Novel Joint-Financing Model for Bilateral Capital Restricted Supply Chains under Cap-and-Trade Regulation

This paper proposes a novel supply chain joint-financing pattern for SMEs with limited funds and financing difficulties. The proposed pattern was designed for green investment under cap-and-trade systems and to promote low-carbon economies characterized by bilateral capital restricted supply chains. The basic conditions for supply chain coordination of low-carbon buy-back contracts are derived through a basic model with no funding support. The joint-financing decisions model is analyzed according to the decision-making behavior of all parties and coordination among components of the supply chain system. The risk to which the bank is subjected under low-carbon transactions is also discussed. The proposed model not only reduces the carbon emissions of unit products, but also expands the scale of production. There are negative correlations between unit emissions reduction with the sharing coefficient of reduction costs, the loan rate, and the wholesale price. To minimize environmental effects while maximizing societal benefits, the government is recommended to ensure a reasonable trade-off between green-innovation subsidies and penalties.