Model of transfer tax on transboundary water pollution in China’s river basin

Transboundary water pollution is a persistent problem in China. This study proposes a Model of Transfer Tax (MTT) which incorporates a typical Stackelberg game between the administrator and individual region of a river basin. The MMT model considers the geographic structure of a river basin and can be used to compute an optimal pollutant transfer tax rate. Given the tax rate, an individual region can decide its optimal pollution reduction. The transfer tax rate serves as an ecological compensation standard that enhances cooperation on pollution reduction among the regions, achieving the minimum pollution reduction cost for the whole river basin.