Modeling decision processes of a green supply chain with regulation on energy saving level

• Decision processes of a green supply chain with regulation on energy saving level are investigated.
• The results suggest both regulation and structures have significant impacts on supply chain performance.
• The policy maker should set the threshold value of energy saving levels with respect to the decentralized chain.
• If saving energy is an urgent priority and regulation is implemented, then vertical integration or coordination should be advocated.

In this study, we first investigate the impact policy makers have when they set a threshold value of energy saving levels. We examine the impact on energy saving level and price of environmentally friendly products (EFP) decided by green supply chains within two different structures, i.e. vertical integration and a decentralized setting. Then, considering the tradeoff between energy savings and profits made by supply chains, we analyze decisions of the policy makers. In addition, we investigate the coordination of a supply chain by using the common wholesale pricing and profit sharing (WPPS) schemes and a lump sum transfer contract. A numerical example is used to illustrate the related issues. Observations are made, and managerial insights are indicated for the policy maker in setting threshold values of energy saving levels.