River pollution abatement : a decentralized solution through smart contracts

Jens Gudmundsson, Jens Leth Hougaard

In river systems, costly upstream pollution abatement creates downstream welfare gains. Absent adequate agreement on how to share the gains, upstream regions lack incentives to reduce pollution levels. We develop a model that makes explicit the impact of water quality on production benefits and suggest a solution for sharing the gains of optimal pollution abatement, namely the Shapley value of an underlying convex cooperative game. We provide a decentralized implementation through a smart contract to automate negotiations and payments. In effect, it ensures a socially optimal agreement supported by fair compensations to regions that turn to cleaner production from those that pollute.

MoreLess

Year of publication:	September 2021
Authors:	Gudmundsson, Jens ; Hougaard, Jens Leth
Publisher:	Frederiksberg, Denmark : Department of Food and Resource Economics (IFRO), University of Copenhagen
Subject:	River pollution \| Decentralized mechanism \| Shapley value \| Water quality \| Smartcontracts \| Gewässerbelastung \| Water pollution \| Dezentralisierung \| Decentralization \| Spieltheorie \| Game theory \| Shapley-Wert \| Fluss \| River \| Umweltpolitik \| Environmental policy \| Umweltschutz \| Environmental protection \| Gewässerschutz \| Water conservation \| Wasser \| Water \| Umweltbelastung \| Pollution