A Production Inventory Model for Deteriorating Items with Collaborative Preservation Technology Investment Under Carbon Tax

The increase in carbon emissions is considered one of the major causes of global warming and climate change. To reduce the potential environmental and economic threat from such greenhouse gas emissions, governments must formulate policies related to carbon emissions. Most economists favor the carbon tax as an approach to reduce greenhouse gas emissions. This market-based approach is expected to inevitably affect enterprises’ operating activities such as production, inventory, and equipment investment. Therefore, in this study, we investigate a production inventory model for deteriorating items under a carbon tax policy and collaborative preservation technology investment from the perspective of supply chain integration. Our main purpose is to determine the optimal production, delivery, ordering, and investment policies for the buyer and vendor that maximize the joint total profit per unit time in consideration of the carbon tax policy. We present several numerical examples to demonstrate the solution procedures, and we conduct sensitivity analyses of the optimal solutions with respect to major parameters for identifying several managerial implications that provide a useful decision tool for the relevant managers. We hope that the study results assist government organizations in selecting a more appropriate carbon emissions policy for the carbon reduction trend.