Allocating the cost of the carbon footprint produced along a supply chain, among the stakeholders involved

Abstract

Greenhouse gas emissions are widely considered nowadays one of the main causes for global climate change. Every product's supply chain consists of several energy usage processes. Three new approaches (end-userpays; production based; and profit based) regarding the allocation of the cost related to the carbon footprint (CF) produced, among producers and users are being presented. These approaches vary according to the ‘blame’ attached to each stakeholder involved, during the several phases of the ‘product's’ life cycle. According to the first approach, CO2 emissions occur as the need for the product/service exists. The second approach allocates the CF production-related cost in each step of the supply chain according to not only how much of this CF is produced in each step, but considering also the CF produced in the previous steps. The allocation follows the profit rate (profit/selling price) of each step of the supply chain. At the third approach, the profit rate used has to do with the profit of each step compared to the total profit of the entire supply chain. To achieve a socially fair price of a product, all stakeholders involved should pay their fair shares, to guarantee that all costs related to the product's supply chain are being fully recovered.