Green Procurement Decisions with Carbon Leakage by Global Suppliers and Order Quantities under Different Carbon Tax

Manufactures have been pressed to reduce greenhouse gas (GHG) emissions by environmental regulations and policies. Towards to reduction of GHG emissions, a carbon tax has been already introduced in 40 countries. Owing to different carbon prices among countries, there are potential risks of carbon leakage, where manufacturers transfer production operations to the countries with lower taxes to pursue lower costs. Moreover, procurement costs and GHG emissions vary by country because of economic conditions and electric energy mixes. Therefore, total GHG emissions could be globally reduced if manufactures relocate their production bases or switch suppliers in the country with lower GHG emission levels. This study proposes a green procurement decision for the supplier selection and the order quantity for minimizing GHG emission and costs considering the different carbon taxes in different countries. First, a bill of materials for each part is constructed through the life cycle inventory database with the Asian international input/output tables for a case study. Second, a green procurement decision considering the different carbon prices is formulated using integer programming. Finally, the results, including carbon leakage, are analyzed from the viewpoint of manufacturers, governments, and global perspectives.