American Institute of Mathematical Sciences

Advanced
January  2017, 13(1): 251-265. doi: 10.3934/jimo.2016015

Influences of carbon emission abatement on firms' production policy based on newsboy model

Dayi He , , Xiaoling Chen and  Qi Huang

School of Humanities and Economic Management, China University of Geosciences (Beijing), 29#, Xueyuan Rd., Beijing, China, 100083

* Corresponding author: Dayi He

Received  December 2014 Revised  September 2015 Published  March 2016

Fund Project: The research is funded by the Fundamental Research Funds for the Central Universities (2-9-2015-033).

Carbon emission allowance(CEA) has been becoming an important factor for firms to make production policies. Cap-and-trade system is fulfilling in many countries and regions as a market scheme promoted by many politicians and economists for its efficiency in resources assignment and promotion to abatement of carbon emission. More and more firms take CEA into their production plan which makes them confronted with influences from two markets, product market and CEA trade market in the meanwhile. Based on the Newsboy model for simplicity, and with assumption that demand of product is a stochastic variable, this paper establishes optimization models to get the optimal production policy under administrative scheme (command-and-control) and market scheme (cap-and-trade) respectively. By comparing the firms' production policy and expected net income(ENI) with or without the existence of CEA trade market, it is found that CEA trade market can reduce the optimal amount of production and carbon emission on the one hand, and it does not decrease firms' ENI on the another hand because the CEA trade market provides more options for firms to make production policy. Hence, in the proposed complete and perfect market, we concluded cautiously that market-based carbon emission abatement scheme is effective to reduce carbon emission and to accomplish regulatory carbon emission abatement goal.

Keywords: Carbon emission allowance, cap and trade abatement scheme, command-and-control, Newsboy model, production optimization.
Mathematics Subject Classification: Primary: 90B05, 97M40; Secondary: 90B30.
Citation: Dayi He, Xiaoling Chen, Qi Huang. Influences of carbon emission abatement on firms' production policy based on newsboy model. Journal of Industrial & Management Optimization, 2017, 13 (1) : 251-265. doi: 10.3934/jimo.2016015
References:
[1]

L. Barreto and S. Kypreos, Emissions trading and technology deployment in an energy-systems 'bottom up' model with technology learning, European Journal of Operational Research, 158 (2004), 243-261.  doi: 10.1016/S0377-2217(03)00350-3.  Google Scholar

[2]

S. Bode, Multi-period emission strading in the electricity sector-winners and losers, Energy Policy, 34 (2006), 680-691.   Google Scholar

[3]

S. Curkovic, Environmentally responsible manufacturing: The development and validation of a measurement model, European Journal of Operational Research, 146 (2003), 130-155.   Google Scholar

[4]

M. Kara, S. Syri, A. Lehtilä, S. Heylynen and V. Kekkonen, The impacts of EU CO2 emissions trading on electricity markets and electricity consumers in Finland, Energy Economics, 30 (2008), 193-211.   Google Scholar

[5]

R. D. Klassen and D. C. Whybark, Environmental management in operations, Decision Sciences, 30 (1999), 601-631.   Google Scholar

[6]

H. E. Klingelhöfer, Investments in EOP-technologies and emissions trading-results from a linear programming approach and sensitivity analysis, European Journal of Operational Research, 196 (2009), 370-383.  doi: 10.1016/j.ejor.2008.03.016.  Google Scholar

[7]

P. Kunsch, J. Springael and J. P. Brans, The zero-emission certificates: A novel CO$_2$-pollution reduction instrument applied to the electricity market, European Journal of Operational Research, 153 (2004), 386-399.  doi: 10.1016/S0377-2217(03)00160-7.  Google Scholar

[8]

S. Lasaló, H. Ignacio, C. J. Carlos and S. Antonio, CO2 emission trading within the European Union and Annex B countries: The cement industry case, Energy Policy, 34 (2006), 72-87.   Google Scholar

[9]

C. F. Lee, S. J. Lin and C. Lewis, Analysis of the impacts of combining carbon taxation and emission trading on different industry sectors, Energy Policy, 36 (2008), 722-729.  doi: 10.1016/j.enpol.2007.10.025.  Google Scholar

[10]

P. Letmathe and N. Balakrishnan, Environmental considerations on the optimal product mix, European Journal of Operational Research, 167 (2005), 398-412.  doi: 10.1016/j.ejor.2004.04.025.  Google Scholar

[11]

C. Liao, H. Önal and M.-H. Chen, Average shadow price and equilibrium price: A case study of tradable pollution permit markets, European Journal of Operational Research, 196 (2009), 1207-1213.  doi: 10.1016/j.ejor.2008.04.032.  Google Scholar

[12]

