Carbon Quotas, Subsidies and Engineering Machinery Remanufacturing

doi:10.15302/J-FEM-2016014

Front. Eng

2016, Vol. 3

Issue (1) : 50-58 https://doi.org/10.15302/J-FEM-2016014

ENGINEERING MANAGEMENT THEORIES AND METHODOLOGIES

Carbon Quotas, Subsidies and Engineering Machinery Remanufacturing

Dong-bin Hu^1,^*(

),Chen-xi Xiao¹,Xiao-hong Chen²

¹. Business School, Central South University, Changsha 410083, China; Collaborative Innovation Center of Resource-conserving & Environment-friendly Society and Ecological Civilization, Changsha 410083, China
². Business School, Central South University, Changsha 410083, China; Collaborative Innovation Center of Resource-conserving & Environment-friendly Society and Ecological Civilization, Changsha 410083, China; Hunan University of Commerce, Changsha 410205, China

Download: PDF(730 KB) HTML
Export: BibTeX | EndNote | Reference Manager | ProCite | RefWorks

Abstract

Engineering machinery manufacturing and remanufacturing are significant sources of greenhouse gases. In the context of emission reduction and resource recovery, the authors analyze the impact of current carbon quota allocations and government subsidies policies on manufacturers’ profits and recovery rates in a closed-loop supply chain. A simplified model consists of two manufacturers, one retailer and a third-party recycler. The study found that carbon quotas and government subsidies can both promote the improvement of recovery rates under certain conditions, and have similar effects in regulating interest distribution between manufacturers. The combination of the two methods can effectively realize the targets of recycling and carbon emissions reduction.

Keywords competitive closed-loop supply chain government subsidies carbon quota allocation remanufacturing

Corresponding Author(s): Dong-bin Hu

Online First Date: 17 May 2016 Issue Date: 26 May 2016

Cite this article:

Dong-bin Hu,Chen-xi Xiao,Xiao-hong Chen. Carbon Quotas, Subsidies and Engineering Machinery Remanufacturing[J]. Front. Eng, 2016, 3(1): 50-58.

URL:

https://academic.hep.com.cn/fem/EN/10.15302/J-FEM-2016014
https://academic.hep.com.cn/fem/EN/Y2016/V3/I1/50

Fig.1 Closed-loop supply chain based on government subsidies and the distribution of carbon quotas.

Variable	Description and assumption
c0	Unit recycling product price that the third-party recycler pays to consumers
pr	Unit recycling product price that Manufacturer 1 pays to the third-party recycler, the decision variables for Manufacturer 1
cm	Unit cost of the new product
cr	Added cost of remanufacturing one product. c r + c 0 means unit cost of the remanufacturing product
p1,pw1	The wholesale price and sales price of product made by Manufacturer 1, p 1 is the decision variables for retailers, p w1 is the decision variables for Manufacturer 1
p2,pw2	The wholesale price and sales price of product made by Manufacturer 2, p 2 is the decision variable for retailers, p w2 is the decision variable for Manufacturer 2
r	The recovery rate, r ( 0 ≤ r ≤ 1 ) is the decision variable for the third-party recycler
V	Profit
l1,l2	The proportion carbon emissions quotas that regulatory body allocate to Manufacturers 1 and 2 non-gratuitously. 0 ≤ l 1 , l 2 ≤ 1 . For the sake of analysis, the authors assume l 1 = v l 2 , 0 ≤ v ≤ 1 . If v < 1 , it means the government allocates more free quota to Manufacturer 1
Em	Carbon emission of unit new product
Er	Carbon emission of unit remanufacturer product. E r = u E m . Here the authors consider the differences of carbon emissions. 0 ≤ u ≤ 1 , it means the carbon emissions of remanufactured product is less than a new product. 1 ≤ u ≤ c m − c 0 − c r l 2 p 2 E m + 1 means the carbon emissions of remanufactured product is more than a new product. When the cost saving is less than the cost of carbon emissions, the remanufacturer will not recycle.
pe	Unit carbon quota price, the price is decided by the market
A	Unit recycling product subsidy from the government
Q1,Q2	The sales quantity of products produced by two manufacturers, referring to Debo et al. (2005) and Ferrer and Swaminathan (2006), the authors suppose Q 1 ( p ) = a − p 1 + ε p 2 , Q 2 ( p ) = a − p 2 + ε p 1 , 0 < ε < 1 , where a represents the basic size of the market
k	Referring to Savaskan et al. (2004), k is the scale parameter

Tab.1 The Description and Assumptions of Variables

Tab.2 The Analytical Solutions of Variables

Fig.2 Impact of subsidies on (a) manufactures’ profit, (b) whole price, and (c) recovery rate.

