Publication Type

Journal Article

Version

publishedVersion

Publication Date

7-2013

Abstract

Carbon emission control becomes a challenge in recent years, and carbon emission trading is an effective way to curb carbon emission. This paper investigates the multi-item production planning problem with carbon cap and trade mechanism, in which a firm uses a common capacity and carbon emission quota to produce multiple products for fulfilling independent stochastic demands, and the firm can buy or sell the right to emit carbon on a trading market of carbon emission. A profit-maximization model is proposed to characterize the optimization problem. The optimal policy of production and carbon trading decisions is analyzed, and an efficient solution method with linear computational complexity is presented for solving the optimal solution. The impacts of carbon price, carbon cap on the shadow price of the common capacity, production decisions, carbon emission and the total profit are investigated. The comparisons of the carbon cap and trade policy and the taxation policy are given to show the effectiveness of the policies. Numerical analyses are presented for illustrating our findings and obtaining some managerial insights and policy implication.

Keywords

Production, Carbon emission, Carbon cap and trade mechanism, Newsvendor, Emission policy

Discipline

Business | Operations and Supply Chain Management

Research Areas

Operations Management

Publication

International Journal of Production Economics

Volume

144

Issue

1

First Page

118

Last Page

127

ISSN

0925-5273

Identifier

10.1016/j.ijpe.2013.01.024

Publisher

Elsevier

Additional URL

http://doi.org/10.1016/j.ijpe.2013.01.024

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