Open Access

ARTICLE

Financing Strategy of Low-Carbon Supply Chain with Capital Constraint under Cap-and-Trade Regulation

by Changli Lu¹, Ming Zhao^1,2, Imran Khan³, Peerapong Uthansakul^4,*

1 School of Economics and Management, Shanghai Maritime University, Shanghai, 201306, China
2 School of Economics and Management, Pingdingshan University, Pingdingshan, 467000, China
3 Department of Electrical Engineering, University of Engineering and Technology Peshawar, Peshawar, Pakistan
4 School of Telecommunication Engineering, Suranaree University of Technology, Nakhon Ratchasima, Thailand

* Corresponding Author: Peerapong Uthansakul. Email:

Computers, Materials & Continua 2021, 66(1), 437-455. https://doi.org/10.32604/cmc.2020.012557

Received 04 July 2020; Accepted 26 July 2020; Issue published 30 October 2020

Abstract

Cap-and-trade regulation provides incentives for manufacturers to reduce carbon emissions, but manufacturers’ insufficient capital can disrupt the implementation of low-carbon emission reduction technologies. To alleviate capital constraints, manufacturers can adopt external financing for low-carbon emission reduction investments. This paper studies the independent financing and financing cooperation behavior in a supply chain in which the manufacturer and retailer first implement low-carbon emission reduction technologies and then organize production and sales in accordance with wholesale price contracts. Through comparing the optimal profits and low-carbon emission reduction levels under the independent financing and financing cooperation mode, we come to the following conclusions: (1) Although financing interest increases the cost of the supply chain, manufacturers prefer to invest in reducing carbon emissions rather than buying carbon quotas. (2) When financing independently, a decentralized decision-making mode (MD) is the best choice for manufacturers. (3) In cooperative financing, when the supply chain adopts a decentralized decision-making mode (SD) in which the retailer determines the financing cost-sharing ratio according to their optimal profit, the profits of the supply chain and its members are significantly improved. (4) When manufacturers and retailers adopt a centralized decision-making model (SC) in cooperative financing, they jointly determine the financing cost-sharing ratio and the level of low-carbon emission reduction. If the financing cost-sharing ratio meets a certain threshold range, the profits of manufacturers and retailers achieve Pareto improvement, indicating that this cooperative financing model is effective.

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