A Rating Charge Model of Transfer Tax for China's Interprovincial Air Pollution Control

Abstract

In this paper, we established a rating charge model of transfer tax (RCTT) to solve transboundary air pollution control problem of China. Firstly, by using the bi-level nonlinear programming model. In this model, the leader is China's central government and the followers consist of China's 31 provinces. The leader aims to decrease the nation's total pollutant control costs, whereas each province attempts to minimize its pollution control costs by balancing its own pollutant reduction cost with transfer tax to or from other provinces, in the context of a transfer tax rate set by the leader. Then, we used the SO2 reduction amount of Beijing, Tianjin and Hebei province from 2003 to 2009 as an example to fit the environmental damage cost of air pollutants. Finally, the optimal solution of RCTT model was compared with Provincial Territorial Management Model based on basic data. The results showed that RCTT model not only can make the total cost of pollution control in the whole region is the lowest but also promote cooperation of each administrative region to control the transboundary air pollution.