Optimal Strategies for Carbon Emissions Policies in Competitive Closed-Loop Supply Chains: A Comparative Analysis of Carbon Tax and Cap-and-Trade Policies

Abstract

This study addresses the optimization of strategies for carbon emissions policies in competitive closed-loop supply chains. It examines three policy scenarios: single carbon tax, single cap-and-trade, and a mixed policy. The objective is to balance environmental and economic benefits while considering factors such as manufacturers’ competitive intensity, product recycling rate, and different carbon emissions policies. A supply chain system is constructed, consisting of two manufacturers and a shared retailer. We employ a decentralized decision-making approach, with a Cournot game between the manufacturers and a Stackelberg game with the retailer. The analysis considers the impacts of the carbon quota, carbon trading price, and recycling rate on the optimal decisions and total supply chain profit. The results demonstrate that the mixed carbon policy can yield superior economic and environmental benefits compared with the single carbon tax policy. However, the single cap-and-trade policy outperforms the mixed policy in terms of profitability. Notably when the mixed carbon quota exceeds a certain threshold, the mixed policy surpasses the single cap-and-trade policy both economically and environmentally. This study extends previous research by examining the impacts of the recycling rate and different carbon emissions policies on supply chain decisions and profit. The findings contribute to understanding of the optimal strategies for carbon emissions reduction in supply chains and provide insights for policymakers and managers. Managerial insights suggest that enterprises should consider adopting a mixed carbon policy to strike a balance between economic and environmental goals.

Keywords: carbon tax policy, Closed-loop supply chain, competitive intensity, cap-and-trade policy, mixed carbon policy