EURO 2024 Copenhagen
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316. Competitive retailers' sourcing strategies under Carbon Border Adjustment Mechanism

Invited abstract in session WB-24: Carbon Regulation, stream Sustainable Supply Chains.

Wednesday, 10:30-12:00
Room: 83 (building: 116)

Authors (first author is the speaker)

1. Fengfeng Xie
Department of Entrepreneurship, Marketing and Management Systems, University of Nottingham Ningbo China

Abstract

We investigate the influence of the newly implemented Carbon Border Adjustment Mechanism (CBAM) by the European Union on sustainable supply chain management. CBAM addresses the global disparity in carbon leakage due to divergent carbon taxation policies that vary across nations and regions. Given that CBAM is designed to prevent double taxation on carbon emissions, understanding its interaction with non-EU carbon regulation mechanisms, like cap and trade policies, is crucial. Our study primarily focuses on how the operational decisions of both EU and non-EU manufacturers are influenced by the interplay between the CBAM and cap and trade policy. Additionally, we aim to analyze how retailers within the EU determine their sourcing strategies, specifically, whether to source globally from non-EU manufacturers or opt for local sourcing within the EU. Our findings reveal that an increase in carbon emission permits allocated to non-EU manufacturers doesn't necessarily lead to a surge in profit. In fact, as additional permits are issued, the supply chain associated with non-EU manufacturers may encounter profitability dilemmas, impacting both the retailer and the non-EU manufacturer. We also find that when the CBAM fee is substantial, and the non-EU manufacturers are granted an large number of permits, retailers are more inclined towards local sourcing.

Keywords

Status: accepted

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