Tactical supply chain planning under a carbon tax policy scheme: A case study

Greenhouse gas emissions are receiving greater scrutiny in many countries due to international forces to reduce anthropogenic global climate change. Industry and their supply chains represent a major source of these emissions. This paper presents a tactical supply chain planning model that integrates economic and carbon emission objectives under a carbon tax policy scheme. A modified Cross-Entropy solution method is adopted to solve the proposed nonlinear supply chain planning model. Numerical experiments are completed utilizing data from an actual organization in Australia where a carbon tax is in operation. The analyses of the numerical results provide important organizational and policy insights on (1) the financial and emissions reduction impacts of a carbon tax at the tactical planning level, (2) the use of cost/emission tradeoff analysis for making informed decisions on investments, (3) the way to price carbon for maximum environmental returns per dollar increase in supply chain cost.