An Analysis of the Eco-Innovation Mechanism and Policies in the Pulp and Paper Industry Based on Coupled Game Theory and System Dynamics

sustainability

Article An Analysis of the Eco-Innovation Mechanism and Policies in the Pulp and Paper Industry Based on Coupled Game Theory and System Dynamics

Lin MA * and Jiayu HU

School of Management Science and Engineering, Nanjing University of Information Science & Technology, Nanjing 210044, China; [email protected] * Correspondence: [email protected]



Received: 25 July 2018; Accepted: 21 September 2018; Published: 28 September 2018


Abstract: The environment is the basis for the living and development of the human, and eco-innovation is the key driver of new economic growth. However, for some underdeveloped regions in China, it is still a challenge for the local government to get a balance between the goals of economic and environment. The paper selects the pulp and paper industry, which creates tremendous pollution to the environment and is closely related to the daily life. According to the particular characteristics of pulp and paper industry in Sichuan Province, the industry of pulp and paper of bamboo is redesigned to improve the local ecosystem, while increasing the income of local farmers. From the perspective of game theory, the relationships between the government, the enterprise, and the farmers are analyzed. The result shows that government increases the subsidy and penalty to the enterprise, which can increase the investment in eco-innovation, enhancing the competitiveness of enterprises and raising the income of farmers. Moreover, it can also improve the ecologically fragile areas by the utilization of bamboo park. In addition, in this paper, a system dynamics model is proposed to explore the impact of different policies on the environment. The results show that increasing the subsidy is a more efficient way to protect the environment, and is one of the important drivers to eco-innovation in some underdeveloped regions in China.

Keywords: eco-innovation; game theory; system dynamics; pulp and paper industry

1. Introduction The environment is the foundation for the living and development of human. President Xi Jinping said that in his speech in 2018: environment is the livelihood of the people, green mountain is the beautiful, and blue sky is also happiness. Nowadays, sustainable development is a hot issue in industrial upgrading and transformation in China [1]; therefore, Chinese President Xi Jinping stressed to say that “lucid waters and lush mountains are invaluable assets”. As the greenhouse effect has intensified, global warming has caused a series of environmental problems that have made people attach more importance to the environmental issues. As a result of the rapid growth of the population, companies make unrestrained requests and destruction of the environment to meet the demand of global markets. For example, some companies directly discharge waste gas and water into environment without treatments, which will cause serious damage to atmosphere layers and water resources. Eco-innovation is regarded as an important way to achieve industrial transformation and upgrading, especially in the regional pulp and paper industry [2]. Eco-innovation is a new concept that is under development, by improving methods, products, and processes to protect environment and obtain the sustainability for development. Eco-innovation means provides a high quality of life by consuming less resource and minimizing the release of harmful substances. Therefore, eco-innovation

Sustainability 2018, 10, 3482; doi:10.3390/su10103482 www.mdpi.com/journal/sustainability Sustainability 2018, 10, 3482 2 of 25 is considered as a major strategy by the European Union to help promote the effectiveness of resources and build a low-carbon society [3]. The Copenhagen Climate Conference in 2009 once again pushed the topic of sustainable development to an unprecedented level, and the green growth has become the political goal pursued by countries around the world. The increase in demand for eco-innovation is due to the pressures of environmental challenges [4]. According to the forecast of the China T21 model constructed by the Millennium Institute of the United States, all the resources in the world are only enough for China to consume 74 years from the current resource consumption rate. Therefore, the government and scholars in China pay more attention to eco-innovation. Nowadays, in China, due to the lack of efficient policy and backward production equipment, a large amount of energy is wasted and the environment is also in dangerous situation, especially in some heavy-pollution industries, such as pulp and paper industry, steel, and chemical engineering. In some underdeveloped areas, due to the lack of awareness of local enterprises and individuals to protect environment, poor areas often develop economics at the expense of environment. At the same time, the local government excessively pursues economic benefits to achieve the goals of poverty alleviation, resulting in the damage of ecological environment in those areas, which increases local ecological vulnerability and the frequent of geological disasters. Moreover, it will cause outflows of population, and the difficulties in introduction of talents. As a result, it is often impossible not only to achieve environmental protection in poor areas, but also to obtain the goal of poverty alleviation. Eco-innovation is a fast-growing area of research. Fussler and James first proposed the concept of eco-innovation, and it refers to innovation that can significantly reduce the impact on environment and obtain benefits for the companies [5]. The concept of sustainable development is defined as development to meet current needs without sacrificing the ability of future generations. Eco-innovation is an important way to contribute to sustainability by R&D new products, improving production processes, and methods [6]. With a clear trade-offs between environmental protection and economic growth, eco-innovation plays a core role by improving environmental technologies to avoid and treat pollution to ensure that the final product will have minimal environmental impact over the product life. Laforet believes that eco-innovation includes economic and environmental benefits, and it can be defined as the production, development of the product, and production process that is useful to reduce environmental risks, pollution, consumption of energy [7]. Peng and Huang believed that eco-innovation is an important way for countries, industries, and enterprises to achieve sustainable development; therefore, it has important theoretical and practical significance [8]. Eco-innovation is not only about technology, but also about organization, culture, and social dimensions [9]. Eryigit and Özcüre divided eco-innovation into three dimensions: technology, organization, and policy [10]. At present, there are many researches about eco-innovation, which focus on pulp and paper industry. The pulp and paper industry is a high energy-consuming industry, and it also generates tremendous pollution to the environment [11]. The researches of eco-innovation in the pulp and paper industry mainly focus on energy consumption, policies and reducing the impact on the environment. Peng and Zeng believed that the pulp and paper industry has huge potential for energy saving, and it can generate huge economic benefits [12]. Kong and Hasanbeigi evaluated 23 kinds of energy-saving technologies and proposed development directions for future R&D [13]. In addition, researches on energy consumption are often associated with the emissions of carbon dioxide [14]. Onarheim and Santos revealed that the application of Carbon capture and storage technology can effectively reduce the emissions of carbon dioxide from the pulp and paper industry [15]. Joelsson and Gustavsson believed that the emissions of carbon dioxide from the pulp and paper industry can be reduced by improving energy efficiency [16]. In some studies, which related to the policies, Scordato and Klitkou believed that the mixes of policies are the key drivers of eco-innovation [17]. Additionally, the strict regulatory measures have the potential to contribute toward long-term competitiveness in the pulp and paper industry [18]. Ericsson and Nilsson also found that the change in climate policy contributes to the revolution of pulp and paper industry in Europe [19]. In addition, effective policies can contribute Sustainability 2018, 10, x FOR PEER REVIEW 3 of 25 Sustainability 2018, 10, 3482 3 of 25 Europe [19]. In addition, effective policies can contribute to the protection of the environment. Zhang and Chen found that the pollutants in the wastewater can be reduced through integrated to the protection of the environment. Zhang and Chen found that the pollutants in the wastewater can policy measures [20]. Bergquist and Keskitalo believed the effective policies can improve the be reduced through integrated policy measures [20]. Bergquist and Keskitalo believed the effective performance in protection of environment while maintaining a high level of productivity [21]. policies can improve the performance in protection of environment while maintaining a high level of The main goal of the paper is to discuss how to reduce the impacts from the pulp and paper productivity [21]. industry on environment in China by utilization of eco-innovation, increase the income of local The main goal of the paper is to discuss how to reduce the impacts from the pulp and paper farmers to realize targeted poverty alleviation, and improve ecological vulnerability of areas. This industry on environment in China by utilization of eco-innovation, increase the income of local farmers research uses a game theory and a system dynamics model to discuss the pulp and paper industry to realize targeted poverty alleviation, and improve ecological vulnerability of areas. This research in China to help the government and enterprises to apply the eco-innovation. uses a game theory and a system dynamics model to discuss the pulp and paper industry in China to This paper first presents a literature review of eco-innovation, and some applications of game help the government and enterprises to apply the eco-innovation. theory and system dynamics model on eco-innovation. The remainder of the paper is organized as This paper first presents a literature review of eco-innovation, and some applications of game follows. Section 2 introduces the current situation of the pulp and paper industry in China. The theory and system dynamics model on eco-innovation. The remainder of the paper is organized background of the pulp and paper industry in Sichuan Province is given in Section 3. Section 4 as follows. Section2 introduces the current situation of the pulp and paper industry in China. discuss a bamboo forest park model by the game theory. Section 5 clarifies how to apply The background of the pulp and paper industry in Sichuan Province is given in Section3. Section4 eco-innovation in the pulp and paper industry from technology, policies, and the activities of discuss a bamboo forest park model by the game theory. Section5 clarifies how to apply eco-innovation farmers, and Section 5 also gives the measures to improve ecological vulnerability. Finally, in the pulp and paper industry from technology, policies, and the activities of farmers, and Section5 conclusions are given in Section 6. also gives the measures to improve ecological vulnerability. Finally, conclusions are given in Section6.

