Emission reduction decision under carbon quota competition versus cooperation trade mode of dual supply chain based on two allocation mechanisms

Under different initial carbon quota allocation mechanisms, firms adopt distinct emission reduction and production strategies, leading to varied carbon trading patterns. This study examines two prevalent allocation mechanisms (grandfathering and benchmarking) and develops single- and dual-supply chain models to analyse competitive versus cooperative carbon trading modes. In the single-chain model, we analyse the influence of carbon trading prices on emission reduction and derive the upper and lower thresholds of initial carbon quotas for each mechanism. Extending to the dual-chain model, we compare competition and cooperation modes, proposing a synergistic effect between allocation mechanisms and carbon trading. Research findings demonstrate that the benchmarking mechanism consistently outperforms grandfathering in both emission reduction and production efficiency, provided the initial carbon quota falls within a defined range. Under the same allocation mechanism, the supply chain prioritises monopolising consumer markets; however, cooperation becomes optimal if a carbon quota surplus exists between dual chains. Furthermore, government allocation policy must set initial quotas within an appropriate range to achieve better emission reduction.