Effects Of Carbon Emission Quota Policy on the Quality and Sales of Manufactured and Remanufactured Products

Low-carbon manufacturing is inevitable way to achieving carbon neutralization. Implementing a carbon emission quota policy is an essential way to boost the low-carbon transformation of remanufacturing industry. Our research aims to improve remanufactured goods’ quality and promote the low-carbon, good-quality growth of remanufacturing. Using a three-level supply chain involving original equipment manufacturers (OEMs), independent remanufacturers (IRs), and retailers, we build a game model with and without carbon emission quota policies. Subsequently, we examine the consequences of carbon emission quota policy on product quality, sales, and price. We also determine the optimal range of carbon emissions for governments to enforce carbon emission rewards and penalties to promote the low-carbon transformation of remanufacturing companies and further facilitate sustainability of remanufacturing industry. By comparing the equilibrium results, we conclude that the carbon emission quota policy incentivizes IRs to upgrade remanufactured goods’ quality and expand production. Furthermore, under this policy, OEMs reduce costs by reducing the production and quality of their products. Surprisingly, when the carbon emission limit is less than the threshold, the policy significantly reduces the gross carbon emissions of OEMs and IRs. However, when the carbon emission limit is greater than the threshold, there is a negative effect on gross carbon emissions. This study enriches the theoretical research of manufacturing/remanufacturing and provides decision support for governments to formulate a carbon emission quota policy. It also offers practical guidance for manufacturers and remanufacturers to make production decisions