Multi-item production planning with carbon cap and trade mechanism

► We investigate a capacitated multi-item production planning problem with carbon cap and trade mechanism. ► The optimal policy and an efficient solution method are proposed. ► The impacts of the carbon cap and trade mechanism on the system performance are analyzed. ► We show the taxation policy is a special case of the carbon cap and trade policy in the studied system. ► Managerial insights are obtained for business managers to understand the impact of carbon emission control.