The Ecological Compensation Mechanism in a Cross-Regional Water Diversion Project Using Evolutionary Game Theory: The Case of the Hanjiang River Basin, China

As a vital method to resolve conflicts between water use in upstream and downstream areas and solve the problem of transboundary water pollution, watershed ecological compensation is widely used worldwide. It is necessary to analyze the influencing factors of watershed ecological compensation from the perspective of how different governments interact with each other. However, the previous literature has paid less attention to the special situation of cross-regional water diversion projects, the changing processes of governmental behavior, and the interventions by the central government. Therefore, when taking the upstream and downstream governments and the central government in the basin of a cross-regional water diversion project as research objects, it is important to study their behavior and influencing factors to improve the ecological compensation system in the basin. This paper first analyzes the interactions among upstream, downstream, and central governments in the basin, based on evolutionary game theory. Second, the evolutionary game models before and after the interventions by the central government were developed separately, and the effects of different contexts on the dynamic evolutionary process were analyzed. Finally, taking the Hanjiang River Basin as an example, which is where the water source area of China’s South-to-North Water Diversion Middle Project is located, the opportunity cost of protecting the water environment in the upstream areas of this basin was estimated by establishing an econometric regression model using data on water quality and gross domestic product. The results show that (1) the initial probabilities of governments affect their final behaviors; (2) even without the supervision of the central government, it is still possible for upstream and downstream governments to reach the desired state spontaneously; (3) the supervision of the central government can promote upstream and downstream governments to reach a stable state faster; and (4) the current level of compensation from the central government is significantly lower than the opportunity cost of protecting the water environment for upstream governments in the Hanjiang River Basin. This paper can provide helpful insights for improving the ecological compensation system in the basin, which helps promote cooperation in water environment protection.