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Managing Risk Aversion for Low-Carbon Supply Chains with Emission Abatement Outsourcing

School of Management Science and Engineering, Hebei University of Economics and Business, Shijiazhuang 050061, China
College of Management and Economics, Tianjin University, Tianjin 300072, China
Author to whom correspondence should be addressed.
Int. J. Environ. Res. Public Health 2018, 15(2), 367;
Received: 16 November 2017 / Revised: 6 January 2018 / Accepted: 19 January 2018 / Published: 21 February 2018
(This article belongs to the Special Issue Green Environment, Green Operations and Sustainability)
PDF [1404 KB, uploaded 21 February 2018]


Reducing carbon emissions, including emission abatement outsourcing at the supply-chain level, is becoming a significant but challenging problem in practice. Confronting this challenge, we therefore break down the practice to focus on a low-carbon supply chain consisting of one supplier, one manufacturer and one third-party emission-reducing contractor. The contractor offers a carbon reduction service to the manufacturer. In view of the increasing proportion of Greenhouse Gases (GHG) emissions and absence of carbon reduction policies in developing countries, we adopt the prospect of consumers’ low-carbon preferences to capture the demand sensitivity on carbon emission. By exploiting the Mean-Variance (MV) model, we develop a supply chain game model considering risk aversion. Comparing the supply chain performances of the cases under risk neutrality and risk aversion, we investigate the impact of the risk aversion of the supplier and the manufacturer on the low-carbon supply chain performances, respectively. We show that the risk aversion of chain members will not influence the relationship underlain by the profit-sharing contract between the manufacturer and contractor, whereas they may extend the supplier’s concerning range. Although the manufacturer’s risk aversion has a positive impact on the wholesale price, interestingly, the supplier’s impact on the wholesale price is negative. Furthermore, we propose a contract to coordinate the risk-averse low-carbon supply chain by tuning the aversion levels of the supplier and the manufacturer, respectively. Through numerical study, we draw on managerial insights for industrial practitioners to adopt a low carbon strategy potentially by managing the risk attitudes along the supply chain channel. View Full-Text
Keywords: carbon efficient operations; emission-reduction outsourcing; low-carbon preference; risk aversion; supply chain coordination carbon efficient operations; emission-reduction outsourcing; low-carbon preference; risk aversion; supply chain coordination

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Wang, Q.; He, L. Managing Risk Aversion for Low-Carbon Supply Chains with Emission Abatement Outsourcing. Int. J. Environ. Res. Public Health 2018, 15, 367.

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