2. Analysis of the Current Pulp and Paper Industry inin ChinaChina

2.1. The Pulp and Paper Industry Structure inin ChinaChina The pulppulp andand paper paper industry industry in Chinain China is geographically is geographically divided divided into the into eastern the eastern regions, regions, central regions,central regions, and western and western regions regions [22]. The [22]. structure The struct of pulpure andof pulp paper and industry paper in isdustry basically is basically the same the in eachsame region, in each and region, the chain and the industry chain isindustry divided is into divided upstream, into upstream, middle, and middle, downstream and downstream parts, as shown parts, inas Figureshown1 .in Figure 1.

Figure 1. Industrial chain of papermaking industry.

The upstreamupstream partpart ofof thethe industrialindustrial chainchain isis aboutabout farmers.farmers. It includes cultivation, cutting, processingprocessing and salesale ofof cropscrops thatthat cancan bebe mademade intointo paperpaper pulp.pulp. Due to thethe obviousobvious differencesdifferences inin climate andand soilsoil characteristics characteristics among among different different regions, regions, various various regions regions have have adopted adopted different different crops tocrops make to pulp.make The pulp. current The current mainstreams mainstreams of pulps of are pulps wood are pulp, wood straw pulp, pulp, straw bamboo pulp, pulp, bamboo and wastepulp, pulp.and waste Moreover, pulp. the Moreover, utilization the rate utilization of waste pulprate of is regardedwaste pulp as oneis regarded of the important as one indicatorsof the important for the sustainableindicators for development the sustainable of the development pulp and paper of the industry pulp and [23 paper]. industry [23]. InIn thethe middle middle part part of theof industrialthe industrial chain, chain, the pulp the and pulp paper and industry paper consistsindustry of consists the enterprises of the andenterprises some small and workshopssome small based workshops on family, based and on they family, transform and they the pulptransform to produce the pulp base to papers. produce base papers. Sustainability 2018, 10, 3482 4 of 25

The downstream part consists of the company which processes and sells base papers, such as fast-moving consumer goods like household papers, factories that use industrial paper and packaging paper to produce products, and printing companies.

2.2. Background of the Pulp and Paper Industry in China The pulp and paper industry is closely related to daily life and belongs to the heavy-pollution industry. According to the statistics of China pulp and paper Association, the national production of paper in 2016 was 108.55 million tons; the consumption was 104.19 million tons; the production of paper and paperboard increased by an average of 4.43% per year from 2007 to 2016, and consumption increased by an average of 4.05% per year [24]. However, the production scale of papermaking enterprises in China is generally small, and ranking relatively low in the world [25]. Compared with other major paper- and paperboard-producing countries such as Canada and Germany, China has a competitive disadvantage in the lack of raw materials, policies, and technology, which largely limits the development of pulp and paper industry [26]. Besides, the domestic pulp and paper industry has caused tremendous ecological and safety problems due to the uneven distribution of resources and intense competitions, which has led to the lost domestic consumer’s confidence. Zhang and Duan found that the pulp and paper industry is the industry with most COD (Chemical Oxygen Demand) emissions [27]. However, compared to the other industries, which generate a lot of pollution, the economic contribution rate of pulp and paper industry is too low [28]. Moreover, due to the scarcity of raw materials, a series of problems of the excessive and random lumbering directly affects the interests of the local people. Some companies even go to deforest illegally in underdeveloped areas such as Southeast Asia, causing some international disputes. In addition, some companies add various substances that are harmful to the human body in the pulp to reduce the costs. For example, bleaching and adding fluorescers to the products which can cause dioxins and other carcinogens [29]. As a result, the Chinese government has enacted a series of strict environmental regulations to force papermaking enterprises to implement green innovation and sustainable development.

