Design of Carbon Rebate Mechanism

Due to increasing of environmental awareness, the amount of carbon emission incurred in manufacturing processes has attracted much attention. In this thesis, we consider a supply chain consisting of one product designer and multiple competing outsourcing manufacturers, where the product designer provides a product design and outsources the manufacturing work to the outsourcing manufacturers. The goal of product designer is to produce at low carbon emission; however, the outsourcing manufacturers have less incentive to do so. Thus, the product designer offers carbon rebate as reward for reduction in carbon emission. The outsourcing manufacturers configure their own production chains after learning the information of the product design and the range of carbon rebate announced by the product designer. The manufacturers compete for common components which results in low carbon emission. Our model investigates how the competition for common components may affect the behaviors of the outsourcing manufacturers. In some cases, the competition causes higher carbon emission and production cost during manufacturing process than without competition.