P. Lund, Impacts of EU carbon emission trade directive on energy-intensive industries indicative micro-economic analyses, Ecological Economics, 63 (2007), 799-806.  doi: 10.1016/j.ecolecon.2007.02.002.  Google Scholar

[13]

J.-L. Mo, L. Zhu and Y. Fan, The impact of the EU ETS on the corporate value of European electricity corporations, Energy, 45 (2012), 3-11.  doi: 10.1016/j.energy.2012.02.037.  Google Scholar

[14]

T. Penkuhn, T. Spengler, H. Püchert and O. Rentz, Environmental integrated production planning for the ammonia synthesis, European Journal of Operational Research, 97 (1997), 327-336.   Google Scholar

[15]

J. Remmers, T. Morgenstern, G. Schons, H. D. Haasis and O. Rentz, Integration of air pollution control technologies in linear energy-environmental models, European Journal of Operational Research, 47 (1990), 306-316.   Google Scholar

[16]

D. Shaofu, D. Junfeng, L. Liang and Z. Jingjiang, Optimal Production Policy with Emission Permits and Trading, Chinese Journal of Management Science, 17 (2009), 81-86.   Google Scholar

[17]

H. van Asselt and F. Biermann, European emissions trading and the international competitiveness of energy-intensive industries: A legal and political evaluation of possible supporting measures, Energy Policy, 35 (2007), 497-506.  doi: 10.1016/j.enpol.2005.12.013.  Google Scholar

[18]

F. Wirl, Evaluation of management strategies under environmental constraints, European Journal of Operational Research, 55 (1991), 191-200.   Google Scholar

[19]

J. Zhang, Emission-dependent Production and Operation Optimization with Emission Permits and Trading, Ph. D thesis, University of Science and Technology of China, 2010. Google Scholar

show all references

References:
[1]

L. Barreto and S. Kypreos, Emissions trading and technology deployment in an energy-systems 'bottom up' model with technology learning, European Journal of Operational Research, 158 (2004), 243-261.  doi: 10.1016/S0377-2217(03)00350-3.  Google Scholar

[2]

S. Bode, Multi-period emission strading in the electricity sector-winners and losers, Energy Policy, 34 (2006), 680-691.   Google Scholar

[3]

S. Curkovic, Environmentally responsible manufacturing: The development and validation of a measurement model, European Journal of Operational Research, 146 (2003), 130-155.   Google Scholar

[4]

M. Kara, S. Syri, A. Lehtilä, S. Heylynen and V. Kekkonen, The impacts of EU CO2 emissions trading on electricity markets and electricity consumers in Finland, Energy Economics, 30 (2008), 193-211.   Google Scholar

[5]

R. D. Klassen and D. C. Whybark, Environmental management in operations, Decision Sciences, 30 (1999), 601-631.   Google Scholar

[6]

H. E. Klingelhöfer, Investments in EOP-technologies and emissions trading-results from a linear programming approach and sensitivity analysis, European Journal of Operational Research, 196 (2009), 370-383.  doi: 10.1016/j.ejor.2008.03.016.  Google Scholar

[7]

P. Kunsch, J. Springael and J. P. Brans, The zero-emission certificates: A novel CO$_2$-pollution reduction instrument applied to the electricity market, European Journal of Operational Research, 153 (2004), 386-399.  doi: 10.1016/S0377-2217(03)00160-7.  Google Scholar

[8]

S. Lasaló, H. Ignacio, C. J. Carlos and S. Antonio, CO2 emission trading within the European Union and Annex B countries: The cement industry case, Energy Policy, 34 (2006), 72-87.   Google Scholar

[9]

C. F. Lee, S. J. Lin and C. Lewis, Analysis of the impacts of combining carbon taxation and emission trading on different industry sectors, Energy Policy, 36 (2008), 722-729.  doi: 10.1016/j.enpol.2007.10.025.  Google Scholar

[10]

P. Letmathe and N. Balakrishnan, Environmental considerations on the optimal product mix, European Journal of Operational Research, 167 (2005), 398-412.  doi: 10.1016/j.ejor.2004.04.025.  Google Scholar

[11]

C. Liao, H. Önal and M.-H. Chen, Average shadow price and equilibrium price: A case study of tradable pollution permit markets, European Journal of Operational Research, 196 (2009), 1207-1213.  doi: 10.1016/j.ejor.2008.04.032.  Google Scholar

[12]

P. Lund, Impacts of EU carbon emission trade directive on energy-intensive industries indicative micro-economic analyses, Ecological Economics, 63 (2007), 799-806.  doi: 10.1016/j.ecolecon.2007.02.002.  Google Scholar

[13]

J.-L. Mo, L. Zhu and Y. Fan, The impact of the EU ETS on the corporate value of European electricity corporations, Energy, 45 (2012), 3-11.  doi: 10.1016/j.energy.2012.02.037.  Google Scholar

[14]

