Production Strategy Of Manufacturer Considering Capital Constraints Under Cap-and-trade Regulation

Climate warming is a significant challenge that mankind is facing today,and carbon emission reduction is the key to prevent global warming.In recent years,China has increasingly paid attention to environmental protection.And China has taken a series of measures,such as optimizing industrial structure,developing new energy and building a national carbon emission trading market,and achieved positive results.China’s Emissions Trading System(ETS)officially launched at the end of 2017,which further promotes carbon emission reduction,promotes technological progress and industrial structure upgrade.Moreover,with the improvement of consumers’ low-carbon awareness,most consumers are more willing to buy environment-friendly products.Facing the changes of national low-carbon policy and market demand,manufacturers should reduce carbon emissions in the production process.In reality,the manufacturer in the supply chain may face capital constraints and the manufacturer will make non-optimal decisions because of capital constraints.Based on the above background,this paper uses the theories and methods of game theory,optimization theory,economics theory and method.And this paper uses a single manufacturer and competitive manufacturers as the object of study and discusses production strategy for capital-constrained manufacturer in cap-and-trade regulation.First of all,this paper discusses a capital-constrained manufacturer’s production decisions for both products under cap-and-trade regulation.We build the newsvendor model to acquire the optimal production decisions and profits.We find that: without bank financing,if manufacturer’s limited initial capital is high,manufacturer can produce more environment-friendly products;with bank financing,when loan interest rate is lower,the manufacturer can produce more environment-friendly products.Secondly,under the premise of carbon emission reduction investment,this paper studies competitive manufacturers’ optimal production and carbon emission reduction decisions.This paper sets up the insufficient initial capital and no financing model,no bankruptcy risk financing model and bankruptcy risk financing model.The study finds that: compared with no financing,the capital-constrained manufacturer under bank financing can produce more products and gain more profits.And in the case of competition,the intensity of competition affects the manufacturers’ optimal decisions and optimal profits.To sum up,under cap-and trade regulation and capital constraints firms are facing enormous challenges,the production strategy of the enterprise will affect the whole supply chain and the overall economy.In this paper,the research would be added to the existing research of supply chain,offers theory and guidance for production decisions of capital-constrained supply chain under cap-and-trade regulation.