Simulation of the strategic evolution process and interactions between stakeholders in water trading and carbon trading

Abstract

Water scarcity and carbon emissions are two of the most pressing issues facing the world. Water rights trading (WRT) and carbon emissions trading (CET) can alleviate pressure on resources and the environment and promote sustainable development. However, the relationship between water scarcity and carbon emissions results in a complex water-carbon nexus between sectors. To explore the mechanisms of interaction among related sectors in the context of WRT and CET, this study built a tripartite evolutionary game model that includes the agriculture, industry, and forestry sectors (AIFSs) to simulate the strategic evolution process and interactions between stakeholders based on replicated dynamic equations. Four cities in the Dongjiang River Basin (DRB) in southern China were analyzed to quantify the influence of key parameters on the strategic evolution process and reveal the relationship between sectors under the effect of WRT and CET. The results indicated that There is a significant impact of agricultural net benefits in the DRB on the choice of AIFS strategy, which in turn leads to better WRT that promotes the mutual coupling of AIFS strategies. In addition, strategy coupling brings higher relative returns and risks to the game system, and multiple markets enable AIFS to hedge losses that may result from single market failures in the mutual game. Furthermore, AIFS' behavioral strategies are not necessarily aligned with market expectations, which has implications for us as we guide the development of WRT and CET.