Cost-sharing contracts for energy saving and emissions reduction of a supply chain under the conditions of government subsidies and a carbon tax

Abstract

To study the cooperation of upstream and downstream enterprises of a supply chain in energy saving and emissions reduction, we establish a Stackelberg game model. The retailer moves first to decide a cost-sharing contract, then the manufacturer determines the energy-saving level, carbon-emission level, and wholesale price successively. In the end, the retailer determines the retail price. As a regulation, the government provides subsidies for energy-saving products, while imposing a carbon tax on the carbon emitted. The results show that (1) both the energy-saving cost-sharing (ECS) and the carbon emissions reduction cost-sharing (CCS) contracts are not the dominant strategy of the two parties by which they can facilitate energy savings and emissions reductions; (2) compared with single cost-sharing contracts, the bivariate cost-sharing (BCS) contract for energy saving and emissions reduction is superior, although it still cannot realise prefect coordination of the supply chain; (3) government subsidy and carbon tax policies can promote the cooperation of both the upstream and downstream enterprises of the supply chain-a subsidy policy can always drive energy saving and emissions reductions, while a carbon tax policy does not always exert positive effects, as it depends on the initial level of pollution and the level of carbon tax; and (4) the subsidy policy reduces the coordination efficiency of the supply chain, while the influences of carbon tax policy upon the coordination efficiency relies on the initial carbon-emission level.