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Joint Emission Reduction Strategy in Green Supply Chain under Environmental Regulation

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  • Wensi Zhang

    (School of Economics, Ocean University of China, Qingdao 266100, China
    Marine Development Studies Institute of OUC, Key Research Institute of Humanities and Social Sciences at Universities, Ministry of Education, Qingdao 266100, China)

  • Jing Xiao

    (School of Economics, Ocean University of China, Qingdao 266100, China)

  • Lingfei Cai

    (Faculty of Business Information, Shanghai Business School, Shanghai 201400, China)

Abstract

Under the threat of global warming, joint emission reduction strategy has been widely adopted as an effective solution for the industry to guarantee environmental sustainability. In the practice of supply chain, environmental regulations and supply chain contracts are applied with the attempt to improve environmental performance. However, whether these measures are actually effective remains unanswered. In this paper, we study a supply chain with one manufacturer and one retailer adopting joint emission reduction strategy. We first investigate under what circumstance the environmental regulation can effectively result in higher emission reduction efforts. The result shows that when the cost coefficient satisfies certain conditions, the increase of penalty or subsidy can lead to more investment in emission reduction. In addition, if the environmental impact caused by the production process is extremely high, the enforcement of the regulation is ineffective. We also explore how the cost-revenue-sharing contract affects the emission reduction strategy and the coordination of the members in the supply chain. The results suggest that the incentive effect of environmental regulation is more effective when the supply chain coordination contract exists. Numerical experiments are also presented to verify our analytical conclusions.

Suggested Citation

  • Wensi Zhang & Jing Xiao & Lingfei Cai, 2020. "Joint Emission Reduction Strategy in Green Supply Chain under Environmental Regulation," Sustainability, MDPI, vol. 12(8), pages 1-24, April.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:8:p:3440-:d:349284
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