Unregulated Cap-and-Trade Model for Sustainable Supply Chain Management

Cap-and-trade models have been largely studied in the literature when it comes to reducing emissions in a supply chain. In this paper, further pursuing the goal of analyzing the effectiveness of cap-and-trade strategies in reducing emissions in supply chains, we propose a mathematical model for sustainable supply chain management. This optimization program aims at reducing emissions and supply chain costs in an unregulated scenario w.r.t. the cap definition, i.e., trading CO 2 is allowed but no formal limit on the CO 2 emissions is imposed. Also, we considered an initial budget for technological investments by the facilities in the considered supply chain, allowing plants to reduce their unit production emissions at a different unit production cost. For this model, differently from what exists in the literature, we derive some theoretical conditions guaranteeing that, if obeyed, the emissions over time have a non-increasing trend meaning that decreasing caps over time can be attained with a self-regulated scenario. Computational results show the effectiveness of our approach.