A Two-echelon Sustainable Supply Chain Coordination Under Cap-and-trade Regulation

It is a hot topic to reduce carbon emissions in the society of calling for sustainable development. Legislation and relevant policies have been established to reduce carbon emissions,including cap-and-trade regulation which is one of the effective strategies to reduce emissions. It regards the carbon emissions as a commodity, allowed to be traded in the market. If the actual carbon emissions of the enterprise exceeds(is lower than) carbon emission cap, it can be purchased(sold) in carbon trading market. Under the pressure of government policy, enterprises increase sustainable investment, such as introducing emissions equipment or technology. On the other hand, in order to deal with the “double marginalization” problem, appropriate coordination mechanisms are required to regulate the behavior of enterprises. Hence, it is significant to introduce sustainable investment into supply chain coordination under cap-and-trade regulation.This paper analyzes the decision behavior and the coordinate mechanisms for a two-echelon sustainable supply chain under cap-and-trade regulation. We consider a twoechelon sustainable supply chain in which the upstream supply only one kind product to the downstream, by analyzing the system where the upstream and downstream as the leader respectively, we conclude the corresponding optimal decision-making in centralized and decentralized system. Furthermore, corresponding contracts are applied to coordinate the supply chain. The structure and main content of this paper is organized as follows:In chapter 1, the main content is the introduction of research background and development of sustainable supply chain coordination under cap-and-trade regulation, the framework of this paper, as well as the main content and innovations.In chapter 2, we consider a two-echelon sustainable supply chain consisting of one supplier and one manufacturer under cap-and-trade regulation, in which the supplier is the leader and market demand is affected by both the sustainability level and the selling price. By comparing the decentralized decision with the centralized decision reveals that the profit in the centralized system increases by at most 1/3. To coordinate a sustainable supply chain, revenue-sharing and two-part tariff contracts are proposed, and only the latter can achieve perfect coordination.In chapter 3, we consider a two-echelon sustainable supply chain consisting of one manufacturer and one retailer under consignment contract with revenue sharing under cap-and-trade regulation, in which the retailer is the leader. By comparing the decision increasing sustainable investment on upstream only with investment on both upstream and downstream, we find that not only the sustainable level of the latter is greater, but also the profits is higher than the former. Finally, sensitivity analysis is undertaken with both traditional approach of ‘one-factor at a time’ and the Taguchi method.In chapter 4, the conclusion of this paper is summarized, and the future research is forecasted.