This paper investigates the value of advance payment financing to carbon emission reduction and production in a supply chain. We discuss two models, namely, (1) a supply chain model with a manufacturer that is not capital-constrained, under the conditions of being with and without advance payment financing, and (2) a supply chain model with a capital-constrained manufacturer, under the conditions of using bank financing and mixed financing. We characterize and compare the optimal solutions in the two supply chain models and then extend the models with cap-and-trade regulation and general stochastic demand. We find that in the supply chain model without a capital-constrained manufacturer, advance payment financing with a low-price discount can increase the supply chain partners’ profits. However, in the supply chain model with a capital-constrained manufacturer, when the manufacturer’s production cost is high, mixed financing with a low-price discount can improve both partners’ profits. Furthermore, in the model with a capital-constrained manufacturer, when the manufacturer’s carbon emission reduction efficiency is high, the use of mixed financing can encourage the manufacturer to increase carbon emission reductions. The results help the manufacturer and the retailer to decide whether to join in advance payment financing.

Motivated by the industrial practices, this work explores the carbon emission reductions for the manufacturer, while taking into account the capital constraint and the cap-and-trade regulation. To alleviate the capital constraint, two contracts are analyzed: greening financing and cost sharing. We use the Stackelberg game to model four cases as follows: (1) in Case A1, the manufacturer has no greening financing and no cost sharing; (2) in Case A2, the manufacturer has greening financing, but no cost sharing; (3) in Case B1, the manufacturer has no greening financing but has cost sharing; and, (4) in Case B2, the manufacturer has greening financing and cost sharing. Then, using the backward induction method, we derive and compare the equilibrium decisions and profits of the participants in the four cases. We find that the interest rate of green finance does not always negatively affect the carbon emission reduction of the manufacturer. Meanwhile, the cost sharing from the retailer does not always positively affect the carbon emission reduction of the manufacturer. When the cost sharing is low, both of the participants’ profits in Case B1 (under no greening finance) are not less than that in Case B2 (under greening finance). When the cost sharing is high, both of the participants’ profits in Case B1 (under no greening finance) are less than that in Case B2 (under greening finance).

The paper considers the sustainable trade credit and inventory policies with demand related to credit period and the environmental sensitivity of consumers under the carbon cap-and-trade and carbon tax regulations. First, the decision models are constructed under three cases: without regulation, carbon cap-and-trade regulation, and carbon tax regulation. The optimal solutions of the retailer in the three cases are then discussed under the exogenous and endogenous credit periods. Finally, numerical analysis is conducted to obtain conclusions. The retailer shortens the trade credit period as the environmental sensitivity of the consumer is enhanced. The cap has no effects on the credit period decisions under the carbon cap-and-trade regulation. Carbon trade price and carbon tax have negative effects on the credit period. The retailer under carbon cap-and-trade regulation is more motivated to obey regulations than that under carbon tax regulation when carbon trade price equals carbon tax. Carbon regulations have better effects on carbon emission reduction than with exogenous credit term when the retailer has the power to decide with regards credit policies.

This paper discusses the impact of a trade credit policy on alleviating conflicts arising on a dual‐channel supply chain that includes one manufacturer and one value‐added retailer. We use the Stackelberg game to model the problem and characterize optimal pricing strategies for each supply chain partner, examining different circumstances in terms of retail price and trade credit contracts. When a consistent price strategy is applied in the dual channels under conditions of an exogenous credit period, trade credit can help both partners to achieve win‐win situations in the following circumstances: (1) when the retail channel's market share is small and the retailer's interest rate is high; or (2) when the retail channel's market share is large and the retailer's interest rate is lower than the manufacturer's. The study also concludes that when an inconsistent price strategy is applied, a trade credit contract can alleviate channel conflicts when the retailer's interest rate is higher than the manufacturer's. Otherwise, the partners may terminate cooperation. However, when the manufacturer has the power to determine and set the credit period, trade credit cannot alleviate channel conflicts under consistent price and inconsistent price scenarios.