How Local Industries Respond to the Emission Permit Regulation: An Agent-Based Modelling Approach

Emission permitting (EP) has been widely implemented to regulate point-source wastewater emissions. However, how local industries respond to an EP intervention and to what extent an EP policy could reduce emissions is subject to great uncertainty and should be investigated. This study develops an agent-based model to examine each individual firm’s changing behaviours and the aggregated environmental and economic performance of the local economy. The Baoding Municipality, located upstream of the Baiyangdian Wetland, a core conservation area in the Xiong’ An New District, was investigated as a case study. The simulation results showed that the regional industrial economy first fell and then rose. The chemical oxygen demand (COD) emissions of the municipal industrial total showed a downward trend from 2015 to 2025, with an average annual reduction of 1.2% under the current EP policy. The textile and papermaking industries had comparatively large potential for emission reduction, accounting for 43.7% and 22.7% of the total industrial emissions, respectively. The simulation results also showed that over 61.9% of firms changed their approach from take-no-action to proactive pollution control up to 2025. Further, the results verify that total emissions would be expected to decrease significantly with tightening permit limits, while the marginal effects of EP regulation would be expected to decline gradually. As quantification of EP’s effects on both environmental and economic aspects, this study provides valuable insights for the advancement of EP policies through national reform.