T. Penkuhn, T. Spengler, H. Püchert and O. Rentz, Environmental integrated production planning for the ammonia synthesis, European Journal of Operational Research, 97 (1997), 327-336.   Google Scholar

[15]

J. Remmers, T. Morgenstern, G. Schons, H. D. Haasis and O. Rentz, Integration of air pollution control technologies in linear energy-environmental models, European Journal of Operational Research, 47 (1990), 306-316.   Google Scholar

[16]

D. Shaofu, D. Junfeng, L. Liang and Z. Jingjiang, Optimal Production Policy with Emission Permits and Trading, Chinese Journal of Management Science, 17 (2009), 81-86.   Google Scholar

[17]

H. van Asselt and F. Biermann, European emissions trading and the international competitiveness of energy-intensive industries: A legal and political evaluation of possible supporting measures, Energy Policy, 35 (2007), 497-506.  doi: 10.1016/j.enpol.2005.12.013.  Google Scholar

[18]

F. Wirl, Evaluation of management strategies under environmental constraints, European Journal of Operational Research, 55 (1991), 191-200.   Google Scholar

[19]

J. Zhang, Emission-dependent Production and Operation Optimization with Emission Permits and Trading, Ph. D thesis, University of Science and Technology of China, 2010. Google Scholar

Figure 1.  Optimal decision making without CEA trading
Figure Options

Download full-size image

Download as PowerPoint slide

Figure 2.  Production decision-making with CEA trading
Figure Options

Download full-size image

Download as PowerPoint slide

Figure 3.  Influence of CEA trading on firm's decision on production plan
Figure Options

Download full-size image

Download as PowerPoint slide

Figure 4.  Influence of CEA's price when production limited by CEA constraint
Figure Options

Download full-size image

Download as PowerPoint slide

Figure 5.  Influence of CEA's price when the firm is not limited by CEA constraint
Figure Options

Download full-size image

Download as PowerPoint slide

Figure 6.  Influence of product price when production limited by CEA constraint
Figure Options

Download full-size image

Download as PowerPoint slide

Table 1.  Influence of CEA's price when production limited by CEA
PcQ1*E[Π(Q1*)]Limited by CEAQ2*E[Π(Q2*)]Producing
01505999.99Y---
301505999.99Y246.078711.93Y
501505999.99Y227.826961.68Y
701505999.99Y06570N
901505999.99Y06570N
Table Options

Download as excel

PcQ1*E[Π(Q1*)]Limited by CEAQ2*E[Π(Q2*)]Producing
01505999.99Y---
301505999.99Y246.078711.93Y
501505999.99Y227.826961.68Y
701505999.99Y06570N
901505999.99Y06570N
Table 2.  Influence of CEA's price when the firm is not limited by CEA constraint
PcQ1*E[Π(Q1*)]Limited by CEAQ2*E[Π(Q2*)]Producing
0272.1811961.68N---
30272.1811961.68N246.0713211.93Y
50272.1811961.68N227.8214461.68Y
70272.1811961.68N017250N
90272.1811961.68N023250N
Table Options

Download as excel

PcQ1*E[Π(Q1*)]Limited by CEAQ2*E[Π(Q2*)]Producing
0272.1811961.68N---
30272.1811961.68N246.0713211.93Y
50272.1811961.68N227.8214461.68Y
70272.1811961.68N017250N
90272.1811961.68N023250N
Table 3.  Influence of product price when production limited by CEA constraint
PmQ1*E[Π(Q1*)]Limited by CEAQ2*E[Π(Q2*)]Producing
351502249.99Y227.292886.92Y
451502249.99Y237.445178.58Y
551502249.99Y243.677525.61Y
651502249.99Y248.169904.55Y
751502249.99Y251.6512304.57Y
Table Options

Download as excel

PmQ1*E[Π(Q1*)]Limited by CEAQ2*E[Π(Q2*)]Producing
351502249.99Y227.292886.92Y
451502249.99Y237.445178.58Y
551502249.99Y243.677525.61Y
651502249.99Y248.169904.55Y
751502249.99Y251.6512304.57Y
[1]

Chong Zhang, Yaxian Wang, Haiyan Wang. Design of an environmental contract under trade credits and carbon emission reduction. Journal of Industrial & Management Optimization, 2021  doi: 10.3934/jimo.2021141
[2]

Ziyuan Zhang, Liying Yu. Joint emission reduction dynamic optimization and coordination in the supply chain considering fairness concern and reference low-carbon effect. Journal of Industrial & Management Optimization, 2021  doi: 10.3934/jimo.2021155
[3]

Xiaoli Yang, Jin Liang, Bei Hu. Minimization of carbon abatement cost: Modeling, analysis and simulation. Discrete & Continuous Dynamical Systems - B, 2017, 22 (7) : 2939-2969. doi: 10.3934/dcdsb.2017158
[4]

