Capacity and production planning with carbon emission constraints

This paper builds a two-stage, stochastic model to study capacity expansion problem in logistics under cap-and-trade and carbon tax regulations. The optimal capacity expansion and production decisions are obtained, and the effects of carbon emission regulations on capacity expansion are studied. Through analytical study and a real case numerical analysis, we find that the carbon tax exhibits different impacts on optimal capacity expansion decisions in low tax rate and high tax rate, and the volatility of capacity investment cost has a larger impact on optimal capacity expansion than that of production cost.