Fig.3 The impact of proportion allocation on two manufacturers’ profit.

Fig.4 The impact of proportion allocation on manufacturers’ wholesale price.

Fig.5 The impact of proportion allocation on recovery rate.

1	Amezquita, T., Hammond, R., Salazar, M., & Bras, B. (1995). Characterizing the remanufacturability of engineering systems. In: Proceedings of 1995 ASME Advances in Design Automation Conference. DE-82(1), 271–278.
2	Bird, L. A., Holt, E., & Levenstein Carroll, G. (2008). Implications of carbon cap-and-trade for US voluntary renewable energy markets. Energy Policy, 36(6), 2063–2073. https://doi.org/10.1016/j.enpol.2008.02.009
3	Cason, T. N. (2003). Buyer liability and voluntary inspections in international greenhouse gas emissions trading: A laboratory study. Environmental and Resource Economics, 25(1), 101–127. https://doi.org/10.1023/A:1023665517698
4	Chang, X., Xia, H., Zhu, H., Fan, T., & Zhao, H. (2015). Production decisions in a hybrid manufacturing-remanufacturing system with carbon cap and trade mechanism. International Journal of Production Economics, 162, 160–173. https://doi.org/10.1016/j.ijpe.2015.01.020
5	Chen, X., & Zhou, Z. (2014). Promote the engineering of ecological civilization construction by building “resource-conserving and environment-friendly society”. Frontiers of Engineering Management, 1(1), 83–88. https://doi.org/10.15302/J-FEM-2014012
6	Debo, L. G., Toktay, L. B., & Wassenhove, L. N. V. (2005). Market segmentation and product technology selection for remanufacturable products. Management Science, 51(8), 1193–1205. https://doi.org/10.1287/mnsc.1050.0369
7	Blass, V.(2012). Closed-loop supply chains: New developments to improve the sustainability of business practices. Journal of Industrial Ecology, 16(2), 285.
8	Ferguson, M. E., & Souza, G. C. (2010). Closed-loop Supply Chains: New Developments to Improve the Sustainability of Business Practices. Boca Raton: CRC Press.
8	Ferrer, G., & Swaminathan, J. M. (2006). Managing new and remanufactured products. Management Science, 52(1), 15–26. https://doi.org/10.1287/mnsc.1050.0465
9	Gao, J., Hou, L., Wang, H., & Han, H. (2015). Regularity research on revenue fluctuation analysis of closed-loop supply chain considered carbon emissions. Chinese Journal of Mechanical Engineering, 51(2), 190–197. https://doi.org/10.3901/JME.2015.02.190
10	Giutini, R., & Gaudette, K. (2003). Remanufacturing: The next great opportunity for boosting us productivity. Business Horizons, 46(6), 41–48. https://doi.org/10.1016/S0007-6813(03)00087-9
11	Guan, Q., Zhou, G., & Cao, J. (2009). Government constrained decision making model in recycling and remanufacturing closed-loop supply chain. Industrial Engineering Journal, 12(5), 40–44.
12	Guide, V. D. R. Jr, & Van Wassenhove, L. N. (2006). Closed-loop supply chains: An introduction to the feature issue (Part 1). Production and Operations Management, 15(3), 345–350. https://doi.org/10.1111/j.1937-5956.2006.tb00249.x
22	Guide, V. D. R. Jr, & Van Wassenhove, L. N. (2009). The evolution of closed-loop supply chain research. Operations Research, 57(1), 10–18. https://doi.org/10.1287/opre.1080.0628
13	Heese, H. S., Cattani, K., Ferrer, G., Gilland, W., & Roth, A. V. (2005). Competitive advantage through take-back of used products. European Journal of Operational Research, 164(1), 143–157. https://doi.org/10.1016/j.ejor.2003.11.008
14	Li, J., Du, W., Yang, F., & Hua, G. (2014). The carbon subsidy analysis in remanufacturing closed-loop supply chain. Sustainability, 6(6), 3861–3877. https://doi.org/10.3390/su6063861
15	Majumder, P., & Groenevelt, H. (2001). Competition in remanufacturing. Production and Operations Management, 10(2), 125–141. https://doi.org/10.1111/j.1937-5956.2001.tb00074.x
16	Mitra, S., & Webster, S. (2008). Competition in remanufacturing and the effects of government subsidies. International Journal of Production Economics, 111(2), 287–298. https://doi.org/10.1016/j.ijpe.2007.02.042
17	Montgomery, W. D. (1972). Markets in licenses and efficient pollution control programs. Journal of Economic Theory, 5(3), 395–418. https://doi.org/10.1016/0022-0531(72)90049-X
18	Savaskan, R. C., Bhattacharya, S., & Van Wassenhove, L. N. (2004). Closed-loop supply chain models with product remanufacturing. Management Sciences, 50(2), 239–252. https://doi.org/10.1287/mnsc.1030.0186
19	Stavins, R. N. (2008). A meaningful U.S. cap-and-trade system to address climate change. SSM Electronic Journal, 32(2008.82), 293–371. https://doi.org/10.2139/ssrn.1281518
20	Sutherland, J. W., Adler, D. P., Haapala, K. R., & Kumar, V. (2008). A comparison of manufacturing and remanufacturing energy intensities with application to diesel engine production. Manufacturing Technology, 57(1), 5–8. https://doi.org/10.1016/j.cirp.2008.03.004
21	Wang, W., & Da, Q. (2011). The decision and coordination under the premium and penalty mechanism for closed-loop supply chain. Chinese Journal of Management Science, 19(1), 36–41 (in Chinese).
23	Xiong, Z., Huang, D., & Xiong, Y. (2011). On the closed-loop supply chain modes of product remanufacturing with government reimbursement. Industrial Engineering Journal, 14, 1–5.
24	Zeng, G., & Wan, Z. (2010). Literature review on carbon emissions trading theory and application research. Chinese Review of Financial Studies, (02), 54–67 (in Chinese).
25	Zheng, J., Zheng, C., Chen, P., & Lu, C. Y. (2014). An evaluation model for the coordinated development of a circular economy in China and its application to energy-intensive industries. Frontiers of Engineering Management, 1(4), 364–371. https://doi.org/10.15302/J-FEM-2014053

