Joint Optimal Production Planning For Multilayer Supply Chains With Stochastic Demand Under Carbon Emission Abatement Policies

Since the Industrial Revolution, the world's rapid economic growth has led to atmospheric carbon dioxide and other greenhouse gases continue to increase, causing global temperatures to rise and some other issues. The international community had made a lot of efforts. At the end of 1997, they developed an international convention which was called "Kyoto Protocol". It announced that carbon dioxide emissions by the world's major industrial countries will be decreased by 5.2% from 2008 to 2012 compared with 1990. In this regard, the world has developed a series of emission reduction policies. The macro-level carbon reduction policy is bound to be implemented in the enterprise level.In this context, we consider three carbon emission reduction policies, and they are the mandatory carbon emissions caps, carbon taxes and cap and trade. We focus on the joint production planning of complex supply chains facing stochastic demands and being constrained by these three carbon emission reduction policies. We study how emission regulation influences the profit and carbon footprint of a typical supply chain.We use the input-output model to capture the interrelated demand link between an arbitrary pair of two nodes in scenarios without or with carbon emission constraints. We design optimization algorithm to obtain joint optimal production quantities combination for maximizing overall profit under regulatory policies, respectively. Furthermore, numerical studies by featuring exponentially distributed demand compare system wide performances in various scenarios. We build the “carbon emission elasticity of profit(CEEP)” index as a metric to evaluate the impact of mandatory carbon emissions caps and carbon taxes policies on both chain wide emissions and profit. Our results manifest that by facilitating the mandatory emission cap in proper installation within the network one can balance well effective emission reduction and associated acceptable profit loss. The outcome that CEEP index when implementing Carbon emission tax is elastic implies that the scale of profit loss is greater than that of emission reduction, which shows that this policy is less effective than mandatory cap from industry standpoint at least.Under the cap and trade policy, we especially consider the purchasing price and selling price. We can get significant reduction while increase supply chain profits by increasing appropriate selling price. Our research under these three policies is valuable and has certain significance for policy-makers.