2.3. Methodology The system dynamics was founded in 1956 by Professor Jay W. Forrester, and it is a technique for simulating complex systems, and testing the behavior of long-term complex systems [30,31]. The system dynamics model can properly weigh feedback and the change of hypothesis scenarios in different situations during the design of dynamic systems, so it is widely used in management to check and discuss policies and decisions [32]. System dynamics is often applied to the research in eco-innovation. At present, the focus of research is to discuss the impact of different policies and mechanisms on the enterprises or the environment in the system, so as to make recommendations for the formulation of policy and sustainable development of enterprises. Zhang and Wang proposed the optimal carbon emission trading system through the system dynamics model, to help government find the best strategies to reduce greenhouse gas [33]. In addition, the system dynamics model can also help the government know how to stimulate enterprises to implement eco-innovation. Tian and Govindan used system dynamics models to study the impact of different policies on green production and non-implementation of green production enterprises, which helps government to know the diffusion mechanism during the green management chain of manufacture industry [34].

3. Constructing an Industrial Chain of Papermaking Industry in a Certain Region

3.1. Regional Background Sichuan Province is located in the subtropical region. Due to the alternation of topography and different monsoon circulations, the climate has large vertical variations and types, which are conducive to comprehensive development of agriculture, forestry, and animal husbandry. According to statistics Sustainability 2018, 10, 3482 5 of 25 in 2016, the area of bamboo forests reached 912,300 hm2 in Sichuan Province, and more than 70% of them can be used to make bamboo pulp. At the same time, Sichuan Province is also located in the ecologically fragile area of the Hengduan Mountains in Southwest China, and geological disasters are frequent, such as mudslides and soil corrosion.

3.2. Analysis of the Current Pulp and Paper Industry in Sichuan Province In order to solve the problem of scarcity of pulping materials in combination with regional characteristics, scholars discussed the possibility of replacing wood pulp with bamboo pulp as a raw material for production in Sichuan Province. The reason why wood pulp has become the main raw material for pulping is due to its wide distribution and excellent quality of wood pulp base paper, but highly concentrated forests such as eucalyptus forests will cause serious damage to the local ecological environment [35]. At present, bamboo pulp is considered to be the best pulping material in addition to wood pulp, and it has a wide distribution in Sichuan [26]. At the same time, compared with the fast-growing forest, the planting and management of bamboo forest is simpler and has higher production capacity [36]. Besides, the researchers also found that, compared with the fast-growing forest, bamboo forest is more conducive to protecting the environment, and the high yield rate of bamboo also provides a theoretical basis to replace wood pulp, compared to fast-growing forests. At first, planting of bamboo can reduce the impact on soil nutrient status [37]. Then, the ecological environment of bamboo area can be protected from damage while maintaining the yield of bamboo by using suitable accompanying tree species [38]. In 2017, the annual bamboo-pulping capacity was 1.6 million tons in Sichuan Province, and the annual production capacity of raw paper was 1.4 million tons, and the annual processing paper capacity was 1.6 million tons. The structure of raw material for paper and pulp in Sichuan Province is: wood pulp 7%; bamboo pulp 38%; waste pulp 55%, and it shows that the companies in Sichuan Province effectively reduce their dependence on wood pulp. Besides, the government plans to build eight projects of bamboo pulp for enterprises and seven supply bases of bamboo forest. However, at present, the bamboo pulp and paper industry still belongs to the minority industry in China, and the yield of bamboo cannot meet the demands of many papermaking companies. Besides, the papermaking enterprises in Sichuan have led a serious impact on Sichuan’s ecological environment.

3.3. The Environmental Impact from the Pulp and Paper Industry in Sichuan Province

3.3.1. Water Pollution The sources of water pollution in the pulp and paper industry chain are from the upstream and mid parts. Farmers in upstream abuse fertilizers and pesticides during the process of planting bamboo forests, resulting in eutrophication of water body. Wastewater generated by papermaking companies in the process of paper making is the main source of water pollution [39]. The composition of contaminants from papermaking companies includes black liquor, wastewater in mid-stage, and wastewater, and the bleaching wastewater contains a large amount of COD, which poses a great risk to the environment [40]. Ni and Ye found that the pulp and paper industry has the highest discharge rate of wastewater in Sichuan Province, but its economic contribution ratio lags far behind other industries [41]. Among them, some small and medium-sized enterprises, such as small workshops, have become the main force of wastewater discharge due to imperfect supervision mechanisms and insufficient social attention. In addition, directly discarding some paper-related products, e.g., printing papers having volatile inks, can also contaminate the water.

3.3.2. Emissions of Greenhouse Gas The carbon emissions from the industry is the largest proportion of carbon emissions in Sichuan Province, and the pulp and paper industry is one of the main sources [42]. The greenhouse gas emissions of papermaking companies are mainly divided into direct and indirect emissions. On the Sustainability 2018, 10, 3482 6 of 25 one hand, they directly discharge carbon dioxide and other gases during the process of production. On the other hand, the indirect emissions are the greenhouse gases produced by purchasing energy for consumption, the majority of which is electric energy [43]. At present, the proportion of coal in the energy consumption of Sichuan Province is relatively large, and it is close to 84% of the total energy consumption [44]. Moreover, coal is the main source of carbon dioxide in China, and it produces 86% of the total carbon dioxide emissions [45].

3.3.3. Low Sustainability From the perspective of geographical distribution, compared with the central and eastern regions, the enterprises in the western region lack of ability to obtain sustainable development [46]. The energy consumption of papermaking companies depend mainly on the utilization of coal, including direct and indirect use, which make the goal of sustainable production is difficult to achieve, since the use of coal will have a serious impact on the environment [47]. Besides, due to the lack of scientific and technological innovation capabilities, it is difficult to integrate information and technology for Sichuan Province, especially in some poverty areas [48]. Therefore, the pulp and paper industry is difficult to achieve the goal of sustainable development in Sichuan Province.

3.3.4. Human Health The papermaking enterprises add various substances to reduce the costs, which are harmful for the human body. For example, they bleach and add fluorescers into the products, and it will generate dioxin and other carcinogens to human body. Moreover, dioxins are highly carcinogenic, teratogenic, and mutagenic, and it is extremely harmful to human health [49]. Besides, due to imperfect technology of wastewater treatment, the discharge of wastewater containing a large amount of heavy metal ions will also cause serious harm to the residents [50].

3.3.5. Ecological Vulnerability Due to the traditional model of planting for bamboo forests, farmers will clean up the mountain and remove weeds to maximize the output of bamboo, which reduces the diversity of species. Additionally, the high density of bamboo will also lead to a decline in diversity of species in the planting areas. Besides, Sichuan Province is located in ecologically fragile area of the Hengduan Mountains in Southwest China, and the traditional model of planting will increase the ecologically fragile areas and the possibility of geological disasters [51].

