Effects of Carbon Tariffs on Optimal Production-Inventory Decisions for Deteriorating Items under Carbon Tax Policy

This study considers a global supply chain system included a single manufacturer without a mature carbon market and a single retailer where its government plans to impose carbon tariffs on imported goods from the manufacturer. A production-inventory model for a three-stage supply chain that includes material supply, manufacturer’s production and delivery, and retailer’s ordering and sales is developed for deteriorating items. Carbon tax policy for the retailer is considered in this study. The purpose is to determine the optimal material supply, production and delivery strategies for the manufacturer, and the optimal pricing and replenishment strategies for the retailer, so as the joint total profit of the entire supply chain is maximized. By using mathematical programming, the optimal solutions for the manufacturer and retailer are obtained. Further, numerical examples are presented to demonstrate the solution procedure. Through numerical analysis, it is expected to provide enterprise or supply chain decision makers, especially in multinational enterprises to understand the impact of carbon tariffs on supply chain inventory and pricing decisions and respond accordingly. © 2022, Tamkang University. All rights reserved.