Stimulating Investments in Energy Efficiency Through Supply Chain Integration

Abstract

Attention to energy efficiency is recently experiencing substantial growth. To overcome the several barriers currently existing that represent an obstacle to the successful implementation of the wide set of energy efficiency measures available, the cooperation among members of a supply chain offers a huge potential. In supply chains, in addition to the traditional coordination of the operations, the members may also share financial resources or act jointly on the capital market. This study presents a two-stage supply chain model considering the opportunity to invest in new energy efficient technologies which are affected by learning effects: the member of the supply chain with better energy performance and/or better financial conditions may find it more profitable to invest in the development of the energy efficiency of its partner. The objective of the model is to determine the optimal investment for each supply chain member so as to maximize the Net Present Value of the supply chain. The impacts of the proposed joint decision-making are investigated through some numerical analysis and managerial insights are proposed: the joint decision-making process on the financial flows for the energy efficiency investments results are especially advantageous (up to a 20% increase of the supply chain Net Present Value) when members have different access to capital, which could be the result of different economic conditions in companies’ countries, as well as different credit policies or different credit ratings.