Abstract: Considering two conditions of whether carbon reduction technology is invested or not, two-stage dynamic game model is discussed in a supply chain consisting of a single manufacturer and a retailer under the Carbon Cap-and-Trade Rules. The influence of consumer's sensitivity coefficients on carbon footprint, carbon emission cap and carbon abatement cost coefficient on enterprises' decisions and carbon reduction is studied under the condition of integrated manners, decentralized manners and cooperative policy. The results show that when the carbon trading price depends linearly on the carbon cap, manufacture and supply chain's profits are not linear with the carbon cap, and the government can make enterprises reduce carbon emissions by formulate a reasonable carbon cap. When consumer's willingness to pay for low carbon product depends on "carbon footprint", the enterprise can reduce the carbon emission as well as obtain greater profits, through investing carbon emission reduction technology, and then realize coordinated development between environment and economy. Carbon emissions can be reduced significantly when manufacturer and retailer make joint decisions on carbon reduction levels through channel coordination.

Key words: carbon cap-and-trade rules, consumer behavior, investment of carbon reduction technology, game