Carbon Reduction Incentives under Multi-Market Interactions: Supply Chain Vertical Cooperation Perspective

Abstract

The greening trend in consumer markets and the marketization and financialization of carbon emission rights have begun to revitalize carbon assets. However, solitary efforts and the spillover of environmental protection effects still hamper enterprises’ enthusiasm for carbon emission reduction. To tackle this challenge, two vertical cooperation mechanisms, cost cooperation and alliance cooperation, are proposed. The mathematical models and solutions are developed for both of the two mechanisms, and their values and applicability are explored, respectively. In addition, the impact of fluctuations in consumer markets, financial markets, and carbon markets on cooperation is examined. The results show that both cooperation models effectively motivate enterprises to enhance carbon reduction and boost market demand. However, cost cooperation may result in inflated product prices and even weaken the profitability of the supply chain. In contrast, alliance cooperation can enhance product price performance and effectively increase supply chain profits. Concerning environmental performance, the initial market is better suited for alliance cooperation, whereas cost cooperation fits the mid-to-late market. The higher financing costs of the financial market and the trading price of the carbon market will strengthen the applicability of cost cooperation. This study offers managerial insights for collaborative decision-making in the context of a multi-market cross-section.