Exploring the impact of different carbon emission cost models on corporate profitability

Wen Hsien Tsai, Shang Yu Lai, Chu Lun Hsieh

Research output: Contribution to journalArticlepeer-review

Abstract

With increasing pressure to cut carbon emissions and develop sustainability plans, companies need carbon credits to offset emissions that cannot be eliminated from their operations, new global carbon exchange to launch in Singapore by 2021 end, the high-quality credit can bridge this gap and play an important role in the overall climate change mitigation strategy. The purpose of this research is to use the production data (including carbon emissions) of paper-making companies in Taiwan to establish a circular economy mathematical programming model and the concept based on the activity cost method (ABC) to explore the impact of different carbon emissions costs (such carbon tax, carbon cap-and-trade, etc.) on the company’s production structure and profitability impact. The research results show that different carbon emission cost models have different effects on the company's optimal product-mix and profitability. The managerial implication is to combine the extensive application of the carbon emission credit mechanism, which can offset the carbon emissions in the production process and have a significant impact on the company's sustainable competitiveness. In addition, this study can also enable decision makers to understand the impact of different carbon emission cost models on the profitability of the company's product mix, which can be used as a reference for production planning decisions.

Original languageEnglish
JournalAnnals of Operations Research
DOIs
StateAccepted/In press - 2022

Keywords

  • Activity-based costing (ABC)
  • Carbon cap-and-trade
  • Carbon tax
  • Circular economy (CE)
  • Optimal product-mix
  • OR in environment and climate change

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