Abstract
This paper investigates a Stackelberg differential game between an upstream region and a downstream region for transboundary pollution control and ecological compensation (EC) in a river basin. Among them, the downstream region as the leader chooses its abatement investment level and an ecological compensation rate to encourage upstream investing in water pollution control firstly. After then, the upstream region as the follower determines its abatement investment level to maximize welfare. FFurthermore, we take into consideration the effects of efficiency-improving and cost-reducing learning by doing which are originated from abatement investment activity of both regions simultaneously. The results show the following. (i) There is an optimal ecological compensation rate and under which a Pareto improvement result can be obtained. (ii) Carrying out EC will shift some abatement investment from the downstream region into the upstream region. (iii) The efficiency-improving and cost-reducing learning by doing derived from abatement investment activity of both regions can decrease the optimal ecological compensation rate, increase abatement investment,and improve the social welfare.
Highlights
Nowadays humans in almost all economic activities have been discharging large amounts of pollutants into water bodies
Jørgensen and Zaccour [6] focused on the issue of cooperative transboundary industrial pollution control and gave a payment distribution mechanism that supports the subgame consistent solution
Maybe it is the first time to take emission permits trading into the issue of transboundary industrial pollution game by Li [8], which focuses on the noncooperative and cooperative optimal emission paths of two neighboring countries
Summary
Nowadays humans in almost all economic activities have been discharging large amounts of pollutants into water bodies. In the current study, the issue that both upstream region and downstream region invest for transboundary pollution control under EC still has not been covered and the important effects of learning by doing on abatement investment have not been taken into account. In “Measures for the implementation of ecological compensation for water quality in Jinhua river basin” (issued in 2018 by Jinhua city government, Zhejiang province, China), the compensation standard is determined for different water qualities firstly, and the upstream region in a river basins can choose investment levels to meet different water quality requirements raised by the downstream region.
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