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Harmonizing model with transfer tax on water pollution across regional boundaries in a China’s lake basin

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Author Info

  • Zhao, Laijun
  • Li, Changmin
  • Huang, Rongbing
  • Si, Steven
  • Xue, Jian
  • Huang, Wei
  • Hu, Yue
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    Abstract

    This paper presents a bilevel programming framework for a harmonizing model with transfer tax (HMTT) on water pollution across regional boundaries of a lake basin in China, where the administrator is the upper-level decision maker and individual regions consisting of the lake basin are the lower-level decision makers (followers). Leader’s cost is the total pollution reduction cost, whereas each region selfishly minimizes its own cost including reduction cost and transfer cost, given the transfer tax rate imposed by the leader. The HMTT guarantees that the imposed environmental quality standard is met through the transfer tax. Based on the KKT conditions of an auxiliary problem, we obtain that the solution set of the HMTT is nonempty. An algorithm is proposed, with the convergence result, to compute the cost-minimized transfer tax rate along with the reduction quantities of individual regions. Theoretical analysis and a case study for China’s Taihu Lake Basin show that the HMTT is superior to the current model of proportional share of pollution reduction (MPSPR). The HMTT not only solves the problem of conflicts over water pollution across regional boundaries but also utilizes the resources of the lake basin more efficiently.

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    Bibliographic Info

    Article provided by Elsevier in its journal European Journal of Operational Research.

    Volume (Year): 225 (2013)
    Issue (Month): 2 ()
    Pages: 377-382

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    Handle: RePEc:eee:ejores:v:225:y:2013:i:2:p:377-382

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    Web page: http://www.elsevier.com/locate/eor

    Related research

    Keywords: Environment; Lake basin; Transboundary pollution; Tax rate; Bilevel programming; KKT conditions;

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    1. Cremer, Helmuth & Gahvari, Firouz, 2004. "Environmental taxation, tax competition, and harmonization," Journal of Urban Economics, Elsevier, vol. 55(1), pages 21-45, January.
    2. Basak Bayramoglu, 2006. "Transboundary Pollution in the Black Sea: Comparison of Institutional Arrangements," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 35(4), pages 289-325, December.
    3. Bennett, Lynne Lewis, 2000. "The integration of water quality into transboundary allocation agreements: Lessons from the southwestern United States," Agricultural Economics, Blackwell, vol. 24(1), pages 113-125, December.
    4. Calvete, Herminia I. & Gale, Carmen & Mateo, Pedro M., 2008. "A new approach for solving linear bilevel problems using genetic algorithms," European Journal of Operational Research, Elsevier, vol. 188(1), pages 14-28, July.
    5. Tang, Christopher S. & Zhou, Sean, 2012. "Research advances in environmentally and socially sustainable operations," European Journal of Operational Research, Elsevier, vol. 223(3), pages 585-594.
    6. Wei, Shouke & Yang, Hong & Song, Jinxi & Abbaspour, Karim C. & Xu, Zongxue, 2012. "System dynamics simulation model for assessing socio-economic impacts of different levels of environmental flow allocation in the Weihe River Basin, China," European Journal of Operational Research, Elsevier, vol. 221(1), pages 248-262.
    7. Carraro, Carlo & Galeotti, Marzio, 1997. "Economic growth, international competitiveness and environmental protection: R & D and innovation strategies with the WARM model," Energy Economics, Elsevier, vol. 19(1), pages 2-28, March.
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