Designing incentive mechanisms for sustainable biomass supply chain systems: An application of the pulp and paper sector

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University of New Brunswick


This thesis examines the design of incentive mechanisms for sustainable biomass supply chain systems focusing on the pulp and paper sector. The study utilizes a combination of literature review, quantitative modeling, and numerical analysis to identify an appropriate subsidy program for the local government to ensure the truth-telling of pulp and paper mills under the cap-and-trade mechanism using the Lagrange model. The analysis shows that the government helps low-demand and high-demand mills, but the help for the high-demand mill leads to more sustainable decisions, while the support for the low-demand mill keeps an economic disaster from happening. The thesis also proposes specific recommendations for the design of cap-and-trade mechanisms in the pulp and paper sector. The local government’s decision to raise the price of carbon under a favorable subsidy contract that considers the views of all members would be environmentally beneficial. Overall, the thesis contributes to understanding how incentivizing mechanisms promote sustainability in biomass supply chain systems with asymmetric information.