3.3.6. Influence on Other Industries The main river system in Sichuan Province is the Yangtze River system. Excessive discharge of wastewater may affect the production and business activities of the companies in downstream, such as the liquor-related industries and mineral water industry. For example, the treatment of water resources to meet the standard of regulations will increase the cost of liquor companies, which is not conducive to their developments. In addition, it may cause pollution to groundwater and water sources, which will seriously affect the survival and development of mineral water companies.

4. Constructing a Bamboo Forest Park Model for Enterprises and Farmers In the traditional agricultural model, due to the restrictions on capital and knowledge of farmers, they are unable to expand the scale of bamboo forests, and it is impossible to link bamboo cultivation with animal husbandry to increase the sales premium products. For enterprises, despite the fact that the regional climate is suitable for the growth of bamboo forests, farmers do not have the ability to conduct scientific management of bamboo forests, so the output of bamboo cannot meet the demand of companies, resulting in high prices for bamboo. Some farmers have unilaterally pursued the production of bamboo forests, which causes some damage to a diversity of local species. Besides, Sustainability 2018, 10, 3482 7 of 25 due to the high management costs and land costs, only few companies can cultivate bamboo forests by themselves to meet their demand of production. In order to solve this dilemma, the paper proposes to establish a bamboo-industrial park base for enterprises and farmers in some poverty areas. The industry park takes enterprises as the leading core, by investing in the R&D for bamboo to help farmers increase the yield of bamboo forests, and formulate production standards for farmers, such as planting density of bamboo, and the species of suitable accompanying plants. In this way, we can increase the yield of bamboo forests while protecting the diversity of local environment. Moreover, the price of bamboo is stable, which is beneficial for companies to enhance their competitiveness. In addition, farmers can also increase their income and achieve the goal of targeted poverty reduction by the park model. For example, farmers can develop characteristic agriculture and animal husbandry, and the enterprises can also set production standards for them to enhance competitiveness.

4.1. Game Analysis From the perspective of game theory, the interaction process between poverty relief and ecological protection is the game process of coordinating the objectives and interests of different stakeholders. To some extent, the results of game theory determine the effect of poverty relief and protection of environment. In the game, the interaction between the government and enterprises, the government and farmers, enterprises and farmers are three core groups of game processes.

4.2. The Game Model between the Government and Enterprises In order to facilitate the analysis, it is assumed that there are only two participants in the government and enterprises. The behavior of government includes supervision and non-supervision. The probability of regulation for government is x, and probability of non-regulation is 1 − x. As the subject of supervision, the enterprise can choose to the traditional enterprise and ecological enterprise. The probability of being a traditional enterprise is y, and the probability of being an ecological enterprise is 1 − y. For the government, the subsidy for R&D of eco-innovation is β1, and the cost of supervision of enterprise is γ1. For enterprise, the cost for eco-innovation is C1, the compensation for restoring environment is B, and profit for a traditional enterprise is P, and the penalty for not implementing eco-innovation is F1. Besides, γ1 should be less than the sum of B and F1. Table1 shows the game model between the government and enterprises.

Table 1. The game model between the government and enterprises.

Enterprises Government Ecological Enterprises Traditional Enterprises

Supervision C1 − γ1, −C1 + β1 + P B + F1 − γ1, −F1 − B + P Non-supervision C1, −C1 + P 0, P

In the case of determining y, the expected returns for supervision (x = 1) and non-supervision (x = 0) of the government are:

U(1, y) = y(B + F1 − γ1) + (1 − y)(C1 − γ1),U(0, y) = 0 + (1 − y)C1 Set U(1, y) = U(0, y), y∗ = γ1/(B + F1)

It shows that if the probability of enterprise that does not engage in ecological investment is great than y*, the best strategy for the government is supervision and punishment; When the probability of the enterprise that engages in ecological investment is equal to y*, the best strategy for the government is non-check or partial check. When the probability is less than y*, the optimal choice for the government is non-check. Sustainability 2018, 10, 3482 8 of 25

In the case of determining x, the expected return of the enterprise to become either a polluting enterprise (y = 1) or an ecological enterprise (y = 0) is:

U(x, 1) = x(−F1 − B + P),U(x, 0) = x(−C1 + β1 + P) + (1 − x)(−C1 + P) x∗ = (P − C1)/(P − β1 − F1 − B)

It means that if the probability of supervision and punishment of the government is greater than x*, the optimal strategy for the enterprise is to implement eco-innovation. When the probability is equal to x*, the best strategy of enterprise is not to make pollution or make a small amount of pollution. When the probability is less than x*, the best choice for the enterprise is not to make pollution. In conclusion, we can know that the conditions to realize the balance should be y* = γ1/(B + F1), and x* = (P − C1)/(P − β1 − F1 − B). From the above relationship, we can find that, when the cost supervision is higher, it will lead to loose the supervision of government and increase the probability of enterprise to make pollution. When the government increases the compensation and fines for recovery of the environment, it can effectively reduce the pollution from the enterprise.

4.3. The Game Model between the Government and Farmers The behavior of government includes supervision and non-supervision. If the probability of supervision is x, and the probability of non-supervision is 1 − x. If the probability for the farmer to develop an ecological livelihood is z, then the probability for the farmer to conduct traditional production is 1 − z. The cost of propagandizing the ecological idea to the farmer is α, and the cost of subsidy and supervision for the farmer are β2 and γ2. For the farmer, the original income is Pf, the sales premium of the product obtained after the ecological livelihood is Ps, the environmental input cost is C2, and the punishment for traditional production is F2. Additionally, C2 < (β2 + Pf + Ps), that is, the farmer’s investment in ecology should be less than the sum of government subsidies and the original income and sales premium; otherwise, the farmers will not carry out ecological livelihood. Table2 show the game model between the government and farmers.

Table 2. The game model between the government and farmers.

Farmers Government Ecological Livelihood Traditional Production

Supervision C2 − γ2 + α, −C2 + β2 + Pf + Ps B + F2 − γ2 + α,F2 + Pf Non-supervision C2, −C2 + Pf + Ps 0, Pf

In the case of determining z, the expected returns of the government regulation (x = 1) and selection of non-regulation (x = 0) are:

U(1, z) = z(C2 − γ2 + α) + (1 − z)(B + F2 − γ2 + α),U(0, z) = z(C2) + 0 So, if U(1, z) = U(0, z), the z∗ = 1 − (α − λ2/B + F2).

