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Transboundary River Basin Eco-Compensation with Reward-Punishment Mechanisms: a Differential Game Perspective

Author

Listed:
  • Zuliang Lu

    (Chongqing Three Gorges University
    Tianjin University of Finance and Economics)

  • Mingsong Li

    (Chongqing Three Gorges University)

  • Lu Xing

    (Chongqing Three Gorges University)

  • Junman Li

    (Chongqing Three Gorges University)

Abstract

The transboundary river basin eco-compensation mechanism serves as an environmental financial instrument aimed at achieving cross-border water quality standards and promoting sustainable watershed development. This study develops differential game models by integrating pollutant dynamic evolution processes with the distinct environmental objectives of upstream and downstream jurisdictions. The analysis compares economic outcomes across three compensation frameworks: No Eco-compensation (NEC), Upstream-Downstream Eco-compensation (UDEC), and Downstream-Upstream Eco-compensation (DUEC), coupled with three policy mechanisms: No Reward-Punishment Mechanism (NRPM), End-of-Period Assessment (EPA), and Real-Time Assessment (RTA). Key findings include: (1) Reward-punishment mechanisms significantly enhance stakeholder engagement in pollution control, effectively supporting emission reduction target attainment. (2) The implementation demonstrates that transboundary eco-compensation stimulates collaborative water resource protection between upstream and downstream regions, effectively reducing pollution discharge while enhancing basin-wide water quality and ecological integrity. (3) The mechanism successfully harmonizes economic interests across basin jurisdictions, establishing reciprocal ecological-economic benefits through compensation-provision linkages that balance protection responsibilities with financial returns.

Suggested Citation

  • Zuliang Lu & Mingsong Li & Lu Xing & Junman Li, 2025. "Transboundary River Basin Eco-Compensation with Reward-Punishment Mechanisms: a Differential Game Perspective," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 39(10), pages 4893-4922, August.
    • Handle: RePEc:spr:waterr:v:39:y:2025:i:10:d:10.1007_s11269-025-04181-y
    DOI: 10.1007/s11269-025-04181-y
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    References listed on IDEAS

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    1. Zhigang Chen & Rongwei Xu & Yongxi Yi, 2020. "A Differential Game of Ecological Compensation Criterion for Transboundary Pollution Abatement under Learning by Doing," Discrete Dynamics in Nature and Society, Hindawi, vol. 2020, pages 1-13, July.
    2. Zhen Yu & Qingjian Zhao, 2022. "Research on the Coordinated Governance Mechanism of Cross-Regional and Cross-Basin Ecological Compensation in the Yangtze River Delta," IJERPH, MDPI, vol. 19(16), pages 1-20, August.
    3. Yuansheng Wang & Xiaojing Wu & Juqin Shen & Chen Chi & Xin Gao & Feng Li, 2021. "Analysis on Decision-Making Changes of Multilevel Governments and Influencing Factors in Watershed Ecological Compensation," Complexity, Hindawi, vol. 2021, pages 1-16, December.
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    5. Danyang Di & Qi Shi & Zening Wu & Huiliang Wang, 2023. "Sustainable Management and Environmental Protection for Basin Water Allocation: Differential Game-based Multiobjective Programming," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 37(1), pages 1-20, January.
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