Optimal operation and subsidies/penalties strategies of a multi-period hybrid system with uncertain return under cap-and-trade policy

As environmental regulations become more stringent worldwide, remanufacturing is attracting growing attention because of its economic and environmental opportunities and many issues related to operational management have been extensively studied in recent years. Most of the existing literature considered largely consistent carbon regulations over the entire planning horizon and assumed that all of the returns are remanufacturable. In practice, carbon regulations may vary at the different stages and whether cores can be remanufactured depends on the quality. In this paper, based on the dual mechanisms of cap-and-trade and subsidies/penalties, we investigate an acquisition and manufacturing/remanufacturing problem with stochastic return of cores and random yield rate, while taking into consideration the distinguishing carbon trading prices over manufacturing and remanufacturing periods as well as product shortages. First, we consider four frequently used probability distribution functions of the core quality level in a multi-period hybrid manufacturing and remanufacturing system to confirm the broader adaptability of the model to a general continuous quality distribution. Second, we propose a general carbon emissions cost function to show the effect of the quality variability on carbon emissions during remanufacturing. Third, the core quality level suitable for corporate recycling and the reasonable quotas of subsidies/penalties for different quality levels are determined simultaneously based on the model. Finally, numerical experiments are carried out using the genetic algorithm (GA) and the particle swarm optimization (PSO) algorithm to illustrate the validity and application of the model and then analyze the sensitivity of the relevant parameters. For all tested instances, important findings obtained include: (1) The increase in the carbon price of manufactured items is more advantageous than the decrease in the carbon price of remanufactured products in reducing carbon emissions and increasing total profits. (2) For quality level of cores, subsidies in the range of 0.2-0.4 and penalties in the range of 0.4-0.56 can simultaneously improve the recovery rate and promote remanufacturing in our experiments.