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.
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Acknowledgements
The authors are grateful to two anonymous referees for their insightful comments that helped improve the paper. The Research of Mingming LENG was supported by the Research and Postgraduate Studies Committee of Lingnan University under Research Project No. DR09A3.
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Song, J., Leng, M. (2012). Analysis of the Single-Period Problem under Carbon Emissions Policies. In: Choi, TM. (eds) Handbook of Newsvendor Problems. International Series in Operations Research & Management Science, vol 176. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-3600-3_13
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DOI: https://doi.org/10.1007/978-1-4614-3600-3_13
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