Carbon Tax Refund Model of Reverse Supply Chain Network to Maximize GHG Reduction and Minimize Costs

To decarbonize supply chains, many countries have introduced carbon taxes, which levy taxes on greenhouse gas (GHG) emissions. Carbon taxes are expected to reduce GHG emissions in supply chains by adding additional economic loads. In contrast, according to life cycle assessment, GHG emissions from material production can be recovered by recycling end-of-life (EOL) products since the GHG emissions for virgin material production are saved by using recycled materials. Thus, recycling contributes not only to reducing consumption of natural resources but also to reducing GHG emissions. To promote more environmentally friendly and economical recycling, one approach is a carbon tax refund based on the amount of recovered GHG emissions. Therefore, recyclers can obtain refunds of the carbon tax based on their recycled volume. This study models a reverse supply chain network with carbon tax refund determined by the material-based GHG emissions recovered through recycling EOL products. First, the reverse supply chain network is modelled to assess the GHG saving rate and cost using mathematical programming. The proposed bi-objective method determines the number of EOL products transported to recycling or disposal facilities to balance total GHG saving rate and cost. Next, the proposed design method is validated by numerical experiments. Finally, the effects by rate of carbon tax refund are examined.