River Pollution Abatement: Decentralized Solutions and Smart Contracts
Speaker(s)Jens Gudmundsson (University of Copenhagen, Denmark)
LocationTinbergen Institute Amsterdam, room 1.01
Date and time
October 13, 2022
11:00 - 12:00
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. Joint paper with Jens Leth Hougaard.
Keywords: River pollution, decentralized mechanism, Shapley value, water quality, smart contract JEL: C7, D47, D62, Q52, Q25