Optimal Fiscal Decentralization and Incentive-Compatible Monitoring for Dual Public Goods: Forest Carbon Sinks and Water Retention

DOI

10.2991/978-94-6239-672-2_47How to use a DOI?

Keywords

forest carbon sequestration; water conservation; public goods; fiscal allocation; principal-agent model; incentive compatibility; ecological compensation

Abstract

Forest ecosystems provide dual public goods of carbon sequestration and water conservation, yet optimal fiscal allocation mechanisms under multi-attribute public goods remain under-explored. This study constructs a principal-agent model incorporating asymmetric information and moral hazard to analyze the optimal fiscal allocation rights and incentive-compatible supervision mechanisms. The theoretical framework demonstrates that when forest ecosystems simultaneously produce carbon sequestration and water conservation services, the optimal fiscal transfer contract should incorporate performance-based incentives contingent on observable outcome indicators. The model derives closed-form solutions for optimal effort levels, supervision intensity, and fiscal allocation ratios under different information structures. Key findings indicate that: (1) dual-attribute public goods require differentiated incentive intensities based on measurement costs; (2) the optimal supervision probability increases with the divergence between social and private benefits; (3) fiscal decentralization with proper incentive alignment can achieve second-best efficiency. This research provides theoretical foundations for designing ecological compensation policies in the context of “dual carbon” goals and water security strategies.

Copyright

© 2026 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Haiwen Long
PY  - 2026
DA  - 2026/05/12
TI  - Optimal Fiscal Decentralization and Incentive-Compatible Monitoring for Dual Public Goods: Forest Carbon Sinks and Water Retention
BT  - Proceedings of the 2026 3rd International Conference on Applied Economics, Management Science and Social Development (AEMSS 2026)
PB  - Atlantis Press
SP  - 493
EP  - 502
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6239-672-2_47
DO  - 10.2991/978-94-6239-672-2_47
ID  - Long2026
ER  -