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Optimal production planning and cap setting under cap-and-trade regulation

Author

Listed:
  • Ping He

    (South China University of Technology)

  • Guowei Dou

    (Shenzhen University)

  • Wei Zhang

    (Zhejiang University)

Abstract

This paper investigates the optimal production decisions of a self-pricing manufacturer and the optimal cap-setting decisions of a regulator under the cap-and-trade regulation. The objectives of the manufacturer and the regulator are to maximize profit and to maximize social welfare, respectively. We first derive the optimal production decisions and the corresponding total emissions of the manufacturer, with given parameters of the cap-and-trade regulation. Based on these results, we then solve the optimal cap-setting problem of the regulator. Furthermore, through sensitive analyses, we show that as the emissions intensity (i.e., the emissions generated from one unit of product) increases, both the optimal total emissions and the optimal cap first increase and then decrease.

Suggested Citation

  • Ping He & Guowei Dou & Wei Zhang, 2017. "Optimal production planning and cap setting under cap-and-trade regulation," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 68(9), pages 1094-1105, September.
    • Handle: RePEc:pal:jorsoc:v:68:y:2017:i:9:d:10.1057_s41274-016-0123-1
    DOI: 10.1057/s41274-016-0123-1
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    References listed on IDEAS

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    Cited by:

    1. Hui Li & Rou Li & Meng Shang & Yu Liu & Dandan Su, 2022. "Cooperative decisions of competitive supply chains considering carbon trading mechanism [Competing manufacturers in a retail supply chain: on contractual form and coordination]," International Journal of Low-Carbon Technologies, Oxford University Press, vol. 17, pages 571-589.
    2. Xu, Xiaoping & Yang, Yuanyuan & Zhang, Juzhi & Cheng, T.C.E., 2023. "Live streaming platform operations and coordination under the cap-and-trade regulation: Platform-enabled mode versus platform-agency mode," International Journal of Production Economics, Elsevier, vol. 260(C).
    3. Min Wang & Jiao Ouyang & Lindu Zhao, 2021. "Production planning with transshipment in a global supply chain under different carbon trading mechanisms," Operational Research, Springer, vol. 21(4), pages 2309-2331, December.
    4. Yang, Lei & Hu, Yijuan & Huang, Lijuan, 2020. "Collecting mode selection in a remanufacturing supply chain under cap-and-trade regulation," European Journal of Operational Research, Elsevier, vol. 287(2), pages 480-496.
    5. Xu, Xiaoping & Zhang, Mengying & Chen, Lai & Yu, Yugang, 2022. "The region-cap allocation and delivery time decision in the marketplace mode under the cap-and-trade regulation," International Journal of Production Economics, Elsevier, vol. 247(C).
    6. Xu, Xiaoping & Choi, Tsan-Ming, 2021. "Supply chain operations with online platforms under the cap-and-trade regulation: Impacts of using blockchain technology," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 155(C).
    7. Chirantan Mondal & Bibhas C. Giri, 2022. "Analyzing a manufacturer-retailer sustainable supply chain under cap-and-trade policy and revenue sharing contract," Operational Research, Springer, vol. 22(4), pages 4057-4092, September.
    8. Cao, Kaiying & Guo, Qiang & Xu, Yuqiu, 2023. "Information sharing and carbon reduction strategies with extreme weather in the platform economy," International Journal of Production Economics, Elsevier, vol. 255(C).
    9. Tianyi Guo & Chaonan Li & Yan Chen, 2022. "Remanufacturing Strategy under Cap-and-Trade Regulation in the Presence of Assimilation Effect," Sustainability, MDPI, vol. 14(5), pages 1-19, March.
    10. Yugang Yu & Xue Li & Xiaoping Xu, 2022. "Reselling or marketplace mode for an online platform: the choice between cap-and-trade and carbon tax regulation," Annals of Operations Research, Springer, vol. 310(1), pages 293-329, March.
    11. Yanhong Yuan & Yaru Zhang & Lei Wang & Li Wang, 2022. "Coping Decisions of Production Enterprises under Low-Carbon Economy," Sustainability, MDPI, vol. 14(15), pages 1-21, August.
    12. Dou, Guowei & Choi, Tsan-Ming, 2021. "Does implementing trade-in and green technology together benefit the environment?," European Journal of Operational Research, Elsevier, vol. 295(2), pages 517-533.
    13. Doo-Ho Lee & Jong-Chul Yoon, 2022. "Decisions on Pricing, Sustainability Effort, and Carbon Cap under Wholesale Price and Cost-Sharing Contracts," Sustainability, MDPI, vol. 14(8), pages 1-21, April.

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