Recently there is a growing concern of global warming, which is mainly because of the carbon emission generated from industrial activities. There is emission due to production, holding and set-up of production process. Cap-and-trade is one of the emission regulations commonly used to control the industrial carbon emissions. In addition to that, tree plantation can help mitigate against climate change by eliminating greenhouse gases from the atmosphere. In this paper, a multi-level lot-sizing problem with environmental impact of greenhouse gas emission in a capacitated job shop situation for multi-period planning horizon is considered. Backlogging is also taken into account in order to incorporate shortage. A mixed integer linear programming model has been developed taking into consideration both carbon cap and trade policies as well as emission reduction activities to optimize the lot size with the objective of minimizing total cost.