How should the center lead China's reforestation efforts?—Policy making games between central and local governments

Abstract Over the past ten years, China has implemented one of the largest reforestation projects in the developing world. However, the reforestation efficiency has been seriously compromised by the conflicts between the central and local governments in implementing policy. While the central government tries to maximize the project's ecological benefits, the local tends to minimize its administrative efforts due to limited budgets. This paper creates a Stackelberg model to simulate central and local relationships and proposes three possible solutions: penalizing high mortality rates of trees, rewarding high survival rates, and a combination of them. It is shown that the ecologically optimal strategy for the central government is to recognize high survival rates with a reward rate quantitatively equal to the size of the reward base fund. Understanding and solving the conflicts between central and local governments in China's ecological projects is particularly important since its rising economy is being drained of natural resources, while exploiting other countries’ resources. Contrary to traditional wisdom that takes local agencies for granted as subordinate organs in the environmental governance system, this work indicates that environmental policy design needs improved mechanisms to motivate local agencies in working more effectively.