Carbon emission reduction and channel development strategies under government subsidy and retailers’ fairness concerns

Abstract

In response to the global challenge of climate change, governments have formulated low-carbon subsidy policies (LCSPs) to promote low-carbon development. Governments commonly subsidize manufacturers’ carbon emission reduction (CER) but may incur retailers’ fairness concerns. Considering this situation, in this paper, we model a two-level dual-channel supply chain consisting of a manufacturer and a retailer under the government’s LCSPs. We use a game theoretical approach to analyze the internal relationship between LCSPs, online channel share, and retailer’s fairness concerns. Further, we discuss the incentives for manufacturers and retailers to develop online channels. We find that regardless of the channel structure, increasing subsidies does not mitigate the negative impact of retailers’ fairness concerns on the supply chain. Whether expanding online channels can reduce the negative effect of retailers’ fairness concerns on the supply chain depends on both the channel structure and the carbon coefficient. By comparing models, we find that manufacturers or retailers developing online channels can improve CER, with the highest CER achieved in Model M, generating high profits for manufacturers. Whether retailers developing online channels will harm manufacturers’ profit depends on the size of the online channel share. The findings of our study provide a guide for supply chain participants to make the optimal carbon emission and channel development strategies when facing government subsidies and having fairness concerns.