Optimal Cost Sharing Contract In Green Supply Chain With Carbon Cap And Trade Mechanism

As the problem of environmental pollution becomes increasingly serious,governments and agencies are actively exploring effective measures to reduce greenhouse gas emissions such as carbon dioxide.A series of environmental policies have been implemented,such as carbon tax,carbon subsidy,carbon cap and trade mechanism(CCT-mechanism),etc.Such environmental policies can effectively stimulate manufacturers to increase the cost of technological innovation,lean production,lean management to design and manufacture more environmentally green products.At the same time,governments and environmental organizations’ large-scale propaganda on environmental degradation have made consumers aware of the serious harm caused by environmental pollution.Consumers gradually have a preference for green products with higher green level and this preference plays a key role in the market demand.Therefore,green product manufacturers will actively increase emission reduction investment to raise the green level of products to stimulate the purchasing enthusiasm of environmentally friendly consumers under the dual drive of consumer environmental awareness(CEA)and environmental policies.In this context,whether the benefits from increased demand for green products can cover the increased investment costs of carbon emission reduction needs to be further studied.Competition among enterprises is widespread in the era of the market economy,whether coordination contracts can effectively alleviate competition and improve the benefits of all parties in the supply chain is another focus of current scientific research.To that end,different from other studies,this research introduces CEA into the green product demand function,and studies how the carbon emission reduction cost sharing contract affects the production decision-making of green supply chain when the government implements the CCT-mechanism.This article divides green products into two categories:development-intensive green product(DIGP)and marginal-cost intensive green product(MIGP).The two products have different emission reduction cost characteristics.First,we research on the optimal price and environmental quality design issue in the centralized anddecentralized decision-making model when CCT-mechanism is implemented in the market.It is found that no matter which green product the enterprise produces,decentralized decision-making model has a large Pareto optimization space compared to centralized model.Second,we design a carbon emission reduction cost sharing contract to coordinate supply chain: the retailer shares a proportion of carbon reduction costs with the manufacturer.The backward induction method is used to obtain the optimal price and environmental quality of the two green products when cost sharing contract is implemented.The optimal solutions of models are compared,and impacts of the CCT-mechanism,CEA and cost sharing contract on different green product supply chains are obtained.Finally,MATLAB7.0 was used to carry out numerical example and conduct sensitivity analysis.Our study gives some management insights: first,CEA is an important factor influences the decision-making of the manufacturer and retailer.Higher CEA will simulate the manufacturer to produce more environmentally friendly products,which will not only help enterprises set higher prices,but also conducive to alleviate environmental pollution emissions;second,CCT-mechanism could stimulate the manufacturer to produce much greener product,but too high carbon price will decrease consumers’ demand and may not benefit the environment;third,the cost sharing contract of the DIGP improves the whole environment quality mainly by improving each product’s greenness,but for the MIGP,the cost sharing contract mainly increases the sales of the green product to lower the total carbon emission;finally,the carbon cost sharing contract with a proper sharing ratio is a win-to-win contract to improve each party’s profit in the DIGP supply chain,but it is not a win-to-win contract for the MIGP supply chain.