Robust Emission Reduction Strategies under Cap-and-Trade and Demand Uncertainty

Abstract

In this study, we consider robust emission reduction strategies for a monopolistic manufacturer facing demand uncertainty under governments’ cap-and-trade regulations. We model the manufacturer’s decision making and associated profits under four different emission reduction strategies: no mitigation measure, undertaking remanufacturing, improving the greening level, and both remanufacturing and improving the greening level. We find that the cap-and-trade regulation enhances the manufacturer’s motivation to be engaged in reducing carbon emissions. Furthermore, the manufacturer’s optimal choice of emissions reduction strategy depends on the level of carbon trading price and the degree of demand uncertainty. Specifically, there exists a threshold of carbon trading price at which the manufacturer’s optimal emissions reduction strategy will change. When the carbon trading price is low (below the threshold), the best strategy for the manufacturer to reduce emissions is to improve the greening level of the products. When the carbon trading price is high (above the threshold), the manufacturer should consider both remanufacturing and improving the greening level. Moreover, the threshold of the carbon trading price is further impacted by the demand uncertainty. With market demand uncertainty rising, the threshold of carbon trading price increases as well. Finally, we find raising the carbon trading price may not necessarily benefit the environment. Overpriced carbon trading may hurt the manufacturer’s production instead of encouraging them to take emission reduction measures.

Ordering Decisions with an Unreliable Supplier under the Carbon Cap-and-Trade System

“…To effectively reduce carbon dioxide emissions, various carbon reduction policies have been introduced. The carbon cap-and-trade system, as an effective emission reduction approach, has been extensively analyzed by scholars in its impact on emission reduction through factors such as carbon trading prices [7][8][9][10][11] and carbon allowances [9]. As research progresses, scholars have integrated the carbon cap-and-trade mechanism with supply chain issues such as inventory management [12,13], supply chain financing [14,15], remanufacturing [8,16,17], channel structure [17][18][19], and competition [20].…”

The Robust Emergency Medical Facilities Location-Allocation Models under Uncertain Environment: A Hybrid Approach

“…However, it assumes that the uncertain parameters fluctuate in an interval [26][27][28][29][30]. Since its emergence, robust optimization theories have been applied to many fields, such as group decision-making [31][32][33][34][35][36], portfolios [37][38][39][40][41], efficiency evaluation [42,43], supply chain management [44][45][46][47][48][49], etc. In emergency medical location decisions, some scholars have adopted the stochastic programming method for modeling [50][51][52][53][54].…”