Design of a Cooperative Sustainable Three-Echelon Supply Chain under Uncertainty in CO₂Allowance

Abstract

Driven by the growing concern regarding greenhouse gas emissions, in this work, we provide a robust stochastic model for the design of a cooperative supply chain (SC) under uncertainty in CO 2 allowance prices from the European Union Emissions Trading System (EU ETS). During the last years, CO 2 allowance prices have undergone unexpected changes, having strong impact on the design and management of optimal SC. The consideration of uncertainty in the allowance prices has therefore become more important. We use an autoregressive integrated moving average (ARIMA) model to predict future allowance prices. A full discretization of the underlying probability space leads to a number of scenarios far too large to be handled, so we compare two approaches to reduce the number of scenarios to a feasible maximum, the ScenRed algorithm and Kmeans clustering. The obtained results are compared with a deterministic approach that is widely studied in the literature, showing an increase in the benefits and a reduction of emissions.

Game-theoretic modeling in regulating greenhouse gas emissions

“…This study highlights the interconnectedness of electricity and emissions markets and the role of market power in shaping environmental outcomes. Garcia-Castro et al [ 39 ] develop a robust stochastic model for a cooperative supply chain under the uncertainty of CO 2 allowance prices. Their approach, which considers fluctuations in allowance prices from the European Union Emissions Trading System, offers insights into designing more resilient and sustainable supply chains.…”