A Stochastic Bilevel Decision-Making Model of Optimal Production Planning with Carbon Emission Trading

In this paper, we focus on a optimal production planning problem with carbon emission trading. We build a bilevel decision-making model with taking into account the participation of the government. In this model, the government is the leader and the firm is the follower. Since the uncertain market factors, the demand of the products and the prices of allowance of carbon dioxide (CO₂) emission are assumed as random variables. The technique of chance-constrained programming are used to deal with the randomness. After that, the bilevel structure of the model is transformed into single model through Karush-Kuhn-Tucker (KKT) algorithm. A numerical example, as additional discussion illustrated the effectiveness of the model and algorithm proposed in this paper.