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A Differential Game of Transboundary Industrial Pollution with Emission Permits Trading

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  • Shoude Li

    (Shanghai Jiao Tong University)

Abstract

Transboundary pollution is a particularly serious problem as it leads people located at regional borders to disproportionately suffer from pollution. In 2007, a cooperative differential game model of transboundary industrial pollution was presented by Yeung. It is the first time that time-consistent solutions are derived in a cooperative differential game on pollution control with industries and governments being separate entities. In this paper, we extend Yeung’s model to an even more general model, in which emission permits trading is taken into account. Our objective is to make use of optimal control theory to find the two regions’ noncooperative and cooperative optimal emission paths such that the regions’ discounted stream of net revenues is maximized. We illustrate the results with a numerical example.

Suggested Citation

  • Shoude Li, 2014. "A Differential Game of Transboundary Industrial Pollution with Emission Permits Trading," Journal of Optimization Theory and Applications, Springer, vol. 163(2), pages 642-659, November.
    • Handle: RePEc:spr:joptap:v:163:y:2014:i:2:d:10.1007_s10957-013-0384-7
    DOI: 10.1007/s10957-013-0384-7
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    1. Ouardighi, Fouad El & Sim, Jeong Eun & Kim, Bowon, 2016. "Pollution accumulation and abatement policy in a supply chain," European Journal of Operational Research, Elsevier, vol. 248(3), pages 982-996.
    2. Shuhua Chang & Suresh P. Sethi & Xinyu Wang, 2018. "Optimal Abatement and Emission Permit Trading Policies in a Dynamic Transboundary Pollution Game," Dynamic Games and Applications, Springer, vol. 8(3), pages 542-572, September.
    3. Lai, Junyu & Wan, Justin W.L. & Zhang, Shuhua, 2019. "Numerical methods for two person games arising from transboundary pollution with emission permit trading," Applied Mathematics and Computation, Elsevier, vol. 350(C), pages 11-31.
    4. Baogui Xin & Wei Peng & Minghe Sun, 2019. "Optimal Coordination Strategy for International Production Planning and Pollution Abating under Cap-and-Trade Regulations," IJERPH, MDPI, vol. 16(18), pages 1-21, September.
    5. David W. K. Yeung & Leon A. Petrosyan, 2016. "A Cooperative Dynamic Environmental Game of Subgame Consistent Clean Technology Development," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 18(02), pages 1-23, June.
    6. Yingxuan Zhang, 2020. "Regional Collaborative Electricity Consumption Management: an Urban Operations Research Model," SN Operations Research Forum, Springer, vol. 1(4), pages 1-28, December.
    7. Ryle S. Perera & Kimitoshi Sato, 2023. "Ensuring Mutual Benefit in a Trans-boundary Industrial Pollution Control Problem," Computational Economics, Springer;Society for Computational Economics, vol. 62(1), pages 91-128, June.
    8. Hao Xu & Ming Luo, 2022. "Optimal Environmental Policy in a Dynamic Transboundary Pollution Game: Emission Standards, Taxes, and Permit Trading," Sustainability, MDPI, vol. 14(15), pages 1-25, July.
    9. Fouad El Ouardighi & Konstantin Kogan & Giorgio Gnecco & Marcello Sanguineti, 2020. "Transboundary pollution control and environmental absorption efficiency management," Annals of Operations Research, Springer, vol. 287(2), pages 653-681, April.
    10. Li, Shoude & Zhang, Yingxuan, 2023. "Abatement technology innovation and pollution tax design: A dynamic analysis in monopoly," Energy Economics, Elsevier, vol. 119(C).
    11. Li, Huiquan & Guo, Genlong, 2019. "A differential game analysis of multipollutant transboundary pollution in river basin," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 535(C).
    12. Shuhua Chang & Xinyu Wang & Alexander Shananin, 2015. "Modeling and Computation of Mean Field Equilibria in Producers' Game with Emission Permits Trading," Papers 1506.04869, arXiv.org.
    13. Wang, Xinyu & Sethi, Suresh P. & Chang, Shuhua, 2022. "Pollution abatement using cap-and-trade in a dynamic supply chain and its coordination," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 158(C).
    14. Hao Xu & Deqing Tan, 2023. "Optimal Abatement Technology Licensing in a Dynamic Transboundary Pollution Game: Fixed Fee Versus Royalty," Computational Economics, Springer;Society for Computational Economics, vol. 61(3), pages 905-935, March.
    15. Jiayi Sun & Deqing Tan, 2023. "Non-cooperative Mode, Cost-Sharing Mode, or Cooperative Mode: Which is the Optimal Mode for Desertification Control?," Computational Economics, Springer;Society for Computational Economics, vol. 61(3), pages 975-1008, March.
    16. Chang, Shuhua & Qin, Weihua & Wang, Xinyu, 2018. "Dynamic optimal strategies in transboundary pollution game under learning by doing," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 490(C), pages 139-147.
    17. Wang, Xinyu & Zhang, Shuhua & Hao, Wenwei, 2022. "Myopic vs. foresighted behaviors in a transboundary pollution game with abatement policy and emission permits trading," Chaos, Solitons & Fractals, Elsevier, vol. 156(C).
    18. Bowon Kim & Jeong Eun Sim & Caroline Elliott, 2015. "Impacts of government and market on firm’s efforts to reduce pollution," Cogent Economics & Finance, Taylor & Francis Journals, vol. 3(1), pages 1062634-106, December.
    19. Huijie Li & Deqing Tan, 2024. "How to Control Waste Incineration Pollution? Cost-Sharing or Penalty Mechanism—Based on Two Differential Game Models," Decision Analysis, INFORMS, vol. 21(2), pages 91-109, June.
    20. Wenguang Tang & Shuhua Zhang, 2019. "Modeling and Computation of Transboundary Pollution Game Based on Joint Implementation Mechanism," Complexity, Hindawi, vol. 2019, pages 1-18, August.
    21. Xiao, Lu & Liu, Jianyue & Ge, Jinwen, 2021. "Dynamic game in agriculture and industry cross-sectoral water pollution governance in developing countries," Agricultural Water Management, Elsevier, vol. 243(C).

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