Optimal Consumption Subsidy Strategy of a Green Supply Chain Under the Cap-and-trade Mechanism

The growing concerns about sustainable development have not only imposed heavy burden on the supply chain to reduce emissions, but also brought great challenges to the government to implement sustainable policies. This study analyzes the role of government consumption subsidy and the cap-and-trade (C&T) mechanism, considering the green marketing cost-sharing coordination in supply chain. The optimal subsidy decisions and subsidy level are obtained under the maximization of the social welfare. Results show that consumption subsidy may not be always needed when the carbon price under the C&T mechanism is at a high level. Besides, the green preference of consumers contributes to the green product market expansion and the social welfare improvement. The government should assess the carbon price and the consumers' green preference before implementing the consumption subsidy policy. In addition, it is profitable for supply chain to carry out the cost-sharing cooperation of sustainable marketing. This paper provides a decision-making basis for the government to formulate sustainable policies and the supply chain to make green decisions.