Dual-Mode Production Planning for Manufacturing with Emission Constraints

We study a dual-mode production planning problem with emission constraints, where a manufacturer produces a single product with two optional technologies. The manufacturer is equipped with the regular and green technologies to comply with emission limitations, and either one or both can be adopted for production. We first investigate the problem under a mandatory emission-cap policy and then extend it to consider emission trading under an emission cap-and-trade scheme. With a multi-level decomposition approach, a polynomial dynamic programming algorithm is developed to solve the models optimally. Analytically, the optimal technology selection strategy is addressed for each production period according to the relationship between the emission cap (or environmental bearing capacity) and setup cost (resp., unit production cost) of each technology. In particular, the manufacturer should arrange its production at an emission level of the emission cap when two technologies are used. Numerical results show that the manufacturer's decisions and benefits are significantly affected by the emission cap under the mandatory emission-cap policy, especially when the cap is at a relatively low level. However, the carbon price may not remarkably affect the manufacturer's cost because its influence could be abated through the flexible technology switch under the emission cap-and-trade scheme