That is, when the probability of the farmer making ecological livelihoods is greater than z*, the best strategy for the government is non-supervise. When the probability of farmers having ecological livelihoods is equal to z*, the government’s best strategy is partial supervision. When the probability of the farmer implementing ecological livelihoods is less than z*, the government’s best strategy is regulation. Similarly, in the case of determining x, the expected income of farmers for ecological livelihoods (z = 1) and traditional production (z = 0) are:

U(x, 1) = x(−C2 + β2 + Pf + Ps) + (1 − x)(−C2 + Pf + Ps),U(x, 0) = x(F2 + Pf) + (1 − x)Pf So, if U(x, 1) = U(x, 0), the x∗ = C2 − Ps/β2 − F2. Sustainability 2018, 10, 3482 9 of 25

It shows that when the probability of the government to supervise is greater than x*, the best strategy for farmers is to carry out ecological livelihoods. When the probability of government’s supervision is equal to x*, the optimal strategy of the farmers is to carry out some ecological innovation. When the probability is less than x*, the best strategy for farmers is to carry out traditional livelihoods. It can be seen that the conditions for achieving equilibrium should be z* = 1 − (α − λ2/B + F2) and x* = C2 − Ps/β2 − F2. From the above relationship, we can know that raising the subsidies and fines for farmers can increase the probability of farmers’ ecological livelihoods; when the government raises subsidies for farmers, the supervision will be reduced due to excessive costs.

4.4. The Game Model between Enterprises and Farmers The behavior of enterprises includes implementing eco-innovation, and carrying out the traditional production. If the probability of the enterprise to perform the traditional production is y, the probability of developing into an ecological enterprise is 1 − y. The probability that a farmer will implement the ecological livelihood is z, and the probability of traditional production is 1 − z. For enterprises, the cost of eco-innovation is C1, the original profit for enterprises is P, and ∆P is used to indicate the ecological benefits generated after ecological input, including farmers’ ecological livelihood management costs and raw material prices. ∆P1 indicates the ecological benefits generated by the enterprise as an ecological enterprise and the farmers are ecologically timed enterprises. ∆P2 indicates the ecological benefits generated by the enterprise when the enterprise develops into an ecological enterprise, but the traditional production is carried out by the farmers. ∆P3 indicates the ecological benefits generated by the enterprise that develops into a polluting enterprise and the farmers carry out the ecological livelihood. ∆P4 is the ecological benefit when the enterprise develops into a polluting enterprise and the farmers carry out traditional production, and it will be 0. The farmer’s investment in ecology is C2, the original income is Pf, and the sales premium and other ecological income obtained by farmers after ecological innovation are ∆Ps. ∆Ps1 is the ecological benefit obtained by farmers when enterprises and farmers are ecologically productive. ∆Ps2 is the ecological benefit of the ecological livelihood of the farmers when the enterprise develops into a polluting enterprise. ∆Ps3 is the ecological benefit obtained by the farmers when the enterprise carries out the ecological input and the traditional production of the farmers. ∆Ps4 is obtained by the farmers when the enterprises and the farmers carry out the pollution production. The ecological benefit is 0. Moreover, C1 < (P + ∆P), that is, the cost of the enterprise’s investment in the development of ecological innovation should be less than the sum of the profit and the income generated after the ecological innovation is not carried out, otherwise, the enterprise will not choose to develop into an ecological enterprise (in Table3).

Table 3. The game model between enterprises and farmers.

Farmers Enterprises Ecological Livelihood Traditional Production

Ecological enterprises P − C1 + ∆P1, −C2 + Pf + ∆Ps1 P − C1 + ∆P2, Pf + ∆Ps3

Traditional enterprises P + ∆P3, −C2 + Pf + ∆Ps2 P, Pf

In the case of determining z, the expected returns of the enterprise as either a polluting enterprise (y = 1) or an ecological enterprise (y = 0) are:

U(1, z) = z(P + ∆P3) + (1 − z)(P),U(0, z) = z(P − C1 + ∆P1) + (1 − z)(P − C1 + ∆P2) So, if U(1, z) = U(0, z), the z∗ = (C1 − 2P − ∆P2)/(∆P1 − ∆P2 − ∆P3 − 2P)

That is, when the probability of farmers having the ecological livelihood is greater than z*, the optimal strategy of the enterprise is to carry out ecological innovation. When the probability of farmers having the ecological livelihood is equal to z*, the best strategy for the enterprise is to carry out part Sustainability 2018, 10, 3482 10 of 25 of ecological innovation. When the probability of ecological innovation carried out by farmers is less than z*, the optimal strategy of the enterprise is not to carry out ecological innovation. Similarly, in the case of determining y, the expected returns of farmers’ ecological livelihoods (z = 1) and traditional production (z = 0) are:

U(y, 1) = y(−C2 + Pf + ∆Ps2) + (1 − y)(−C2 + Pf + ∆Ps1),U(y, 0) = yPf + (1 − y)Pf + ∆Ps3 So, if U(y, 1) = U(y, 0), the y∗ = (∆Ps3 + C2 − ∆Ps1)/(∆Ps3 + ∆ps2 − ∆ps1)

That is, when the probability of an enterprise having pollution production is greater than y*, the optimal strategy of the farmer is to carry out traditional production. When the probability of a company implementing pollution production is equal to y*, the best strategy for farmers is to carry out part of the ecological livelihood. When the probability of the enterprise implement pollution production is less than y*, the optimal choice for farmers is to carry out ecological livelihoods. It can be seen that the conditions for achieving equilibrium should be z* = (C1 − 2P − ∆P2)/(∆P1 − ∆P2 − ∆P3−2P) and y* = (∆Ps3 + C2 − ∆Ps1)/(∆Ps1 + ∆ps2 − ∆ps1) From the above relationship, we can know that increasing the investment of enterprises in ecological innovation can increase the probability of farmers’ ecological livelihoods.

