Analysis of the single-period problem under carbon emissions policies
Document Type
Book chapter
Source Publication
Handbook of newsvendor problems: Models, extensions and applications
Publication Date
1-1-2012
First Page
297
Last Page
313
Publisher
Springer
Keywords
Cap-and-trade; Carbon emissions; Carbon tax; Single-period model
Abstract
We investigate the classical single-period (newsvendor) problem under carbon emissions policies including the mandatory carbon emissions capacity, the carbon emissions tax, and the cap-and-trade system. Specifically, under each policy, we find a firm’s optimal production quantity and corresponding expected profit, and draw analytic managerial insights. We show that, in order to reduce carbon emissions by a certain percentage, the tax rate imposed on the high-margin firm should be less than that on the low-margin firm for the high-profit perishable products, whereas the high-margin firm should absorb a high tax than the low-margin firm for the low-profit products. Under the cap-and-trade policy, the emissions capacity should be set to a level such that the marginal profit of the firm is less than the carbon credit purchasing price. We also derive the specific (closed-form) conditions under which, as a result of implementing the cap-and-trade policy, the firm’s expected profit is increased and carbon emissions are reduced.
DOI
10.1007/978-1-4614-3600-3_13
Publisher Statement
Copyright © 2012 Springer Science+Business Media New York. Access to external full text or publisher's version may require subscription.
Additional Information
ISBN of the source publication: 9781461435990
Full-text Version
Accepted Author Manuscript
Language
English
Recommended Citation
Song, J., & Leng, M. (2012). Analysis of the single-period problem under carbon emissions policies. In T.-M. Choi (Ed.), Handbook of newsvendor problems: Models, extensions and applications (pp. 297-313). doi: 10.1007/978-1-4614-3600-3_13