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Impacts of Supply Chain Competition on Firms’ Carbon Emission Reduction and Social Welfare under Cap-and-Trade Regulation

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  • Kelei Xue

    (School of Management Science and Engineering, Shandong University of Finance and Economics, Jinan 250014, China)

  • Guohua Sun

    (School of Management Science and Engineering, Shandong University of Finance and Economics, Jinan 250014, China)

Abstract

In the carbon neutrality era, firms are facing increasingly intense environmental pressure and market competition. This paper considers two competitive supply chains with consumers’ low-carbon preference under the cap-and-trade regulation, each of which consists of one manufacturer and one retailer. Considering competition or integration in vertical and horizontal directions, four different supply chain structures are modeled. By applying a game-theoretical approach, the equilibrium pricing, carbon emission reduction (CER) level, profit, and social welfare are obtained. Through comparison and analysis, the economic and environmental impacts of supply chain competition are explored. The results show that (1) the carbon quota acts as a kind of financial subsidy and brings direct economic profit to the supply chain, which cannot be used to incentivize the firm to invest in CER technology; (2) the HCVI strategy can bring the highest CER level, the most market demand, and social welfare among the four strategies; (3) for the enterprise and the government, it is recommended to take measures and enact policies to strengthen the vertical integration and horizontal competition between supply chains. Our study can guide firms on how to cope with increasingly fierce industry competition and environmental pressure by adjusting their operational decisions and supply chain structure.

Suggested Citation

  • Kelei Xue & Guohua Sun, 2022. "Impacts of Supply Chain Competition on Firms’ Carbon Emission Reduction and Social Welfare under Cap-and-Trade Regulation," IJERPH, MDPI, vol. 19(6), pages 1-25, March.
    • Handle: RePEc:gam:jijerp:v:19:y:2022:i:6:p:3226-:d:767477
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    Cited by:

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    3. Weihao Wang & Deqing Ma & Jinsong Hu, 2023. "Study of Carbon Reduction and Marketing Decisions with the Envisioning of a Favorable Event under Cap-and-Trade Regulation," IJERPH, MDPI, vol. 20(5), pages 1-27, March.
    4. Kelei Xue & Guohua Sun & Tongtong Yao, 2022. "Incentive Mechanisms for Carbon Emission Abatement Considering Consumers’ Low-Carbon Awareness under Cap-and-Trade Regulation," IJERPH, MDPI, vol. 19(7), pages 1-27, March.
    5. Shi Chen & Fu-Wei Huang & Jyh-Horng Lin, 2022. "Effects of Cap-and-Trade Mechanism and Financial Gray Rhino Threats on Insurer Performance," Energies, MDPI, vol. 15(15), pages 1-20, July.
    6. Fan Ding & Zhangping Lu & Mengfan Jin & Licheng Sun, 2022. "Manufacturer’s Encroachment and Carbon Emission Reduction Decisions Considering Cap-and-Trade Regulation and Consumers’ Low-Carbon Preference," IJERPH, MDPI, vol. 19(16), pages 1-28, August.

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