5. Model and Measures

5.1. Technology of Ecological Innovation In order to improve the energy efficiency of papermaking enterprises and reduce the impact on the environment, scholars have discussed the technological innovation of papermaking enterprises. Happonen believed that laser-cutting technology has a promising future in the paper industry, and can help companies expand production scale and save energy [52]. The research of Ramnath found that biotechnology such as lipolytic enzymes can effectively solve the problem of dissolution in high-purity chemical wood pulp [53]. Georgieva and Boeva-Spiridonova believed that enzymatic treatment can effectively help the degradation of lignin and cellulose in the process of poplar wood pulp and improve the quality of chemical mechanical pulp [54]. There are also many studies exploring the interaction between energy efficiency and greenhouse gas emissions. Shabbir and Mirzaeian believed that improving the energy efficiency of paper companies can effectively reduce the carbon dioxide produced in production. It is proposed that the cogeneration technology can help paper companies in Pakistan save 16.9% of energy and achieve a reduction in emission of greenhouse gas by about 14.3% [55]. Griffin and Hammond found that British paper companies account for 6% of total industrial greenhouse gas emissions due to direct or indirect energy use, and they also believed that energy efficiency and heat recovery technologies, bioenergy, and thermal electrification technologies are key to solving this problem [56]. Sathitbunanan and Ritthong believed that green energy efficiency is not only the key to reducing greenhouse gas emissions, but also helps companies to become more competitive in green markets [57]. Research shows that wastewater of pulp and paper industry is the sixth largest pollution source in the world [58]. The monitoring indicators for wastewater of papermaking industry mainly include COD, BOD5 (Biochemical Oxygen Demand), SS (Suspended Substance) and other organic pollutants [59]. At present, the mainstream wastewater treatment technologies in China include physical and chemical technology, and other new technologies which can reduce the generation of wastewater by improving the papermaking process. The physical and chemical technology is to achieve control of pollution by adding chemical substances to the wastewater, such as adding a composite coagulant to wastewater to dissolve and decompose solid and organic matter in wastewater, and reduce COD and sludge discharge [60]. However, the physical and chemical technology has many drawbacks: a. If the wastewater contains a lot of fine particles or the wastewater temperature is low, the treatment of this method is ineffective; b. The secondary treatment of wastewater containing heavy metal ions and it will cause secondary Sustainability 2018, 10, 3482 11 of 25 pollution to the environment and cause harm to human health; c. This method of treatment will increase greenhouse gas emissions. The new technology is a pollution control technology developed by researchers to further treat wastewater to achieve sustainability, including biological treatment technology and electrolytic pollution control technology. Biological treatment technology is to treat wastewater by cultivating bacteria and fungi. Compared with traditional physical and chemical treatment technologies, the biological treatment technology effectively decomposes wastewater and reduces secondary pollution of wastewater to the environment, and it can produce clean energy [61]. However, there are also difficulties in application: (a) This treatment depends on bacteria and fungi, but due to its generally short life span and the need for certain survival conditions, the efficiency and stability of the treatment is lacking; (b) This method generally has high energy consumption and will challenge the cost management of enterprises; (c) Biological treatment technology is not obvious for the organic matter in wastewater. In view of the shortcomings of a single pollution control measure, some scholars have pointed out that, by improving the pollution control process, a combination of various treatment technologies can effectively reduce pollution. For example, the problem of soluble organic matter in wastewater cannot be effectively treated by coagulation and sedimentation methods, but the treatment efficiency of wastewater can be improved by combining chemical oxidation treatment [62]. Karthik and Dhodapkar found that closing the water loop through suitable treatment can reduce the pollutants during the wastewater, and it also can improve the wastewater-recycling rate [63]. For large-scale enterprises associating with scientific research institutions and university, they can carry out R&D of eco-innovation such as biological treatment technology and heat recovery technology. Besides, they need to clear the barriers of popularization within existing technologies, and to reduce energy consumption in production and improve the effectiveness of wastewater treatment. For SMEs, because they do not have the ability to develop new processing technologies, their focus should be on how to improve existing processes and technologies. For example, green energy alternatives, i.e., renewable fuels, such as biofuels, are used to improve energy use and increase the proportion of waste paper pulp used to reduce energy waste and greenhouse gas emissions. In addition, to improve the existing physical and chemical treatment technologies, the heavy metal ions in the wastewater are reduced, thereby achieving the goal of ecological protection.

5.2. Policies of Eco-Innovation Although we obtained the equilibrium condition for realizing the optimal ecological mechanism through game analysis, since the analysis is static analysis, and the result is uncertain. Therefore, the system dynamics model was introduced to solve the uncertainty brought by static analysis. A causal loop diagram is shown in Figure2, and a flow graph of the influence on environment under different policies is established by Vensim software, and is shown in Figure3. Moreover, the relevant equations are shown in Table4. The data were collected from National Bureau of Statistics of China, including China Statistical Yearbook, Environmental statistics, and the policies published by the government on websites. Sustainability 2018, 10, x FOR PEER REVIEW 11 of 25 reduce the pollutants during the wastewater, and it also can improve the wastewater-recycling rate [63]. For large-scale enterprises associating with scientific research institutions and university, they can carry out R&D of eco-innovation such as biological treatment technology and heat recovery technology. Besides, they need to clear the barriers of popularization within existing technologies, and to reduce energy consumption in production and improve the effectiveness of wastewater treatment. For SMEs, because they do not have the ability to develop new processing technologies, their focus should be on how to improve existing processes and technologies. For example, green energy alternatives, i.e., renewable fuels, such as biofuels, are used to improve energy use and increase the proportion of waste paper pulp used to reduce energy waste and greenhouse gas emissions. In addition, to improve the existing physical and chemical treatment technologies, the heavy metal ions in the wastewater are reduced, thereby achieving the goal of ecological protection.

5.2. Policies of Eco-Innovation Although we obtained the equilibrium condition for realizing the optimal ecological mechanism through game analysis, since the analysis is static analysis, and the result is uncertain. Therefore, the system dynamics model was introduced to solve the uncertainty brought by static analysis. A causal loop diagram is shown in Figure 2, and a flow graph of the influence on environment under different policies is established by Vensim software, and is shown in Figure 3. Moreover, the relevant equations are shown in Table 4. The data were collected from National Bureau of Statistics of China, including China Statistical Yearbook, Environmental statistics, and the policies published Sustainability 2018, 10, 3482 12 of 25 by the government on websites.

Government revenue and expenditure + + Government supervision intensity Willingness for + The amount of pollution government to govern governance from - government + Government - + Total pollution subsidy policy + The rate of production pollution - + + Environmental - carrying capacity Unit governance - cost - Production scale under environment carrying capacity Willingness for - enterprises to govern + Production income+ The amount of pollution governance from enterprises

+ + Profit - The output value governance of PPI expenditure of enterprises +

+ - The contribution to GDP from PPI + GDP

Sustainability 2018Figure, 10, 2.x FOR The PEERcausal REVIEW loop diagram of the impact of policies on the environment model. 12 of 25

Tax rate

Government revenue and Annual tax revenue expenditure governance expenditure of government Willingness for The amount of pollution government to govern governance from government Government Total supervision intensity pollution Total amount of The rate of Increase in pollution Government pollution governance production pollution emissions subsidy policy The rate of Environmental Unit governance government subsidy cost policy carrying capacity

Production scale River water Production scale under volume The amount of pollution Unit profit environment carrying governance from capacity enterprises

Production income governance expenditure of Output Profit enterprises Increment of value of PPI Willingness for output value enterprises to govern GDP Increment in GDP

The rate of Contribution to increment in GDP GDP from PPI FigureFigure 3. TheThe flow flow graph graph of of the impact of policies on the environment model. Sustainability 2018, 10, 3482 13 of 25

Table 4. Main variables and parameter settings.

