Research on low-carbon supply chain decision-making under carbon cap-and-trade and subsidy policy

Abstract Under the background of carbon cap and carbon subsidy policies implemented by the government, considering a low-carbon supply chain led by a manufacturer and followed by a retailer, the market demand is influenced by the level of emission reduction and promotion of low-carbon products. Stackelberg game theory is used to construct four models, one with no carbon cap and three with a carbon cap respectively. And we get the equilibrium solutions of the degree of emission reduction, degree of promotion, sharing ratio, market demand, manufacturer and retailer profit of low-carbon products. Through comparative analysis, it is found that the MKM model is the optimal one in which the government implements carbon cap and carbon subsidy policies and the manufacturer shares the cost of low-carbon promotion. In this model, the degree of manufacturer’s emission reduction is positively correlated with the influence coefficient of low-carbon emission reduction, manufacturer’s marginal revenue, government unit subsidy for low-carbon emission reduction and the initial price of carbon trading. Meanwhile, it is negatively correlated with the government’s carbon emission quota, elastic coefficient of carbon emission quota and the cost coefficient of low-carbon emission reduction. The results are closely related to the government unit subsidies for low-carbon emission reduction and the government carbon allowances. The manufacturer is more willing to accept the MKM model only when they exceed a certain threshold. Finally, the validity of the models would be verified by a numerical example.