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Outsourcing and authorized remanufacturing under voluntary emission reduction mechanism

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Listed:
  • Jian Cao

    (Zhejiang University of Technology
    The University of Iowa)

  • Qin Shao

    (Zhejiang University of Technology)

Abstract

Alongside carbon taxes and carbon trading, the Voluntary Emission Reductions Mechanism (VERM) has become a crucial tool for regulating greenhouse gas emissions. However, its impact on the closed-loop supply chain (CLSC) with remanufacturing has received limited investigation. Additionally, Original Equipment Manufacturers (OEMs) provide technical services to independent remanufacturers (IRs) with limited capacity. In this study, we develop a supply chain game model with an OEM and an IR to analyze how VERM influences outsourcing and authorized remanufacturing modes in terms of production, fees, emission reduction levels, environmental impact, and consumer surplus. Our findings can be summarized as follows: (1) There exists an optimal emission reduction technology level that maximizes profits and enhances consumer surplus for each member. (2) The VERM encourages collaboration for emissions reduction but may not consistently reduce carbon emissions throughout the entire supply chain. (3) The outsourcing remanufacturing model optimizes both OEM profits and emission reduction levels under VERM. (4) The emission reduction level is positively correlated with the trading price of VERs, but it may be inversely related to consumer preferences for remanufacturing. (5) Two-part tariff contracts and cost-sharing contracts prove highly effective for fostering collaboration and boosting revenue for both OEMs and IRs.

Suggested Citation

  • Jian Cao & Qin Shao, 2025. "Outsourcing and authorized remanufacturing under voluntary emission reduction mechanism," Flexible Services and Manufacturing Journal, Springer, vol. 37(3), pages 776-815, September.
    • Handle: RePEc:spr:flsman:v:37:y:2025:i:3:d:10.1007_s10696-024-09555-9
    DOI: 10.1007/s10696-024-09555-9
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    References listed on IDEAS

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