Variable Unit Calculation Formula/Function Government revenue and 100 million yuan INTEG [(Annual tax revenue–governance expenditure of government),0] expenditure Annual tax revenue 100 million yuan Profit × Tax rate Governance expenditure of Unit governance cost × Amount of pollution governance from the government + Government supervision × Annual 100 million yuan government tax revenue/3 + Government subsidy policy × Amount of pollution governance from enterprises Amount of pollution 100 million tons Willingness for the government to govern × Increase in pollution emissions governance from government Total pollution 100 million tons INTEG [(Increase in pollution emissions–Total amount of pollution governance),0] Increase in pollution emissions 100 million tons Production scale × Rate of production pollution Total amount of pollution 100 million tons Amount of pollution governance from the government + Amount of pollution governance from enterprises governance WITHLOOKUP (Time) ([(1995, 0)(2018, 4 × 107)], (1995.14, 526, 316), (1996.83, 877, 193), (1998.45, 1.804 × 106), (2000.63, 2.932 × 106), (2003.27, 7.367 × 106), (2004.28, 9.29825 × 106), (2005.34, 1.08772 × 107), (2007.59, 2.179 × 107), Production scale Dmnl (2009.39, 2.472 × 107), (2010.33, 2.9 × 107), (2010.83,2.662 × 107), (2012.02,2.696 × 107), (2012.87, 2.629 × 107), (2014.34, 2.502 × 107), (2015.19, 2.652 × 107), (2016.03, 2.82456 × 107), (2017.65, 2.89474 × 107)) Profit 100 million yuan Production income–governance expenditure of enterprises Production income 100 million yuan MIN (Production scale, Production scale under environment carrying capacity) × Unit profit The amount of pollution 100 million tons MIN (Total pollution, governance expenditure of enterprises/(Unit governance cost-Government subsidy policy)) governance from enterprises governance expenditure 100 million yuan Production income × Willingness for enterprises to govern × (1 + Government supervision intensity) of enterprises Environmental carrying Dmnl 1–Total pollution/River water volume × 100 capacity Production scale under Dmnl 3 × 107/Environmental carrying capacity environment carrying capacity WITHLOOKUP (Time) ([(1996, 0) (2018, 0.06)], (1996.47, 0.0557895), (1998.02, 0.0455263), (2000.51, 0.0365789), Rate of production pollution Dmnl (2002.73, 0.0289474), (2004.68, 0.0255263), (2006.9, 0.02258), (2008.04, 0.01801), (2008.65, 0.01731), (2009.59, 0.01449), (2011, 0.0144737), (2012.89, 0.01116), (2014.23, 0.01032), (2016.12, 0.006895)) Sustainability 2018, 10, 3482 14 of 25

Table 4. Cont.

Variable Unit Calculation Formula/Function WITHLOOKUP (Time) ([(1996, 2000) (2020, 5000)], (1996.51, 2092.11), (1998.44, 2105.26), (2001.09, 2184.21), (2003.49, Unit profit 100 million yuan 2263.16), (2007.19, 2460.53), (2009.43, 2789.47), (2010.17, 3684.21), (2011.49, 3802.63), (2013.32,3802.63), (2014.5, 3802.63), (2015.23, 4026.32), (2017.72, 4078.95), (2019.71, 4092.11)) Tax rate Dmnl 0.17 Willingness for enterprises Dmnl 0.15 to govern Government subsidy policy yuan 10000 + GDP × Rate of government subsidy policy Government supervision Dmnl 0.6 intensity Unit governance cost yuan 40,000 River water volume 100 million cu.m 8.00 × 108 Increment in output value 100 million yuan Production scale + Production income GDP 100 million yuan INTEG (Increment in GDP,0) Increment in GDP 100 million yuan GDP × Rate of increment in GDP Rate of government Dmnl 4 × 10-5 subsidy policy Rate of increment in GDP Dmnl Contribution to GDP from PPI × 4.5 × 10−5 Contribution to GDP from PPI 100 million yuan LN (Profit) * 6.4 × 10−5 Increment of output value 100 million yuan Production scale + Production income Output value of PPI 100 million yuan INTEG (Increment of output value,0) Sustainability 2018, 10, 3482 15 of 25

5.2.1. Reality Test The present study compares the difference between the fitted value and the actual value of the two main variables, which are profit and total amount of wastewater. The error values for 2009–2015 were observed to test the validity of the model. The results showed that the maximum errors of the two variables are 1.12% and 3.85%, respectively, and the average of the error ratio, defined as the ratio of the error to the actual value are 0.60% and 1.32%, respectively, which are all less than 3%, within an acceptable range of error. This result proved that the system dynamics simulation model effectively reflects the relationship between the variables and the fitting is better. As Tables5 and6 show:

Table 5. Reality test of profit.

Profit Year Actual Value Fitted Value Error Error Ratio 2009 504.71 499.045 5.665 0.011224 2010 727.08 726.964 0.116 0.00016 2011 760.41 761.812 −1.402 −0.00184 2012 774.21 778.978 −4.768 −0.00616 2013 749.61 756.535 −6.925 −0.00924 2014 726.99 731.566 −4.576 −0.00629 2015 792.82 787.231 5.589 0.00705

Table 6. Reality test of total pollution.

Total Pollution Year Actual Value Fitted Value Error Error Ratio 2009 392,604 391,625 979 0.00249 2010 393,699 398,309 −4610 −0.0117 2011 382,265 385,993 −3728 −0.0098 2012 342,717 342,870 −153 −0.0004 2013 285,452 290,338 −4886 −0.0171 2014 275,501 264,887 10,614 0.03853 2015 236,684 233,689 2995 0.01265

5.2.2. Simulation Results and Discussion The model was run for the period from 1998 to 2016, on the basis of which the impact of government policy changes on the environment was explored. In order to study the impact of different policies on the environment, the simulation model describes the impact on environmental carrying capacity and total pollution under different governance subsidy policies and supervision. The paper discusses the impact of three different policies on the environmental carrying capacity and total pollution, as shown in Table7.

Table 7. Policy simulation scenario settings.

