Emission Reduction Of Low Carbon Supply Chain When Considering Governmental Intervention

With British first proposed the "low carbon" concept in the "White book of British energy" in 2003, and quickly received worldwide extensive attention, many countries and companies began the relentless low-carbon practice. On one hand, governments are actively implementing policies such as tax or subsidy to guide firms in emission reduction, on the other hand, firms are actively engaged in environmental practice to cope with pressures coming from government and the public. Based on practice, using related theory and methods of decision optimization, this research considered the impact of supply chain cooperation model, structural characteristics of supply chain, and governmental intervention on firms’ decision making and studied three models exist in green supply chain management but still not studied by any literature, which are: the first one is production emission reduction under supply chain quality collaboration and carbon tax, the second one is supplier’s emission reduction under downstream firm’s supervision and governmental intervention, and the third one is carbon emissions under dual channel closed-loop supply chain considering governmental tax and subsidy.The first part studies in the assembly supply chain, when the manufacturer’s products’ attributes largely depend on the properties of the original components provided by suppliers and the manufacturer could not directly control the suppliers’ attribute design over components, manufacturers often choose to collaborate with suppliers to improve both the environmental and traditional quality of the original components. Due to the complementary relationship of environmental quality and traditional quality, when the end-market demand increases, all suppliers’ demand also increase accordingly. But the impacts of changes in different quality design are different, especially when considering the governmental tax on production pollution. This chapter discusses in the presence of governmental tax, the cooperation model selection between the manufacturer and supplier. We first assume that suppliers simultaneously decide their components’ quality levels and if a supplier has reached an agreement with the manufacturer, then the quality level is decided by the supplier and manufacturer jointly. When the government considers tax, firms have to decide their emission abatement level. Then suppliers decide their wholesale price and the manufacturer decides the retail price. The impact of tax on firms and how firms should choose the collaboration model are analyzed. We also compare the impacts of different collaboration models on environment and social welfare.The second part further discusses when the supplier’s production pollution has seriously affected the living environment of downstream consumers and the government needs to regulate the supplier’s emission through policies, the collaboration problem of supply chain members, as well as the optimization of governmental decision-making. On one hand, the government can impose tax on firms over their emission and force firms reduce emission reduction. On the other hand, the government can also provide subsidy for firms to encourage them invest in emission reduction. Meanwhile, due to the gradual increase of consumer awareness over environmental protection, increase of product-related carbon emissions will reduce consumers’ demand for the product. Therefore, forced by market pressure, or due to social responsibility, some downstream firms may supervise, review and urge their suppliers to reduce emissions. This section compares the circumstances of downstream firm’s supervision over the supplier’s emission reduction, governmental taxation, governmental subsidy, downstream firm’s supervision over the supplier’s emission reduction combined with governmental taxation, downstream firm’s supervision over the supplier’s emission reduction combined with governmental subsidy. We assume that the government first decides taxation policy or subsidy policy, and then the supplier decides the wholesale price and emission reduction levels. If the downstream firms urges the supplier to reduce emissions, then the emission reduction level is determined jointly by the supplier and downstream firm. Finally, the downstream firm decides the retail price level. According to backward induction and multi-stage Stackelberg game, each individual’s optimal choice are derived and we analyze the impact of firms and governmental decisions on environmental welfare and social welfare.The third part discusses that under the dual channel closed-loop supply chain structure that a manufacturer sells through a traditional retailer and an e-tailer, the manufacturer reduces carbon emissions from product’s life cycle’s final stage through recovery and remanufacturing. The governmental subsidy for the manufacturer’s remanufacturing and taxation on the e-tailer to prevent consumers’ free-riding are analyzed. Free-riding behavior of consumers under dual channel structure means that compared with traditional physical store, online store does not have to pay for rental fees, with little or no artificial and hydropower fees, and there are no consumption tax in some countries’ electronic shopping. All these make the prices of online stores lower than that of the traditional stores. Hence some consumers often experience products from traditional store, understand products’ features and attributes, obtain explaination services from professional sales staff but ultimately purchase the same product from an online store at a lower price. Because firms’ pricing decisions will affect the number of recycling waste products and thereby affecting the optimal ratio of government subsidies. While the dual channel structure will inevitably affect the pricing decisions of firms(for example, consumers experience products from traditional stores will waste the traditional retailer’s service and consumers’ buying from an online store with a lower price will certainly influence firms’ pricing decisions). This chapter considers the impact of consumers’ free-riding in dual channel closed-loop supply chain context on firms and governmental decision making and the environment.