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Strengthening carbon regulations and competitive pressures are forcing supply chains to provide environmental (e-) products to replace traditional (t-) products. However, cap-and-trade policy allows manufacturers, the main carbon emission emitters, to trade their emission permits freely. Considering manufacturers' power and key role in producing and carbon trading, we develop a duopoly model consisting of two competing manufacturers. Despite asymmetrical carbon emission reduction efficiencies, the two manufacturers can independently and simultaneously decide their respective t-/e-products outputs, emission reduction levels, and permits trade quotas. The unique Nash equilibrium is derived with the overall cap. We find that the low-cost manufacturer uses its cost advantage to invest more in emission reduction, then sells the excess emission permits to its rival, but makes its rival more competitive in product market. Interestingly, our results show that cap-and-trade policy triggers an industry collusion in which manufacturers reduce competition and improve the power and profits by reducing overall output and adopting differentiated product strategy. Furthermore, the cost advantage and high product substitution can accelerate low-cost manufacturer's transformation but hinder high-cost manufacturers. The impacts of cap-and-trade policy on consumer surplus and social welfare are also discussed to provide guidance for policy makers. [ABSTRACT FROM AUTHOR]

Manufacturers face a choice of whether to reduce their carbon emissions through employing low-carbon technologies. Though many carbon regulations are set up to curb carbon emissions, some firms choose not to take low-carbon production because the additional cost of low-carbon progressing is high. However, low-carbon production would be a better alternative when we consider consumer's low-carbon premium in the cap-and-trade system. In this work, we solve the manufacturer's multi-product joint pricing and production problem when consumers value the low-carbon product higher than the ordinary product. Our findings provide firms with conditions where low-carbon production is profitable. Furthermore, we find that the cap-and-trade would constrain the total carbon emissions and promote low-carbon production simultaneously under certain conditions. [ABSTRACT FROM AUTHOR]

Many countries like China are in a dilemma between economic growth and environmental deterioration (e.g., smog weather). Simultaneously, a growing people concern the product's environmental performance along with their improving environment awareness. This paper focuses on the impacts of carbon footprint and low-carbon preference on the production decision of emission-dependent firms in the cap-and-trade system. The cap-and-trade system uses the total “cap” to attain environmental goals and allows “trade” to achieve the effective scheduling through market regulation. Under this mechanism, through analyzing the influence of carbon footprint and low-carbon preference on the market supply and demand, we build a production optimization model and develop the optimal decisions. Several interesting management insights on environmental preference and policy are concluded. [ABSTRACT FROM AUTHOR]