Structure Adjustment of Automobile Supply Chain Facing Low-carbon Emission Standard

Driven by the EU 2019 low-carbon emission standard for automobile industry, gasoline car brands such as Fiat have considered either to (1) pay penalty or (2) cooperate with E-vehicle brands such as Tesla to pool their carbon emissions. These two strategies result in corresponding supply chain structures where the latter has cooperation relationship between automobile brands because the gasoline car brand has to purchase and resell E-vehicles. In this paper, we study under what conditions the gasoline car brand will choose the Pooling Strategy, which promotes low-carbon transformation. We show that the gasoline car brand's profit will always be hurt by the EU 2019 Standard, but a sufficiently high excess emission premium can successfully induce the gasoline car brand to choose the Pooling Strategy. We then develop a lifetime environmental performance index and find that, interestingly, a tighter carbon emissions standard may result in worse environmental performance.

Automated summary

The EU's 2019 low-carbon emission standard has driven gasoline car brands to either pay penalties or cooperate with E-vehicle brands like Tesla to pool their carbon emissions. However, a sufficiently high excess emission premium can successfully induce gasoline car brands to choose the cooperation strategy for low-carbon transformation.