Production and carbon emission reduction decisions of remanufacturing firms with low‐carbon credit financing under uncertain demand

Abstract This paper investigates the optimal production and carbon reduction strategy for a capital‐constrained remanufacturing firm considering demand uncertainty. The remanufacturing firm can accept low‐carbon credit financing. We construct optimization models with no financing and low‐carbon credit financing and analyze the impacts of capital, carbon emission caps, and other factors on the remanufacturer's decision and profit. The results show that (i) the output of remanufactured products and overall profit are higher when using low‐carbon credit financing, regardless of strict carbon emission conditions; (ii) low‐carbon credit can help remanufacturers withstand the impact of carbon price fluctuations; (iii) the demand uncertainty of new and remanufactured products has opposite effects on carbon emission reduction investment; (iv) increasing the carbon cap can enhance the remanufacturing level while a high carbon cap reduce incentives to remanufacture.