Carbon allowance allocation rules and sales channel strategies in an e-commerce platform supply chain

The carbon cap-and-trade mechanism is increasingly influencing the online selling channel selection and pricing strategy in an e-commerce platform supply chain with two different sales channels (agency selling and reselling channels). This paper examines how two carbon allowance allocation rules (grandfathering and benchmarking) influence channel selection, pricing and profitability in a platform supply chain consisting of one supplier and one e-commerce platform. Using game-theoretic models under four scenarios arising from two carbon allowance allocation rules and two sales channels, we find that the benchmarking rule consistently yields lower retail prices, higher demand, and greater consumer surplus compared to grandfathering. However, the preferred carbon allowance allocation rule differs across stakeholders. In agency channel, the platform’s profit is lower (higher) under benchmarking with the higher (lower) supplier’s carbon allowance compared to grandfathering. In reselling channel, the platform consistently benefits more from benchmarking. Under agency channel with a high (low) platform fee, the government prefers the grandfathering (benchmarking) when the grandfathering allowance is high (low). Under reselling channel, the government prefers the benchmarking (grandfathering) when the benchmarking allowance is high (low).