How can carbon quota pledge financing contribute to the two-stage production and carbon abatement of emission-dependent remanufacturing firms?

Abstract

Due to the severe environmental pollution problem and the guidance of carbon emission reduction (CER) policies by the government, firms conduct carbon abatement investment (CAI) through different CER paths to realize low carbon production, in which capital constraint may be a significant factor that cannot be ignored. Thus, to rational use the carbon quota allocated, carbon quota pledge (CQP) acts as an effective financing method in supporting CERs. In this paper, based on carbon cap-and-trade mechanism, we establish two two-period manufacturing/ remanufacturing production decision models to contrastively evaluate the effectiveness of capital constraint and carbon quota pledge financing (CQPF) on the optimal production, CER and profits of firms under two CAI methods consisting of carbon emission purification and R&D investment. Our results indicate that CQPF more effectively enhance CERs and increase profits of firms when the self-owned capital is shortage, whereas it contributes to the increase in carbon emissions simultaneously. We also find that R&D investment has a cumulative effect, namely, the CER effect of the second period is more obvious than that of the first period, and the CERs and expected profits may even be higher than the case of carbon emission purification.