Supply Chain Investment, Financing Schemes With the Uncertainty of Low-Carbon Technology Innovation: Carbon Asset Pledge vs. Sell–Buyback?

Abstract

Carbon emissions are recognized as major contributors to the greenhouse effect, accelerating global warming. Meanwhile, technology innovation is acknowledged as a key determinant influencing carbon emissions. Therefore, implementing low-carbon technology innovation (LCTI) becomes a critical approach to mitigating global warming. However, the uncertainty of LCTI and capital constraints hinder enterprises from adopting such innovations. Additionally, the constraints imposed by traditional financing channels exacerbate the predicament faced by enterprises. In this paper, we build a two-echelon supply chain model in the context of LCTI uncertainty, consisting of a retailer with sufficient capital and a manufacturer facing capital constraints, where traditional financing channels are restricted, to explore the strategies of LCTI investments, carbon asset financing, and product pricing. The research findings are as follows: Firstly, LCTI does not consistently result in higher expected profits for the manufacturer. This means that the manufacturer may lack the willingness to invest in such endeavors unless the probability coefficient of success in LCTI surpasses a certain threshold. Conversely, the retailer always benefits as a free rider from the manufacturer's investment in low-carbon technology. Secondly, both carbon asset pledge and sell–buyback financing can continuously increase the manufacturer's LCTI investments, but their impacts on the manufacturer's profits differ. Under pledge financing, higher LCTI investments imply greater profits for the manufacturer. In contrast, under sell–buyback financing, the impact may be either positive or negative, which depends on the fluctuation of carbon price. If carbon price escalates beyond a certain degree, sell–buyback financing may backfire. Yet, it also provides the opportunities for the manufacturer to maximize profits. Thirdly, improving LCTI investments can either benefit or harm the environment. This is contingent upon the relationship between the carbon emission ratio and the demand ratio. Win–win economic benefits and environmental performance can be achieved only when the carbon emission ratio is lower than the demand ratio. Finally, in the context of LCTI uncertainty, although carbon asset financing can enhance the manufacturer's LCTI investments and has the potential to improve the manufacturer's profits, it fails to prevent the retailer's free-riding behavior. An LCTI cost-sharing mechanism can limit such behavior and help the manufacturer and retailer reach a win–win outcome.