Impacts of Carbon Emission Trading Prices on Financing Decision of Green Supply Chain Under Carbon Emission Reduction Percentage Measure

Abstract

As the global pursuit of carbon neutrality has intensified, the influence of carbon emission limits on the supply chain has become increasingly evident. The purpose of this study is to investigate the optimal financing options of the supply chain under the carbon emission reduction percentage measure and to provide financing recommendations for carbon-emitting enterprises. This study focuses on a supply chain consisting of a capital-constrained manufacturer and a capital-rich retailer. Under the carbon emission reduction percentage measure, we use the Stackelberg game theory to determine the manufacturer’s and retailer’s optimal decisions for bank financing, zero-interest early payment financing, and in-house factoring financing. Finally, we find a U-shaped relationship between the price sensitivity of commodities and the retailer’s (manufacturer’s) optimal profit. The impact of the carbon emission reduction percentage on the supply chains’ financing decisions follows a quadratic pattern. Carbon emission trading prices exhibit a monotonic influence on the equilibrium financing options of the supply chain. When carbon emissions do not exceed the standards, internal financing becomes more favorable as the carbon emission trading price increases. Conversely, when carbon emissions exceed the standards, external financing becomes more prevalent as the carbon emission trading price increases. The findings assist supply chain managers in selecting the optimal financing method when confronted with carbon emission limitations. These conclusions contribute to the development of more targeted measures and the promotion of green supply chains.

Keywords

• Carbon emission reduction percentage
• carbon emission trading prices
• capital constraints
• financing decision
• supply chain finance