Title: Optimal emission-dependent production policy with stochastic demand

Authors: Jing-Jiang Zhang, Teng-Fei Nie, Shao-Fu Du

Addresses: School of Management, University of Science and Technology of China, No. 96, Jinzhai Road, Hefei, Anhui 230026, China. ' School of Management, University of Science and Technology of China, No. 96, Jinzhai Road, Hefei, Anhui 230026, China. ' School of Management, University of Science and Technology of China, No. 96, Jinzhai Road, Hefei, Anhui 230026, China

Abstract: The paper addresses the issue of manufacturer|s optimal production policy under stochastic demand in an emission |cap and trade| system, in which emission permit becomes another essential factor for production. Three typical sources of emission permits are considered, including emission quota allocated by the government, permits purchased via emission trading, and emission savings via purification. The emission-dependent manufacturer will balance a tradeoff to enable effective production and to determine an appropriate production scale to maximise expected profit. With these considerations in mind, two different cases of single- and multi-time purification are investigated respectively, and the optimal emission-dependent production models are proposed. Moreover, the existence and uniqueness of the optimal policy are guaranteed, and several valuable managerial insights are further concluded.

Keywords: optimal production; emission permits; emission trading; production policies; emission-dependent production; stochastic demand; cap and trade; emission quotas; government quotas; emission savings; tradeoffs; production scale; expected profits; profit maximisation; single-time purification; multi-time purification; society; systems science; assessment methods; social systems.

DOI: 10.1504/IJSSS.2011.038931

International Journal of Society Systems Science, 2011 Vol.3 No.1/2, pp.21 - 39

Available online: 07 Mar 2011 *

Full-text access for editors Access for subscribers Purchase this article Comment on this article