How carbon trading influences manufacturing/remanufacturing? A coordination mechanism design based on outsourced remanufacturing

Carbon trading, one of the key policy instruments for reducing carbon emissions, can significantly contribute to the government's goal of achieving "peak carbon" and "carbon neutrality". Thus, under pressure from the government to implement carbon trading policies, enterprises often seek new low-carbon production technologies or business models. Meanwhile, outsourcing remanufacturing is often considered an effective means of promoting carbon reduction. Therefore, based on an outsourced remanufacturing model, we investigated the impact of carbon trading on the manufacturing/remanufacturing supply chain (SC) by constructing a game model involving an original equipment manufacturer (OEM) and an outsourced remanufacturer (OR) under decentralized versus centralized decision-making conditions. Furthermore, we designed a coordination mechanism to address the loss of benefits for the overall SC under decentralized decision-making conditions. We drew the following conclusions: (1) Whether in a decentralized or centralized decision-making model, there is a feasibility boundary condition when a government implements the carbon trading policy. Namely, the policy fails when the carbon trading price is greater than a certain threshold. (2) The decentralized decision-making approach reduces the sales of remanufactured goods and the recycling rate for used goods compared to the centralized decision-making paradigm, resulting in a marginal loss of profit. And, as the price of carbon trading rises, carbon trading regulations tend to expand the room for coordination of interests in the decentralized decision-making paradigm. (3) A single cost-sharing contract, while increasing revenues for OEM and SC, reduces revenues for OR. Profit-sharing contracts and fixed-cost contracts increase OEM and OR revenues, but overall SC profits are still lower than in the centralized decision-making model. Therefore, this paper combines revenue-sharing, cost-sharing, and fixed-fee outsourcing contracts to effectively achieve SC coordination.