Low-carbon supply chain operations: impacts of carbon tax and fairness concerns

Abstract

Abstract Under a carbon tax, this study established game theory models of a low-carbon supply chain to investigate the effects of fairness and carbon tax rate on the retail price and on carbon emission reduction level, as well as on the profits of the manufacturer, retailer and the whole supply chain. Results show that the carbon emission reduction level and the supply chain profit under a centralized supply chain are both higher than those under a decentralized supply chain, if the manufacturer’s fairness concern, the carbon emission reduction level and the supply chain profit will further decrease, but manufacturers’ profits are taking a growing share of the supply chain’s total profits. Under three different modes, the carbon emission reduction level will increase with the increase of the carbon coefficient. The retail price and the supply chain profit are jointly determined by the carbon tax rate and the carbon coefficient. Moreover, the implementation of a carbon reduction investment cost-sharing contract can increase the demand of low-carbon products and reduce the retail price. Under a carbon tax, regardless of whether manufacturers pay attention to fairness, the carbon reduction investment cost-sharing contract can effectively improve the overall efficiency of the low-carbon supply chain.