LAUSR

Abstract Green Credit Policy (GCP) in South Korea is an environmentally friendly regulation that enables manufacturers to reduce pollution by cooperating with suppliers. The main objective of this study is to investigate the impact of the GCP on manufacturers’ efforts to reduce pollution in the supply chain. This study adopts an optimal control model that reflects the GCP’s incentive scheme as well as consumers’ environmental awareness. A numerical analysis is illustrated to demonstrate the applicability of our model. We find that manufacturers can create additional value by reducing their suppliers’ pollution at the desirable levels. Furthermore, our finding suggests that manufacturers should strengthen their capability to reduce pollution to obtain more incentives under the GCP.