Game analysis for the impact of carbon trading on low-carbon supply chain

Abstract The emergence of carbon trading will affect low carbon behavior in manufacturers. To analyze the impact of carbon trading on low-carbon supply chain (LCSC) under different production modes, we developed a game model between low-carbon products and ordinary products. Based on the game model, the impact of carbon trading on unit retail price, sales volume, sales profit and consumer surplus are comparatively analyzed from different production modes of low carbon manufacturers. Results show that: 1) Carbon trading could increase the unit retail price of ordinary products and low-carbon manufacturers will also raise the unit retail price of low-carbon products to obtain more revenue under the competitive market environment. 2) The carbon trading will promote the sales volume of low-carbon products when the manufacturer only produces low-carbon products. However, in the case of a manufacturer producing two products simultaneously, the carbon trading could promote the sale of low-carbon products only when the environmental impact ratio of the unit ordinary product to the unit low-carbon product is greater than a certain threshold. 3) The impact of carbon trading on profit is related to the environmental impact ratio of the two kinds of unit products. 4) The government could adjust the impact of carbon trading on consumer surplus through carbon credit.