Analyzing production optimization models across various carbon pricing policies

Abstract

As the EU and the US successively proposed the carbon border adjustment mechanism (CBAM) and the Clean Competition Act (CCA), importers are now required to declare the carbon emissions of their products. Particularly, wheel companies face increasing time pressure with the gradual development of implementation paths for net-zero emissions and implementing carbon pricing policies in various countries. This research uses the production data of Taiwan wheel companies to establish a mathematical model for the activity-based cost optimisation decision-making process. It explores the impact of different carbon emission costs on a company’s product mix with pricing decisions. Further, the research proposes five mathematical programmes for single-period cost optimisation decision-making under carbon pricing. These models provide some detailed view, such as changes in profits and product mix caused by high carbon taxes or other changes for each resource. Furthermore, the production cost optimal model proposed in this research can be used by enterprises to fulfill their social responsibilities while ensuring profitability and serve as a reference for making net-zero transformation decisions.

KEYWORDS:

• Clean Competition Act (CCA)
• activity-based cost
• product mix
• cost optimisation
• carbon pricing
• mathematical model

Acknowledgment

The authors would like to thank the National Science and Technology Council of Taiwan for the financial support of this research under Grant No. MOST111-2410-H-008-021, MOST112-2410-H-008-061, and NSTC 112-2410-H-025-046.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

The authors confirm that the data supporting the findings of this study are available within the article.

Additional information

Funding

This work was supported by National Science and Technology Council of Taiwan [grant number: MOST111-2410-H-008-021, MOST112-2410-H-008-061, and NSTC 112-2410-H-025-046].

Notes on contributors

Chu-Lun Hsieh

Chu-Lun Hsieh received the Ph.D. degree in the Department of Business Administration, National Central University, Taiwan. He joined National Taichung University of Science and Technology, Taichung, Taiwan, in 2023, where he is currently an Assistant Professor in the Department of Accounting Information. He is a member of the Certified Government Auditing Professional (CGAP). His research interests include government auditing, ERP performance measurement, carbon tax and carbon policies, circular economy, green production, optimisation decisions, activity-based costing, and management accounting. He has published several papers in the International Journal of Production Research, Annals of Operational Research, Journal of Cleaner Production, etc.

Wen-Hsien Tsai

Wen-Hsien Tsai is a Professor of Accounting and Information Systems in the Department of Business Administration at National Central University, Taiwan. He received his PhD in Industrial Management from the National Taiwan Science and Technology University. He is a certified SAP Application Consultant on Accounting. His research interests include Activity-Based Costing (ABC), green optimisation, carbon tax and carbon right, and Enterprise Resource Planning (ERP). He has published several papers in International Journal of Production Research, International Journal of Production Economics, European Journal of Operational Research, Annals of Operational Research, Computers and Operations Research, Computers and Industrial Engineering, Journal of the Operational Research Society, Omega, Information & Management, Decision Support Systems, Transportation Science, Industrial Marketing Management, etc.

Po-Yuan Chu

Po-Yuan Chu received the Ph.D. degree in the Department of Business Administration, National Central University, Taiwan, in 2019. He serves as an SAP Consultant in International Business Machine, Taiwan in 2020. His research interests include, activity-based costing, carbon emission, carbon right, and linear programming.