Joint Decisions on Low-carbon Investment and Production Quantity in Make-to-Stock Manufacturing

Abstract

Decisions on low-carbon investment are vital to the manufacturing industry. Despite current research on green supply, few works have paid attention to decisions on emission reduction in low-carbon sensitive markets. We attempt to address the issue of joint decisions on low-carbon investment and production quantity for optimal tradeoff between profit and emission reduction. A model based on economic order quantity (EOQ) under three carbon policies is proposed. The concavity properties of the model are analyzed, and the solution processes elaborated. The model is validated by numerical experiments to study the practical situations with and without carbon policies. The results reveal that investment in lowering carbon emission of products can be profitable in low-carbon sensitive markets, and that different decision strategies can be taken under different carbon policies.