Bank or retailer? Manufacturer financing for carbon emission reduction using the carbon emission quota as a pledge

In the low-carbon economy, manufacturers face the dual pressures of carbon emission abatement and capital shortage. Creatively using the carbon asset financing role for carbon emission abatement is an urgent issue to explore. A bank carbon financing (BCF) mode and a supply chain carbon financing (SCF) mode with loans from a bank and from a retailer, respectively, using the carbon emission quota as a pledge (CEQP) are considered to support the manufacturer emission reduction as well as responsible consumption and production. Stackelberg game models for the BCF and the SCF modes are developed, and the equilibrium solutions are obtained through backward induction. Some interesting results are obtained. The manufacturer benefits from the use of the CEQP in the BCF mode but not in the SCF mode with fixed carbon-trade price. The low-emission, but not the high-emission, manufacturers benefit from higher final carbon-trade prices in promoting abatement and improving profits with fluctuating carbon-trade prices. The manufacturer preferences for the BCF and the SCF modes depend on the interest rates and interest rate discounts based on its environmental and financial performances. In the hybrid financing modes, the manufacturer cannot benefit by dividing the carbon quota between the bank and the retailer.