Carbon Taxes in Authorizing Remanufacturing: A Comparative Analysis of Uniform and Differentiated Policies

Abstract

As carbon tax policies are increasingly adopted worldwide, manufacturers face the dual challenge of maintaining profitability while reducing emissions. Although the impacts of carbon taxes have been widely documented, the effects of uniform and differentiated carbon taxes on remanufacturing, especially under authorizing remanufacturing, remain unexplored. To address this gap, we develop a game-theoretic model consisting of an original equipment manufacturer (OEM) and a third-party remanufacturer (TPR) under two carbon tax policies. We also incorporate a coordination mechanism to mitigate inefficiencies arising from decentralized. Our findings indicate: (1) TPRs benefit more from differentiated carbon taxes, while OEMs can offset the added tax burden through authorizing fees. In this case, differentiated taxes are beneficial to both parties under certain conditions. (2) Uniform carbon taxes offer greater environmental benefits and consumer surplus, particularly when tax differences are below a critical threshold. (3) The impact of both tax policies is influenced by the scale of product recycling and consumer preference. In addition, three main contributions are as follows. (1) This study analyzes how uniform and differentiated carbon taxes influence manufacturing decisions and profits in remanufacturing. (2) We provide some insights into OEMs and TPRs' competitive and cooperative dynamics, especially in optimizing authorizing agreements. (3) This study assesses the effect of carbon taxes on profits, environment, and consumer surplus, highlighting the significance of low-carbon preferences.

Keywords: Carbon tax policy, Uniform carbon tax, Differentiated carbon tax, Authorizing remanufacturing, Game theory