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Low-Carbon Supply Chain Management Considering Free Emission Allowance and Abatement Cost Sharing

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Listed:
  • Peng Wu

    (Business School, Sichuan University; Chengdu 610064, China)

  • Yixi Yin

    (Business School, Sichuan University; Chengdu 610064, China)

  • Shiying Li

    (School of Public Administration, Sichuan University, Chengdu 610064, China)

  • Yulong Huang

    (Business School, Sichuan University; Chengdu 610064, China)

Abstract

As people concern themselves with environmental problems, the right to emit carbon dioxide becomes a new resource with business value that is incorporated in firms’ budgets. This paper studies the optimal emission abatement decision for firms in a supply chain, considering emission costs. Four Stackelberg models are established that differ in free emission allowance allocation schemes and emission abatement cost-sharing schemes. On comparing optimal solutions in the models, the results show that regardless of which free emission allowance allocation scheme or emission abatement cost-sharing scheme is adopted, upstream firms tend to set a higher emission reduction rate. If supply chain firms aim for a higher emission reduction rate, they should advocate that upstream and downstream firms establish emission abatement cost-sharing contracts. The upstream firms should undertake larger emission reduction costs, and use free emission allowance allocation schemes based on emission intensity; the optimal emission reduction rate is related to carbon price, and the relationship may not be monotonous, affected by the difficulty of reducing emissions.

Suggested Citation

  • Peng Wu & Yixi Yin & Shiying Li & Yulong Huang, 2018. "Low-Carbon Supply Chain Management Considering Free Emission Allowance and Abatement Cost Sharing," Sustainability, MDPI, vol. 10(7), pages 1-18, June.
    • Handle: RePEc:gam:jsusta:v:10:y:2018:i:7:p:2110-:d:153573
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    2. Guangsheng Zhang & Xiao Wang & Yu Zhang & Jiayun Kang, 2022. "Research on the Emission Reduction Decision of Cost-Sharing Logistics Service Supply Chain in the O2O Model," Sustainability, MDPI, vol. 14(20), pages 1-21, October.

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