Vertical decentralization, environmental regulation, and enterprise pollution: An evolutionary game analysis

Abstract

Achieving sustainable economic development and mitigating climate change require effective green transformation management. This study builds an evolutionary game model for industrial enterprises, local governments, and the central government, analyzing the dynamic interactions among vertical decentralization, environmental regulation, and enterprise pollution. Our research reveals that increasing environmental taxes can incentivize industrial enterprises to adopt green transformation practices and promote governments at all administrative levels to supervise and enforce environmental regulations. Moreover, in the context of vertical decentralization, financial incentives provided by the central government to local governments become critical drivers for promoting green transformation. Furthermore, the additional social benefits resulting from local government supervision and governance are key factors in green transformation management, while the negative social effects of industrial enterprises not rectifying their actions are noteworthy. Our study emphasizes the need for an integrated framework incorporating these critical elements for successful green transition management. The findings of this research provide valuable insights for developing nations seeking to enhance their governance capacity throughout the green transformation process.