Carbon emission reduction driven by a non-mandatory emission reduction target in a supply chain

Abstract

This paper considers a supply chain comprising a retailer and a low-carbon manufacturer that adopts a non-mandatory emission reduction target (NERT) as a reference point. Using a game-theoretic framework, we first analyze the impact of exogenous NERT on supply chain dynamics. Subsequently, we extend the analysis to explore three additional dimensions: the power structure of channel members, the loss aversion of the manufacturer, and the endogeneity of NERT. The results show that (1) an exogenous NERT benefits the retailer and consumers but harms the manufacturer when it is relatively high. In contrast, an endogenous NERT always benefits channel members and consumers. (2) An exogenous NERT can mitigate the negative effects of consumer environmental awareness (CEA) on channel members, while an endogenous NERT can eliminate such negative effects. (3) Increasing the manufacturer’s target sensitivity improves the emission reduction level (ERL) in the exogenous NERT model but may reduce the ERL in the endogenous NERT model. (4) Although the manufacturer’s utility first decreases and then increases as its target sensitivity increases, increasing the manufacturer’s target sensitivity helps to achieve the NERT.