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This paper presents a joint economic lot size model for a single manufacturer-a single buyer. The purposed model involves the greenhouse gas emission from industrial and transport sectors. We divide the emission into two types, namely the direct and indirect emissions. In this paper, we consider the Government’s penalty and incentive policies to reduce the emission. We assume that the demand of the buyer is normally distributed and partially backordered. The objective is to minimize joint total cost incurred by a single manufacturer-a single buyer and involves the transportation costs of the freight forwarder. Transportation costs are the function of shipping weight, distance, fuel price and consumption with two transportation modes: truckload and less-than-truckload shipments. Finally, an algorithm procedure is proposed to determine the optimal order quantity, safety factor, actual shipping weight, total emission and frequency of deliveries. Numerical examples and analyses are given to illustrate the results

Greenhouse gas penalty and incentive policies for a joint economic lot size model with industrial and transport emissions