Production Strategy with Substitution Under Cap-and-Trade Regulation

This paper researches the two products production strategy under cap and trade policies by newsboy model. The green product could be regarded as an equivalent of the regular product. The useful conclusions can be obtained: 1) The establishment of cap and trade will benefit for the improvement of manufacture performance. 2) After green technology input, the quantity of regular product will raise and the quantity of green product under cap and trade will decrease. 3) There is expectant profit that could be earned through selling extra carbon emission or buy less carbon emission from outside market after green technology input under cap and trade policy.