Carbon asset pledge financing under allowance allocation mechanisms: Strategies for capital-constrained manufacturers

Under carbon trading policies, research and development (R&D) in carbon emission reduction (CER) technologies has become a key strategy for manufacturing industries to mitigate carbon compliance costs. However, limited attention has been given to how specific carbon allowance allocation methods interact with capital constraints in supply chains. To address this gap, this paper develops a carbon-emission-dependent supply chain model that incorporates two allocation mechanisms, namely the grandfathering system and the benchmarking system, involving a capital-constrained manufacturer and a retailer. Based on the manufacturer's initial capital and carbon allowance endowment, three financing scenarios are examined: no financing, pure carbon asset pledge financing (PCAPF), and hybrid carbon asset pledge financing (HCAPF). The results show that: 1) The threshold for adopting the no-financing strategy is lower under the grandfathering system, while the PCAPF thresholds in both systems depend on the total carbon allowance. 2) From a profitability perspective, the retailer's profit is higher under the benchmarking system, whereas the manufacturer achieves higher profit under the grandfathering system when the total allowance is relatively abundant. 3) From an environmental perspective, the benchmarking system imposes stricter constraints and induces higher CER efforts, but when the R&D cost coefficient exceeds a certain threshold, the environmental impact under benchmarking surpasses that under grandfathering. 4) Under both systems, the no-financing scenario achieves the highest CER efforts, product output, and retailer's profit, while excessive reliance on HCAPF weakens all three.