Pigovian tax-based equilibrium strategy for waste-load allocation in river system

Efficient waste-load allocation plays a critical role in improving water quality. In this paper, a Pigovian tax-based waste-load allocation problem generalized from a prototype in the Tuojiang River basin is proposed. To control water quality and resolve the conflicts between dischargers, a Pigovian tax-based equilibrium strategy for waste-load allocation is designed to provide an optimization method for water quality management that fully considers the Stackelberg game between the environmental regulators and the river system dischargers. The successful application of this model to the Tuojiang River basin demonstrates its practicality and efficiency. Sensitivity analyses under different tax rate settings are given to provide the environmental regulators with insights into the impacts of a Pigovian tax policy on the discharger's BOD removal decisions, as well as to identify the waste-load allocation trade-offs between costs and equity. Compared to conventional models, the proposed method has the ability to reduce pollutants and achieve equitable waste-load allocations. The results demonstrated that as the proposed method can encourage dischargers to improve emissions performance, it could be of significant assistance to environmental decision making.