Energy Reports (Nov 2022)
How carbon allowance allocation rule affects manufacturing/remanufacturing decisions under the carbon credits buy-back policy
Abstract
Focusing on the carbon asset attribute, two-period decision models of manufacturing/remanufacturing issues considering different carbon allowance allocation rules of the grandfathering and benchmarking are formulated under the carbon credits buy-back policy. The Kuhn–Tucker condition (KKT) is utilized to solve the above models, and relevant conclusions are verified and further analyzed by the numerical analysis. The study results show that: (1) Compared with the grandfathering, the benchmarking is more beneficial to the implementation and effectiveness of the carbon credits buy-back policy, including the better promotion of recycling and remanufacturing activities, and the protection of other production activities. (2) The benchmarking shows greater advantages in promoting remanufacturing activities and ensuring product diversification, especially when the final carbon price is relatively higher. (3) Considering the carbon credits buy-back policy, the capital-constrained manufacturer under the benchmarking is more motivated to carry out emissions reduction activities in manufacturing or remanufacturing process, which are beneficial to economic and environmental benefits. (4) Overall, the emissions reduction in the remanufacturing process can better help the capital-constrained manufacturer achieve a win–win target of economic and environmental benefits compared with that in the manufacturing process. Analysis results provide practical suggestions for capital-constrained manufacturers and policy-makers.
