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

Zuliang Lu (), Mingsong Li, Lu Xing and Junman Li
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Zuliang Lu: Chongqing Three Gorges University
Mingsong Li: Chongqing Three Gorges University
Lu Xing: Chongqing Three Gorges University
Junman Li: Chongqing Three Gorges University

Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), 2025, vol. 39, issue 10, No 10, 4893-4922

Abstract: 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.

Keywords: Differential game; Cost sharing; Environmental compensation; Reward-punishment mechanisms (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s11269-025-04181-y

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