A new solution for sustainable manufacturing: The dynamics of digital twins and carbon futures under emission reduction targets

The manufacturing industry is under increasing pressure from both regulatory bodies and societal expectations to adopt more sustainable practices. While digitalization presents a promising solution to improve both sustainability and productivity, theoretical research on this integration is still in its infancy. Practical examples of digital twin adoption build confidence in its potential for sustainable operations, however, there is still a lack of ready answers or guided solutions for the manufacturing on how to effectively integrate emerging technology into their sustainability efforts. This research addresses these gaps by theoretically exploring how digital twin technologies can create an effective meta-inventory to promote sustainable manufacturing within emission trading regulations. Emission futures, a rarely discussed carbon financial instrument, are integrated into emission regulations to address concerns about the necessity of meta-inventory given its substantial investment, since a well-designed emission mechanism alone could potentially deliver satisfactory results. A unified model is developed for an uncertain market with green awareness. Our research reveals that meta-inventory consistently outperforms emission futures in emission reduction, while enabling manufacturers to invest less in green initiatives and still achieve better sustainability outcomes. Smart manufacturing should prioritize a large digital inventory and a small physical one to mitigate transformation risks.