eng Science and Education Publishing Journal of Business and Management Sciences 2333-4533 2020-01-10 8 1 7 11 10.12691/jbms-8-1-2 JBMS2020812 article Xinyuan Cui 1143450566@qq.com 1 Duanshu Peng 1 Yulong Huang 2 Business School, Sichuan University, P.R. China, 610065 School of Management, Zhejiang University, P.R. China, 310058 Carbon tax scheme is one main low-carbon policy to curb carbon emission. This paper develops an optimal production policy model with defective items in a single production period under carbon tax scheme. We assume that the demand for perfect items is price-sensitive and environment-sensitive and the defective items can always be sold. Firstly, we get the optimal production policy and the maximum expected profit. Secondly, we analyze the effect of some parameters emphatically and the results show that when the tax rate is low, firm can’t utilize the optimal production policy unless the rate of perfect product is high. We also find that the optimal production lots may increases when the rate of perfect product increases and the profit may decreases in the same situation, which is inconsistent with intuition. http://pubs.sciepub.com/jbms/8/1/2/jbms-8-1-2.pdf carbon tax scheme optimal production policy defective item price-sensitive environment-sensitive