Abstract for: Dynamics of Emission-based Production and Inventory Control System and Carbon Market: Moving towards an integrated framework

This paper proposes using technological transition and a carbon market in the EPICS model. Sub-unit of capacity upgradation is used to reduce unit emission as a long-term system objective via., a clean technology transition modeled using the Bass Diffusion model for technological forecasting. The delay involved in the transition requires the system to have a short-term solution for carbon credit from a fictitious carbon market (another sub-unit). A modified stock management structure determines ordering/buying decisions for a deficit/surplus in carbon credit to increase/decrease Emission Allowance for smooth operations without higher environmental costs. This paper is the first step toward creating a generic model to understand the interplay in operations for the above three sub-units for long-term and short-term decisions. Sub-units are simulated under various scenarios for POUT policies to determine dynamics and costs associated with selected parameters. Average Cost (holding and backlog) and Environment Cost (Emission Cost, Revenue, and penalty) are considered performance measures for the POUT policy in the system. Initial results suggest that the choice of control parameters significantly impacts the system and environmental cost.