Subsidy and penalty strategy for a green industry sector by bi-level mixed integer nonlinear programming

To achieve worldwide environmental protection, each government and enterprise must work out policies to reduce carbon emissions and to increase recycle products. This study proposes a bi-level mixed-integer nonlinear programming (BL-MINLP) model to develop subsidy and penalty strategies for governments and enterprises engaged in the collection and recovery operations of environmental protection. The government is the leader who intends to reduce environmental impacts and seek the financial balance in environmental subsidy and penalty policies for the recovery and carbon emission. The enterprise is the follower who wants to minimize its costs of recycling and refunding subject to the unit subsidy and unit penalty decisions of the government. This study applies the Karush–Kuhn–Tucker approach to solve the trade-off problem between the government and the enterprise. Sensitivity analysis was carried out on parameters related to the recovery rate and the carbon emission from transportation to facilitate the effective control and management.