Decision-making and environmental implications under cap-and-trade and take-back regulations

Abstract

To reduce carbon emissions during production and realize the recycling of resources, the government has promulgated carbon cap-and-trade regulation and take-back regulation separately. This paper firstly analyses the manufacturing, remanufacturing and collection decisions of a monopoly manufacturer under cap-and-trade regulation and take-back regulation conditions, and then explores the environmental impact (i.e., carbon emissions) of both carbon regulation and more stringent take-back regulation. Finally, numerical examples are provided to illustrate the theoretical results. The results indicate that it will do good for the environment once the cap-and-trade regulation is carried out. We also conclude that government’s supervision of carbon trading price plays an important role in reducing the environmental impact. Furthermore, unexpectedly, we prove that if emissions intensity of a remanufactured (vis-á-vis new) product is sufficiently high, the improvement of collection and remanufacturing targets might lead to the deterioration of environment.