Joint Design and Pricing Problem for Symbiotic Bioethanol Supply Chain Network: Model and Resolution Approach

Abstract

To fight climate change, the Province of Quebec, Canada, has set targets to reduce greenhouse gas emissions by reducing fossil fuel consumption and integrating biofuel content into gasoline and diesel fuel. Motivated by a real-world case study, this paper presents a novel distributed decision model for designing a symbiotic supply chain network and supporting pricing decisions. A distributed decision-making problem is formulated as a game theoretic approach considering a Stackelberg–Nash equilibrium. A novel mathematical model is proposed to support the decisions of four actors: corn farms, processing depots, pig farms, and biorefineries. In addition to the configuration of a biofuel-based industrial symbiosis, the model offers the possibility of setting purchase prices and supply levels for biomass (corn stover supplied by farms), as well as determining sales prices and production levels for the main product (the cellulosic sugar used for the bioethanol production) and a coproduct (pig feed sold to pig farmers). A three-step optimization process involving the user is proposed to address the computational challenges posed by large design problem instances. The case study of the Province of Quebec is used to evaluate the performance of the proposed resolution approach.