Carbon emission reduction and product collection decisions in the closed-loop supply chain with cap-and-trade regulation

Governments’ emission policies and consumers’ increasing environmental awareness have brought pressure on manufacturers. Particularly, governments are requiring manufacturers to manage their end-of-life products. Hence, the supply chain should consider environmental and economic performance comprehensively. This study considers strategies on carbon emission reduction and used product collection on the basis of cap-and-trade regulation in the closed-loop supply chain. Decentralised and centralised decision models are formulated, and the equilibrium solutions of these models are then derived. The impact of used product collection on carbon emission reduction is further analysed. Findings show that when the parameters meet a certain condition, the scenario where the manufacturer leads the collection is optimal for carbon emission reduction, used product collection, and profit generation; otherwise, the supply chain will select the retailer to collect used products. Under the special collection model with a fixed return rate, used product collection is beneficial for reducing carbon emissions. High initial carbon emissions are inconducive to carbon emission reduction and used product collection. Moreover, the government can affect supply chain decisions by regulating and controlling carbon trading prices.