A New Green Efficiency-Based Carbon Taxing Policy and Its Effects on a Production-Inventory System with Random Carbon Emissions and Green Investment

In this study, the author proposes a new carbon taxing policy. This proposed carbon tax has two tax components. The first component is constant, and the second component depends on the green efficiency of production. The green efficiency of production is measured by the average amount of emissions per unit production in an assessment year. The green efficiency-based tax component can be reset every year. Lesser average emission rate indicates better green efficiency. The second component of this proposed carbon tax forces the firm to improve the green efficiency of production, which results in cleaner production. The author incorporates this new carbon tax policy in a production-inventory system with a price-sensitive demand rate. A rule is provided for the implementation of this new tax. Emissions during setup, production, and storage are considered as independent random variables. The firm has the opportunity of investing in green technologies to improve green efficiency. A profit maximization policy is adopted to solve the developed model. A solution algorithm is also provided. The model is illustrated by numerical examples with randomly generated model parameters. The results of numerical examples show the environmental benefits of the proposed carbon tax.