Low carbon strategy analysis with two competing supply chain considering carbon taxation

• Two competing supply chains under carbon taxation are studied. • Vertical collaboration can improve the abatement rate and decrease retail prices. • Horizontal collaboration hurts retailers and supply chains. • Two-part tariff contract is an effective tool for manufacturers to abandon horizontal collaboration. We investigate the carbon emission reduction efforts and pricing decisions for a two chains system under carbon taxation. In this system, each chain consists of a retailer, who acts as a follower and a manufacturer who acts as a leader. Moreover, we consider two situations: in the vertical orientation, two manufacturers individually make carbon reduction decisions; in the horizontal orientation, two manufacturers make carbon emission abatement decisions simultaneously. Besides, comparison of the optimal solutions are discussed under two situations, the results indicate that: (1) the government can encourage manufacturers to optimize the abatement rate of their products by imposing appropriate carbon taxes under two situations. (2) As long as carbon taxation occurs, each supply chain members’ vertical collaboration will drop carbon emission rate and product price. (3) When each chain is a decentralized system, although the horizontal collaboration between manufacturers improves the abatement rate of products, it reduces both retailers’ profits and customers’ interests. (4) The two-part tariff contract proposed by the downstream retailers can induce the two manufacturers to abandon their collaboration. This contract can not only realize Pareto improvement for supply chain members, but also protect the environment because of the larger abatement rate. (5) When the fixed fee falls into a certain range, the two-part tariff contract can yield a larger system benefit.