Energy conservation strategy and coordination of a closed-loop supply chain with risk-averse members under carbon tax regulation

This paper considers a closed-loop supply chain including a risk-averse manufacturer and a risk-averse retailer under carbon tax regulation, where the manufacturer takes back used products collected from customers by the retailer. The stochastic demand for the product is linearly dependent on the sales price and level of energy saving equipment. Under the mean-variance framework, two manufacturer-led decentralized systems are modeled and compared to reveal whether the risk-averse manufacturer should invest in energy saving equipment. A two-part tariff contract is then proposed to coordinate the decentralized system with equipment investment. The conditions of realizing a win-win outcome for the system agents are further derived. The developed models are illustrated by numerical examples, and a sensitivity analysis is conducted to identify the effects of major parameters on optimal decisions of the closed-loop supply chain. Some managerial implications are also discussed.