Integrated ABC–TOC Framework for Comparing Five Multi-Period Carbon-Pricing Models

Abstract

The cement industry is one of the largest producers of carbon dioxide emissions and thus needs production-planning models that produce profit while simultaneously being environmentally sustainable. This study presents an integrated optimization method of Activity Based Costing(TOC) to analyse the impact of carbon tax, tax exemptions, emissions trading, environmental, social and governance requirements, and production-resource constraints on optimisation of cement manufacturing decisions. Five carbon-pricing models are developed. These models are: continuous incremental progressive carbon-tax structure, tax-exemption mechanism, emissions-trading mechanism, combined tax-exemption and emissions-trading mechanism, and discontinuous incremental progressive carbon-tax structure. The models include raw-material costs, labour costs, operational costs, fixed costs, carbon-emission costs, production capacity, other raw-material usage, and carbon-emission restrictions. LINGO 20 is used to calculate the best product mix and to analyse the profitability and environmental effects in the five policy scenarios. It is found that the total profit in the results of the model 3 is $22.74486 billion, the highest total profit among all of the models. The models can also be used to help target a reduction in the carbon-emission ratio and help with the progressive use of alternative materials. Based on sensitivity analysis, the higher the rate of the carbon tax, the more likely the profitability of the models will decrease. The proposed framework offers a pragmatic decision support tool for both cement manufacturers and policy makers who are aiming to navigate the trade-offs between profitability, emissions, resource efficiency, and ESG performance.