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

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.

Suggested Citation

  • Zhao, Laijun & Li, Changmin & Huang, Rongbing & Si, Steven & Xue, Jian & Huang, Wei & Hu, Yue, 2013. "Harmonizing model with transfer tax on water pollution across regional boundaries in a China’s lake basin," European Journal of Operational Research, Elsevier, vol. 225(2), pages 377-382.
    • Handle: RePEc:eee:ejores:v:225:y:2013:i:2:p:377-382
    DOI: 10.1016/j.ejor.2012.10.002
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    3. Xin Gao & Juqin Shen & Weijun He & Fuhua Sun & Zhaofang Zhang & Xin Zhang & Liang Yuan & Min An, 2019. "Multilevel Governments’ Decision-Making Process and Its Influencing Factors in Watershed Ecological Compensation," Sustainability, MDPI, vol. 11(7), pages 1-28, April.
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    6. He, Jie & Huang, Anping & Xu, Luodan, 2015. "Spatial heterogeneity and transboundary pollution: A contingent valuation (CV) study on the Xijiang River drainage basin in south China," China Economic Review, Elsevier, vol. 36(C), pages 101-130.
    7. Fangju Jia & Dong‐dong Wang & Kun Zhou & Lianshui Li, 2022. "Differential decision analysis of transboundary pollution considering the participation of the central government," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 1684-1703, September.
    8. Quanxi Wang & Ni Wang & Haodong Wang & Yuan Xiu, 2022. "Study on Influencing Factors and Simulation of Watershed Ecological Compensation Based on Evolutionary Game," Sustainability, MDPI, vol. 14(6), pages 1-23, March.
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