[1]	He Liu,Tao Li,Wei-ye Han,Qiang Chen,Shou-zhi Huang,Er-yang Ming,Qiang Sun. Status and Prospect of Remanufacturing Technology for Tubing and Sucker Rods[J]. Front. Eng, 2016, 3(3): 258-263.
[2]	Wang Gao,Tao Li,Shi-tong Peng,Liang Wang,Hong-chao Zhang. Optimal Timing and Recycling Operation Mode for Electro-Mechanical Products Active Remanufacturing[J]. Front. Eng, 2016, 3(2): 115-122.
[3]	Qiao Xiang,Yong He,Ting-hong Hou. An Exploration of Surface Integrity Remanufacturing for Aeroengine Components[J]. Front. Eng, 2016, 3(2): 107-114.
[4]	Bin-shi Xu. Green Remanufacturing Engineering and Its Development Strategy in China[J]. Front. Eng, 2016, 3(2): 102-106.
[5]	Jie Xiong,Jian-cheng Fan,Jv Yuan. The Application and the Prospect of Remanufacturing Technologies in the Metallurgical Industry[J]. Front. Eng, 2016, 3(2): 165-170.
[6]	Xiao-qiu Shi,Yan-yan Li,Wei Long. The Integration Model of Closed-Loop Supply Chain Resource Allocation Considering Remanufacturing[J]. Front. Eng, 2016, 3(2): 132-135.
[7]	Qing Yang,Lu Zheng. Managing Coordination Complexity in the Remanufacturing of Aircraft Engines[J]. Front. Eng, 2016, 3(2): 158-164.
[8]	Wen-qiang Liu,Jun-yuan Mo,Cheng-kui Gu. The Development Situation, Future and Counter Measures of Remanufacturing Industry in China[J]. Front. Eng, 2016, 3(2): 123-131.
[9]	Ming-zhou Liu,Cong-hu Liu,Mao-gen Ge,Yuan Zhang,Qing-hua Zhu. Remanufacturing in Industry 4.0[J]. Front. Eng, 2016, 3(2): 144-146.
[10]	Ling-ling Zhang,Ming-hui Zhao,Qiao Wang. Research on Knowledge Sharing and Transfer in Remanufacturing Engineering Management Based on SECI Model[J]. Front. Eng, 2016, 3(2): 136-143.
[11]	Bin-shi Xu,Pei-jing Shi,Han-dong Zheng,En-zhong Li. Engineering Management Problems of Remanufacturing Industry[J]. Front. Eng, 2015, 2(1): 13-18.

Viewed

Full text

Abstract

Cited

Shared

Discussed