System Dynamics-Based Game Theoretical Analysis for Watershed Eco-Compensation Design: A Case Study in Tuojiang River, Sichuan Province, China

Eco-compensation is an important policy tool to trade off economic development and environmental protection in a watershed. This study introduced the gross ecosystem product (GEP) accounting system to identify the eco-compensation provider (ECP) and eco-compensation receiver (ECR) of a river basin. Then, a cooperative game model and a non-cooperative game model between the ECP and the ECR were established, in which system dynamics was incorporated into the game theoretical analysis to aid selection of the optimal compensation scheme. The study further demonstrated the model applications by taking the Tuojiang River Basin as a case. The results showed that the accounted GEP increased from CNY 32.2 billion in 2018 to CNY 35.5 billion in 2020, with a growth rate of 10.2%. Deyang City, as an ECP, had a cumulative difference of CNY 11.759 billion between its accounted GEP and actual GEP output over the three years. Neijiang City, Zigong City, and Luzhou City were taken as the ECR, receiving the GEP revenues as CNY 11.289 billion, 7.661 billion, and 1.497 billion, respectively. Chengdu City changed from the ECP to the ECR and ultimately to the ECP. However, Ziyang City and Meishan City changed from the ECP to the ECR. The eco-compensations increased to varying degrees during 2018–2020 in both game scenarios, with ECP payments and ECR revenues increasing by 16.5% and 4.6% in the non-cooperative game and by 5.0% and 50.8% in the cooperative game. Particularly, the eco-compensation obtained by the cooperative game had better environmental and economic performance, as there was a total of CNY 7.049 billion being saved. However, there was no savings of compensation by the non-cooperative game. It is expected that the results may provide insight into the design of the eco-compensation standard for a river basin.