Enhancing the Efficiency of Enterprise Shutdowns for Environmental Protection: An Agent-Based Modeling Approach with High Spatial-Temporal Resolution Data

Abstract

Top-down environmental policies aim to mitigate environmental risks but inevitably lead to economic losses due to the market entry or exit of enterprises. This study developed a universal dynamic agent-based supply chain model to achieve tradeoffs between environmental risk reduction and economic sustainability. The model was used to conduct high-resolution daily simulations of the dynamic shifts in enterprise operations and their cascading effects on supply chain networks. It includes production, consumption, and transportation agents, attributing economic features to supply chain components and capturing their interactions. It also accounts for adaptive responses to daily external shocks and replicates realistic firm behaviors. By coupling high spatial-temporal resolution firm-level data from 18 916 chemical enterprises, this study investigates the economic and environmental impacts of an environmental policy resulting in the closure of 1 800 chemical enterprises over three years. The results revealed a significant economic loss of 25.8 billion USD, ranging from 23.8 USD to 31.8 billion USD. Notably, over 80% of this loss was attributed to supply chain propagation. Counterfactual analyses indicated that implementing a staggered shutdown strategy prevented 18.8% of supply chain losses, highlighting the importance of a gradual policy implementation to prevent abrupt supply chain disruptions. Furthermore, the study highlights the effectiveness of a multi-objective policy design in reducing economic losses (about 29%) and environmental risks (about 40%), substantially enhancing the efficiency of the environmental policy. The high-resolution simulations provide valuable insights for policy designers to formulate strategies with staggered implementation and multiple objectives to mitigate supply chain losses and environmental risks and ensure a sustainable future.