Decision-Making and Environmental Implications under Cap-and-Trade and Take-Back Regulations

Area of Science:

• Environmental Economics
• Operations Management
• Industrial Ecology

Background:

• Governments implement carbon cap-and-trade and take-back regulations to curb emissions and promote resource recycling.
• These regulations impact manufacturing, remanufacturing, and collection decisions for a monopoly manufacturer.

Purpose of the Study:

• Analyze manufacturer decisions under dual regulatory frameworks.
• Evaluate the environmental impact, specifically carbon emissions, of these regulations.
• Investigate the influence of collection and remanufacturing targets on environmental outcomes.

Main Methods:

• Theoretical analysis of a monopoly manufacturer's production and remanufacturing strategies.
• Examination of environmental impacts under different regulatory scenarios.
• Numerical simulations to validate theoretical findings.

Main Results:

• Carbon cap-and-trade regulation generally improves environmental quality.
• Government supervision of carbon trading prices is crucial for reducing environmental impact.
• Increased collection and remanufacturing targets can paradoxically worsen environmental outcomes if remanufactured products have high emissions intensity.

Conclusions:

• Carbon cap-and-trade policies are effective in reducing carbon emissions.
• Effective environmental policy design requires careful consideration of remanufacturing emissions intensity.
• Government oversight of carbon markets and take-back schemes is vital for achieving environmental goals.