Under a Carbon Neutral Mechanism, Enterprise$S Multi-Period Environmental Investments and Price Bargaining Decision to Suppliers

Along with the rising global awareness of carbon reduction, the carbon reduction objectives of countries all over the world have become more specific after the Paris Agreement. In addition to limiting the carbon emission of enterprises based on carbon emission cap and trade enforced by all governments, the power consumptions by products have gradually been drawing more and more attentions from consumers. Under such trend, the effective reduction of carbon emission has become an important subject for various enterprises to enhance competitiveness. This is a two-year research project. The first year of this project will be focused on the enterprise decisions based on the objective of cost minimization under the situations of cap and trade policy, carbon market trend, and stochastic demands. The factors to be considered include: multiple periods, multiple products, multiple carbon exchanges, inventory, production cost, and carbon emission; the decision makings include: investment in energy saving and high production capacity equipment, selection of spot and futures during carbon trading, and production planning. The investment decision model will be established by dynamic programming, and sensitivity analysis will be carried out with respect to prices of carbon market, demand variation, and cap and trade policy strength in order to propose the managerial insights' analyses to serve as the reference for effective corporate planning of carbon reduction investment. The competitors will be introduced in the second year of this project such that there is no demand monopoly, and customers begin to select products based on quality and energy consumption. As a result, enterprises will carry out price negotiation with suppliers based on the product quality demands of customers in order to improve their competitiveness and profits. Based on the mathematic model established in the first year, the objective equation will be converted from minimum cost to maximum profit with the addition of objective equation of maximum supplier profit. The actual price negotiation situation will be understood and imported into the dynamic programming model via industrial interviews, and the price negotiation relationship between enterprises and suppliers will be presented in the Pareto frontier method in order to interpret the scenario and implication of this relationship with respect to price negotiations between enterprises and suppliers.

Project ID:PB10601-1327
External Project ID:MOST105-2221-E182-047-MY2