, Elsevier, vol. 76(C), pages 34-47.
    35. Ma, Xiaochen & Pan, Yanchun & Zhang, Manzi & Ma, Jianhua & Yang, Wen, 2024. "Impact of carbon emission trading and renewable energy development policy on the sustainability of electricity market: A stackelberg game analysis," Energy Economics, Elsevier, vol. 129(C).
    36. Wang, Bangjun & Ji, Feng & Zheng, Jie & Xie, Kejia & Feng, Zhaolei, 2021. "Carbon emission reduction of coal-fired power supply chain enterprises under the revenue sharing contract: Perspective of coordination game," Energy Economics, Elsevier, vol. 102(C).
    37. Jin, Minyue & Li, Gendao & Reimann, Marc, 2022. "Team of rivals: How should original equipment manufacturers cooperate with independent remanufacturers via authorisation?," European Journal of Operational Research, Elsevier, vol. 296(3), pages 837-845.
    38. Linghu, Dazhi & Wu, Xilin & Lai, Kee-Hung & Ye, Fei & Kumar, Ajay & Tan, Kim Hua, 2022. "Implementation strategy and emission reduction effectiveness of carbon cap-and-trade in heterogeneous enterprises," International Journal of Production Economics, Elsevier, vol. 248(C).
    39. Wang, Hai & Ye, Shuai & Chen, Hui & Yin, Junya, 2023. "The impact of carbon emission trading policy on overcapacity of companies: Evidence from China," Energy Economics, Elsevier, vol. 126(C).
    40. Wiskich, Anthony, 2024. "A carbon tax versus clean subsidies: Optimal and suboptimal policies for the clean transition," Energy Economics, Elsevier, vol. 132(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Xia, Xiqiang & Chen, Jun & Wang, Wei & Wang, Haijie, 2024. "Impact of differentiated carbon taxes on remanufacturing mode selection," Energy Economics, Elsevier, vol. 140(C).
    2. Feng, Huchen & Hu, Yu-Jie & Li, Chengjiang & Wang, Honglei, 2023. "Rolling horizon optimisation strategy and initial carbon allowance allocation model to reduce carbon emissions in the power industry: Case of China," Energy, Elsevier, vol. 277(C).
    3. Wu, Xiaoping & Liu, Peng & Yang, Lin & Shi, Zhuangfei & Lao, Yongshuai, 2024. "Impact of three carbon emission reduction policies on carbon verification behavior: An analysis based on evolutionary game theory," Energy, Elsevier, vol. 295(C).
    4. Fang, Chang & Fan, Shuyi & Chi, Mingxiang & Wang, Weizhong, 2023. "The optimal remanufacturing strategy, returned quality choice and independent remanufacturers’ advantage for tackling extreme weather," International Journal of Production Economics, Elsevier, vol. 259(C).
    5. Xu, Song & Govindan, Kannan & Wang, Wanru & Yang, Wenting, 2024. "Supply chain management under cap-and-trade regulation: A literature review and research opportunities," International Journal of Production Economics, Elsevier, vol. 271(C).
    6. Jiang, Ke & Wang, Die & Xu, Liping & Wang, Feng, 2024. "Assessing the impact of carbon quota allocation in enhancing supply chain members emission reduction and advertising efforts," Socio-Economic Planning Sciences, Elsevier, vol. 95(C).
    7. Zheng, Xiao-Xue & Zhang, Shiyuan & Jia, Fu & Lin, Xiao, 2024. "A new biform game-based coordination mechanism for a carbon complementary supply chain under hybrid carbon regulations," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 187(C).
    8. Yan Zhou & Xin-Tong Lin & Zhi-Ping Fan & Kar-Hung Wong, 2022. "Remanufacturing Strategy Choice of a Closed-Loop Supply Chain Network Considering Carbon Emission Trading, Green Innovation, and Green Consumers," IJERPH, MDPI, vol. 19(11), pages 1-42, June.
    9. Ullah, Sami & Lin, Boqiang, 2024. "Harnessing the synergistic impacts of financial structure, industrialization, and ecological footprint through the lens of the EKC hypothesis. Insights from Pakistan," Energy, Elsevier, vol. 307(C).
    10. Jie Deng & Xuwei Luo & Mengsi Hu, 2022. "Implications of a Carbon Tax Mechanism in Remanufacturing Outsourcing on Carbon Neutrality," IJERPH, MDPI, vol. 19(9), pages 1-21, May.
    11. Pan, Junyu & Du, Lizhao & Wu, Haitao & Liu, Xiaoqian, 2024. "Does environmental law enforcement supervision improve corporate carbon reduction performance? Evidence from environmental protection interview," Energy Economics, Elsevier, vol. 132(C).
    12. Yanli Fang & Zhuoyi Ren & Fang Yang, 2023. "The Impact of Carbon Allowance Allocation Rules on Remanufacturing Decisions in a Closed-Loop Supply Chain," Mathematics, MDPI, vol. 11(13), pages 1-24, June.
    13. Zhang, Xuefeng & Li, Zhe & Li, Guo, 2024. "Grandfather-based or benchmark-based: Strategy choice for carbon quota allocation methods in the carbon neutrality era," Renewable and Sustainable Energy Reviews, Elsevier, vol. 192(C).
    14. Yuqing Hu & Lijun Meng & Jingya Xue & Hongying Xia, 2023. "Authorization or Outsourcing: Considering the Contrast/Assimilation Effect and Network Externality of Remanufactured Products under Government Subsidy," Sustainability, MDPI, vol. 15(14), pages 1-27, July.
    15. Yunting Feng & Yong Geng & Ge Zhao & Mengya Li, 2022. "Carbon Emission Constraint Policy in an OEM and Outsourcing Remanufacturer Supply Chain with Consumer Preferences," IJERPH, MDPI, vol. 19(8), pages 1-16, April.
    16. Faqi Xie & Yushuang Deng & Huiru Chen, 2023. "Pricing and Quantity Decisions under Asymmetric Carbon Emission Reduction Information and Cap-and-Trade Mechanism," IJERPH, MDPI, vol. 20(3), pages 1-27, January.
    17. Qian, Zhifeng & Day, Steven James & Ignatius, Joshua & Dhamotharan, Lalitha & Chai, Junwu, 2024. "Digital advertising spillover, online-exclusive product launches, and manufacturer-remanufacturer competition," European Journal of Operational Research, Elsevier, vol. 313(2), pages 565-586.
    18. Weisheng Deng, 2019. "Does Remanufacturing Always Benefit the Manufacturer and Hurt the Supplier?," Sustainability, MDPI, vol. 11(6), pages 1-13, March.
    19. Yuyan Wang & Tingting Yu & Rui Zhou, 2022. "The Impact of Legal Recycling Constraints and Carbon Trading Mechanisms on Decision Making in Closed-Loop Supply Chain," IJERPH, MDPI, vol. 19(12), pages 1-26, June.
    20. Yang, Lei & Hu, Yijuan & Huang, Lijuan, 2020. "Collecting mode selection in a remanufacturing supply chain under cap-and-trade regulation," European Journal of Operational Research, Elsevier, vol. 287(2), pages 480-496.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:141:y:2025:i:c:s014098832400820x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eneco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.