Unregulated Cap-and-Trade Model for Sustainable Supply Chain Management

Abstract

Cap-and-trade models have been largely studied in the literature when it comes to reducing emissions in a supply chain. In this paper, further pursuing the goal of analyzing the effectiveness of cap-and-trade strategies in reducing emissions in supply chains, we propose a mathematical model for sustainable supply chain management. This optimization program aims at reducing emissions and supply chain costs in an unregulated scenario w.r.t. the cap definition, i.e., trading CO2 is allowed but no formal limit on the CO2 emissions is imposed. Also, we considered an initial budget for technological investments by the facilities in the considered supply chain, allowing plants to reduce their unit production emissions at a different unit production cost. For this model, differently from what exists in the literature, we derive some theoretical conditions guaranteeing that, if obeyed, the emissions over time have a non-increasing trend meaning that decreasing caps over time can be attained with a self-regulated scenario. Computational results show the effectiveness of our approach.