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Managing Carbon Footprints under the Trade Credit

Author

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  • Xiaohong Chen

    (School of Business, Central South University, Changsha 410083, Hunan, China
    The Collaborative Innovation Center for Resource-conserving & Environment-friendly Society and Ecological Civilization, Central South University, Changsha 410083, Hunan, China
    Office of the President, Hunan University of Commerce, Changsha 410205, Hunan, China)

  • Wei Gong

    (School of Business, Central South University, Changsha 410083, Hunan, China
    The Collaborative Innovation Center for Resource-conserving & Environment-friendly Society and Ecological Civilization, Central South University, Changsha 410083, Hunan, China)

  • Fuqiang Wang

    (School of Business, Central South University, Changsha 410083, Hunan, China
    The Collaborative Innovation Center for Resource-conserving & Environment-friendly Society and Ecological Civilization, Central South University, Changsha 410083, Hunan, China)

Abstract

We investigate how the retailer adjusts optimal ordering policy in the presence of cap-and-trade system and trade credit, and the corresponding changes of the retailer’s total costs and carbon footprint. Trade credit is one of the most used short-term financing tools. Our study shows that carbon emissions trading will shorten the ordering cycle for products that emit more carbon dioxide during the storage stage, and therefore reduce the buying behavior stimulation effect of trade credit on these products. Under the cap-and-trade system, the retailer’s total cost may increase or decrease, depending on the combination of carbon cap allocated to the retailer and the carbon price. Moreover, trade credit and the corresponding cost of capital affect the retailer’s carbon emission reduction strategy by changing the retailers’ consolidated cost during the ordering and inventory holding stages.

Suggested Citation

  • Xiaohong Chen & Wei Gong & Fuqiang Wang, 2017. "Managing Carbon Footprints under the Trade Credit," Sustainability, MDPI, vol. 9(7), pages 1-14, July.
    • Handle: RePEc:gam:jsusta:v:9:y:2017:i:7:p:1235-:d:104884
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    References listed on IDEAS

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    Cited by:

    1. Junwu Wang & Yinghui Song & Mao Li & Cong Yuan & Feng Guo, 2022. "Study on Low-Carbon Technology Innovation Strategies through Government–University–Enterprise Cooperation under Carbon Trading Policy," Sustainability, MDPI, vol. 14(15), pages 1-26, July.
    2. SungYong Choi & KyungBae Park & Sang-Oh Shim, 2019. "The Optimal Emission Decisions of Sustainable Production with Innovative Baseline Credit Regulations," Sustainability, MDPI, vol. 11(6), pages 1-16, March.

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