Effects of the carbon credits buy-back policy on manufacturing/remanufacturing decisions of the capital-constrained manufacturer

Under the emissions trading mechanism, this article explores optimal manufacturing/remanufacturing decisions considering the carbon credits buy-back policy by focusing on the value of carbon assets. First, two non-linear programming models are formulated under the cases with/without the carbon credits buy-back policy and solved using the Kuhn-Tucker Conditions (KKT). This article then systematically investigated the impacts of the carbon credits buy-back policy and related crucial parameters on production quantities, selling quantity of carbon quotas, total profits and total carbon emissions resorting to the theoretical analysis and numerical analysis. The results show that the carbon credits buy-back policy could improve operating situations, while specific implementation effect also depends on some factors. Among them, the higher value of the carbon savings of unit remanufactured product could strengthen the advantages of the carbon credits buy-back policy, and the rising carbon savings more significantly promotes the remanufacturing activities. Furthermore, both the carbon price and carbon quotas have significant effects on manufacturing/remanufacturing decisions under the carbon credits buy-back policy. Meanwhile, the carbon price can more effectively adjust production and emissions reduction activities, and consequently controls carbon emissions while protecting production activities. Finally, the results proposed in this paper provide guidance suggestions to manufacturers and policy-makers.