Study Of Production Decision Based On The Carbon Emission Trade Policy

Since the Industrial Revolution, Greenhouse Gases emissioned by human beings have been increased annually, which makes the greenhouse effect much stronger. This problem attracts worldwide attention and worries. However, nowadays the world still confronts severe situation concerning carbon reduction. According to WMO in2008, greenhouse gases, such as CO2, CH4and N2O, have rised38%,157%and19%respectively since the Industrial Revolution.CO2contributes most to the stronger greenhouse effect among all greenhouse gases. In the10,000years before Industiral Revolution, CO2content staied in the level of280ppm that meant the balance between atmosphere, ocean and biosphere. Comparatively, it reached385.2ppm in2008at the annual increasing rate of0.5%. And this number will top550ppm if we don’t make any positive change. In that case, disasters will happen, such as extreme wether.In order to restrain carbon emission, a series of international meetings have been hold, such as United Nations Conference on Environment and Development in1992and the Copenhagen Climate Conference in2009. Kyoto Protocol is one of the most significant agreements that were achieved in these global meetings. It proposed three carbon reduction mechanisms including Clean Development Mechanism (CDM), Joint Implementation (JI) and International Emission Trading (IET). All of these three are based on the market allowing countries and companies to trade their carbon permission. Compared with traditional government command, these economic instruments ask for less administrative intervention. IET has been adopted by many environmental organizations and countries, such as EU, USA and Japan.As the second largest carbon emission country, China shoulders the responsibilities actively. In the Copenhagen Climate Conference, Chinese government promised to reduce the carbon emission per GDP by40%to50%in2020compared with that in2005. Particularly, Chinese government starts setting up emission trading system that will bring into many enterprises with high emission. We can image that companies in China have to deal with the challenge of the emission trading instrument in the near future.How to fit into the emission trading system (ETS) by adjusting operational decisions? This is the basic question this research tries to answer. Three scenarios are analyzed based on ETS:deterministic demand, stochastic demand and low-carbon technology. Several significant managerial implications are concluded in the end.