A Bi-level optimization approach to reduce the pollution burden of lake water with ecological compensation

Abstract

Lake Ecological Compensation (LEC) mechanism is a localized approach of payment for ecosystem services to address the conflict between economic development and ecological conservation. However, how to motivate regional stakeholders to participate in water quality protection is a challenge. Based on the traditional Coase Theorem, vertical eco-compensation mechanism has been proposed to solve pollution of lake basin. The quantification of LEC is characterized by key water quality indicators (NH3-N and COD) in this paper. Integrating LEC mechanism with the ecological-economic model, this paper proposes a bi-level optimization framework for the conservation of the lake water environment. Referring to Coase’s theory, the leader’s goal is to distribute waste load permits equally to sub-regions while followers aim to minimize environmental costs. The appropriate application of this method to Taihu Basin demonstrates its efficiency and practicality. The LEC mechanism with different scenarios is analyzed and suggestions for lake water quality are made. The results show that: (1) Considering equitable principle, the new COD allocation scheme has reduced the total amount of emissions by 17% compared to the data in 2020, and the total amount of NH3-N has decreased by 16%. (2) With the cooperation of lake basin institutions, the LEC mechanism is proved to be an effective measure in promoting the conservation of the lake water environment. (3) The spillover effect of environmental and ecological policies in lake water indicates the need to upgrade industrial structure. This paper proposes to provide a more reliable the conservation of the lake water environment paradigm.