AI Insight
This study examines how cap-and-trade carbon policies affect manufacturers' emission reduction decisions and retailers' green advertising strategies across different supply chain models. The research finds that higher carbon trading prices typically encourage emission reductions, but when both carbon prices and reduction costs are very high, further price increases can paradoxically reduce firms' motivation to cut emissions. The effectiveness of cost-sharing arrangements between supply chain partners depends critically on the specific allocation structure rather than simply the magnitude of sharing ratios.
Why it matters
These findings provide actionable guidance for businesses navigating environmental regulations and supply chain coordination under carbon trading systems. The results suggest that policymakers and firms must carefully calibrate carbon pricing mechanisms and cost-sharing strategies to avoid unintended consequences that could undermine emission reduction goals.
Understand the Science
by Weisi Zhang, Jiahao Kong, Wei Zhao, Juanjuan Liu
Rising concerns about climate change and growing consumer awareness of environmental sustainability have accelerated the adoption of cap-and-trade policies worldwide. This study investigates how different supply chain operation models influence manufacturers’ carbon reduction decisions and retailers’ green advertising strategies. Our analysis reveals that higher carbon trading prices generally stimulate greater emission reduction efforts. However, when both the carbon price and the cost of emission reduction are sufficiently high, further increases in carbon prices may instead weaken firms’ incentives to reduce emissions. We further find that increasing cost-sharing ratios alone does not necessarily improve coordination outcomes. Instead, the effectiveness of coordination depends critically on the structure of cost-sharing. The effectiveness of supply chain coordination hinges on strategic allocation of cost-sharing ratios, specifically, the RC model performs better when carbon reduction cost-sharing is low and advertising cost-sharing is high. When carbon reduction cost-sharing is high, the MC model is preferred under low advertising cost-sharing, whereas the DC model becomes more effective when advertising cost-sharing is high.
Source: Strategies for carbon reduction and advertising investments in partially centralized supply chains