Huaying Guo, Jin Liang. An optimal control model of carbon reduction and trading. Mathematical Control & Related Fields, 2016, 6 (4) : 535-550. doi: 10.3934/mcrf.2016015
[5]

Shuhua Zhang, Junying Zhao, Ming Yan, Xinyu Wang. Modeling and computation of mean field game with compound carbon abatement mechanisms. Journal of Industrial & Management Optimization, 2021, 17 (6) : 3333-3347. doi: 10.3934/jimo.2020121
[6]

Wei Chen, Yongkai Ma, Weihao Hu. Electricity supply chain coordination with carbon abatement technology investment under the benchmarking mechanism. Journal of Industrial & Management Optimization, 2020  doi: 10.3934/jimo.2020175
[7]

Qingguo Bai, Jianteng Xu, Fanwen Meng, Niu Yu. Impact of cap-and-trade regulation on coordinating perishable products supply chain with cost learning. Journal of Industrial & Management Optimization, 2021, 17 (6) : 3417-3444. doi: 10.3934/jimo.2020126
[8]

Qingguo Bai, Fanwen Meng. Impact of risk aversion on two-echelon supply chain systems with carbon emission reduction constraints. Journal of Industrial & Management Optimization, 2020, 16 (4) : 1943-1965. doi: 10.3934/jimo.2019037
[9]

Xue-Yan Wu, Zhi-Ping Fan, Bing-Bing Cao. Cost-sharing strategy for carbon emission reduction and sales effort: A nash game with government subsidy. Journal of Industrial & Management Optimization, 2020, 16 (4) : 1999-2027. doi: 10.3934/jimo.2019040
[10]

Roberta Ghezzi, Benedetto Piccoli. Optimal control of a multi-level dynamic model for biofuel production. Mathematical Control & Related Fields, 2017, 7 (2) : 235-257. doi: 10.3934/mcrf.2017008
[11]

Torsten Trimborn, Lorenzo Pareschi, Martin Frank. Portfolio optimization and model predictive control: A kinetic approach. Discrete & Continuous Dynamical Systems - B, 2019, 24 (11) : 6209-6238. doi: 10.3934/dcdsb.2019136
[12]

Qiong Liu, Jialiang Liu, Zhaorui Dong, Mengmeng Zhan, Zhen Mei, Baosheng Ying, Xinyu Shao. Integrated optimization of process planning and scheduling for reducing carbon emissions. Journal of Industrial & Management Optimization, 2021, 17 (3) : 1025-1055. doi: 10.3934/jimo.2020010
[13]

Jianyu Cao, Weixin Xie. Optimization of a condition-based duration-varying preventive maintenance policy for the stockless production system based on queueing model. Journal of Industrial & Management Optimization, 2019, 15 (3) : 1049-1083. doi: 10.3934/jimo.2018085
[14]

Qianru li, Weida chen, Yongming zhang. Optimal production and emission reduction policies for a remanufacturing firm considering deferred payment strategy. Journal of Industrial & Management Optimization, 2021, 17 (5) : 2475-2503. doi: 10.3934/jimo.2020078
[15]

Jian-Xin Guo, Xing-Long Qu. Robust control in green production management. Journal of Industrial & Management Optimization, 2020  doi: 10.3934/jimo.2021011
[16]

Filipe Martins, Alberto A. Pinto, Jorge Passamani Zubelli. Nash and social welfare impact in an international trade model. Journal of Dynamics & Games, 2017, 4 (2) : 149-173. doi: 10.3934/jdg.2017009
[17]

Ciro D'Apice, Peter I. Kogut, Rosanna Manzo. On optimization of a highly re-entrant production system. Networks & Heterogeneous Media, 2016, 11 (3) : 415-445. doi: 10.3934/nhm.2016003
[18]

Kota Kumazaki. A mathematical model of carbon dioxide transport in concrete carbonation process. Discrete & Continuous Dynamical Systems - S, 2014, 7 (1) : 113-125. doi: 10.3934/dcdss.2014.7.113
[19]

T. L. Mason, C. Emelle, J. van Berkel, A. M. Bagirov, F. Kampas, J. D. Pintér. Integrated production system optimization using global optimization techniques. Journal of Industrial & Management Optimization, 2007, 3 (2) : 257-277. doi: 10.3934/jimo.2007.3.257
[20]

Shoufeng Ji, Jinhuan Tang, Minghe Sun, Rongjuan Luo. Multi-objective optimization for a combined location-routing-inventory system considering carbon-capped differences. Journal of Industrial & Management Optimization, 2021  doi: 10.3934/jimo.2021051

2020 Impact Factor: 1.801

Tools

Metrics

  • PDF downloads (186)
  • HTML views (408)
  • Cited by (1)

Other articles
by authors

[Back to Top]

Copyright © 2021 American Institute of Mathematical Sciences