Selection of optimal coordination contract for sustainable supply chain under carbon tax

Abstract

The purpose of this paper is to find an optimal coordinating contract on a two-echelon sustainable supply chain composed of a manufacturer and a retailer under carbon tax policy. Taking consumer environmental awareness (CEA) and manufacturer's abatement investment cost into account, this study compares wholesale price contract, revenue-sharing contract and green cost-sharing contract, and finds that none of them can obtain coordination. Then, "Adjusted" contracts are introduced and proved that only adjusted revenue-sharing contract can coordinate the supply chain. Considering the profit redistribution proposition of the two-part tariff contract, the study introduces combined contracts, which are found capable of obtaining supply chain coordination as well as a win-win outcome.