Two-echelon sustainable supply chain coordination with consignment contract under cap-and-trade regulation

Taking into account the consumer has a low carbon preferences, under the dual driving force of environment production and economic benefit, the manufacturer invests in the emission reduction technology in the production process and sales process, such as introducing the emission reduction equipment or cleaner production technology. For a two- echelon sustainable supply chain that includes single manufacturer and single retailer, this paper studies the coordination efficiency of consignment contract on this supply chain under cap-and-trade regulation. And then we explore that how the manufacturer rationally chooses the way of investment in emission reduction, i. e., whether the manufacturer should invest in production and sales processes or only in the production sector. Finally, a numerical example is undertaken to illustrate the theoretical results, and the robustness analysis and optimization of the parameters are carried out by using the Taguchi method. It is found that when the carbon cap is stipulated by the government is higher than a threshold, the profit loss rate is less than 25%, and the consignment contract can achieve better coordination. In addition, compared with the emission reduction investment only in the production process, investment in both production and sales sectors is more sustainable and profitable. © 2019, Editorial Office of Control and Decision. All right reserved.