Carbon-regulated EOQ models with consumers' low-carbon awareness

Abstract

In the context of a low-carbon economy, firms must make positive responses in their operation management, including inventory management. Carbon-emission regulation policies have marked their influence on the optimization of low-carbon inventory systems. In addition to regulation policies, consumers' low-carbon awareness can also influence inventory systems by affecting demand. This study investigates the influence of regulation policies and consumers' low-carbon awareness on optimal order size, emission levels, and total costs. Two widely used regulation policies, i.e., the carbon-tax mechanism and cap-and-trade mechanism, are incorporated into the classical Economic Order Quantity (EOQ) model. Analytical conclusions were obtained by optimization methods to indicate the influences of regulation policies and consumers' low-carbon awareness. Our study implies that inventory systems under different regulation policies perform similarly except with regard to total cost. Numerical examples provide more support for these analytical conclusions. Some managerial insights can be derived from the analytical conclusions and numerical examples.