Template-Type: ReDIF-Paper 1.0
Author-Name: Jens Gudmundsson
Author-Name-First: Jens 
Author-Name-Last: Gudmundsson
Author-Email: jg@ifro.ku.dk
Author-Workplace-Name: Department of Food and Resource Economics, University of Copenhagen
Author-Name: Jens Leth Hougaard
Author-Name-First: Jens Leth
Author-Name-Last: Hougaard
Author-Email: jlh@ifro.ku.dk
Author-Workplace-Name: Department of Food and Resource Economics, University of Copenhagen
Title: River pollution abatement: Decentralized solutions and smart contracts
Abstract: 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. It ensures a socially optimal agreement supported by fair compensations to regions that turn to cleaner production from those that pollute.
Length: 26 pages
Creation-Date: 2021-09
Revision-Date: 2021-10
File-URL: http://okonomi.foi.dk/workingpapers/WPpdf/WP2021/IFRO_WP_2021_07_update.pdf
File-Format: Application/pdf
Number: 2021/07
Classification-JEL: C7, D47, D62, Q52, Q25
Keywords: River pollution, Decentralized mechanism, Shapley value, Water quality, Smart contract
Handle: RePEc:foi:wpaper:2021_07