Intensity of Supervision Basis of Subsidy Current 0.6 10,000 A1 0.8 10,000 A2 0.6 12,000

In Figures4 and5, the increasing in subsidy and intensity of policy increases the environmental carrying capacity during the initial 12 years. However, after that, the changing in subsidy and intensity declines the environmental carrying capacity compared to current policies. Besides, as shown in Figure6, during the initial 12 years, the measure of increasing subsidy is the best way to increase the Sustainability 2018, 10, x FOR PEER REVIEW 16 of 25 Sustainability 2018, 10, x FOR PEER REVIEW 16 of 25 Sustainability 2018, 10, x FOR PEER REVIEW 16 of 25 increase the environmental carrying capacity; after that, the best strategy is to keep the current Sustainabilityincrease the2018 environmental, 10, 3482 carrying capacity; after that, the best strategy is to keep the current16 of 25 increasepolicies ofthe subsidy environmental and intensity. carrying capacity; after that, the best strategy is to keep the current policies of subsidy and intensity. policies of subsidy and intensity. environmental carrying capacity; after that, the best strategy is to keep the current policies of subsidy and intensity.

Figure 4. The influence of different supervision intensities on the environmental carrying capacity. Figure 4. The influence of different supervision intensities on the environmental carrying capacity. Figure 4. TheThe influence influence of different supervision intens intensitiesities on the environmental carrying capacity.

Figure 5. The influence of different subsidies of policies on the environmental carrying capacity. Figure 5. The influence influence of different subsidies of policiespolicies onon thethe environmentalenvironmental carryingcarrying capacity.capacity. Figure 5. The influence of different subsidies of policies on the environmental carrying capacity.

Figure 6. The influenceinfluence of different policies on the environmental carryingcarrying capacity.capacity. Figure 6. The influence of different policies on the environmental carrying capacity. Figure 6. The influence of different policies on the environmental carrying capacity. Sustainability 2018, 10, 3482 17 of 25 Sustainability 2018, 10, x FOR PEER REVIEW 17 of 25

The similarsimilar situationsituation occursoccurs inin thethe simulationsimulation ofof totaltotal pollution.pollution. Figures7 7 and and8 8show show that, that, during thethe initial initial 12 12 years, years, the the increase increase in subsidy in subsidy and supervision and supervision intensity intensity reduces thereduces total pollution.the total However,pollution. afterHowever, that, after the total that, pollution the total increasespollution comparedincreases compared with the current with the policies. currentIn policies. addition, In Figureaddition,9 shows Figure that, 9 shows during that, the during initial 12the years, initial the 12 increase years, the in subsidyincrease isin thesubsidy best way is the to best reduce way the to totalreduce pollution; the total after pollution; that, the after best that, way the is best to keep way the is to current keep the policies. current policies.

Total pollution 1 1 1 400,000 12 2 2 12 1 2 2 2 2 2 2 300,000 1 2 300,000 1 1 1 2 1 1 1 1 200,000 21 1 1 2 12 2 2 100,000 2 1 100,000 2

0 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Time (Year) Total pollution : Intensity increses to 80% 11111111 Total pollution : Current 22222222222

Figure 7. The influence influence of different supervisionsupervision intensities on the total pollution.pollution.

Total pollution 1 1 1 400,000 21 2 2 1 12 1 2 2 2 2 2 1 2 1 1 300,000 12 2 1 1 2 1 1 1 200,000 200,000 2 12 1 2 12 2 2 100,000 2 1 100,000 12

0 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Time (Year) Total pollution : Increasing 20% basis of subsidy 11111111 Total pollution : Current 222222222222 Total pollution : Current 222222222222 Figure 8. The influence influence of different subsidy policies on the total pollution.pollution. Sustainability 2018, 10, 3482 18 of 25 Sustainability 2018, 10, x FOR PEER REVIEW 18 of 25

Total pollution 500,000

1 3 21 375,000 32 3 1 21 2 333 3 1 2 3 2 12 250,000 2 1 1 2 3 1 1 3 1 12 2 23 3 125,000 1 2 1 3 2

0 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Time (Year) Total pollution : Increasing 20% of basis of subsidy 1111111 Total pollution : Intensity increases to 80% 222222222 Total pollution : Current 33333333333 Figure 9. The influence influence of different policies on the total pollution.pollution.

In conclusion,conclusion, during during the the initial initial 12 years,12 years, the increasethe increase in both in subsidy both subsidy and supervision and supervision intensity canintensity effectively can effectively protect the protect environment, the environment, and the measure and the of increasingmeasure of subsidy increasing is a moresubsidy effective is a more way toeffective protect way the environmentto protect the than environment increasing thethan intensity increasing of supervision. the intensity However, of supervision. after 12 However, years, the effectivenessafter 12 years, of increasingthe effectiveness in subsidy of andincreasing supervision in subsidy intensity and reduces supervision compared intensity with that reduces of the currentcompared policies. with that Therefore, of the current in the processpolicies. of Theref formulatingore, in the the process policies of of formulating environmental the protection,policies of environmental sustainabilityprotection, environmental cannot be achieved sustaina bybility relying cannot on thebe unchangingachieved by policies, relying andon the increaseunchanging in subsidy policies, is and the the best increase strategies in forsubsidy the areas is the where best strategies serious problems for the areas associated where with serious the ecosystemproblems associated emerge, and with the the government ecosystem shouldemerge, adjust and the the government policies by regularly should adjust assessing the policies ecosystem by inregularly regions. assessing ecosystem in regions. In addition,addition, althoughalthough many scholarsscholars believe that effectiveeffective policiespolicies cancan motivatemotivate companiescompanies toto implementimplement eco-innovations, some scholars point out that, due to differences sizes ofof thethe enterprisesenterprises and theirtheir operatingoperating conditions,conditions, there there is is not not a policya policy that that can can be be suitable suitable for for all theall the enterprises, enterprises, and and the governmentthe government should should treat themtreat differentlythem differently to improve to improve the efficiency the efficiency of supervision. of supervision. For the large-scale For the enterprises,large-scale enterprises, due to their higherdue to exposuretheir higher rate, exposure they are easierrate, they to withstand are easier the to pressure withstand from the the pressure society andfrom shareholders. the society and Besides, shareholders. they need Besides, to actively they maintainneed to actively the brand maintain in order the to brand meet in the order demands to meet of managementthe demands andof management development. and Therefore, development. compared Therefore, to small compared and medium-sized to small and enterprises, medium-sized they areenterprises, more active they in theare R&Dmore of active eco-innovation. in the R& However,D of eco-innovation. for small and medium-sizedHowever, for enterprises,small and theymedium-sized have less probabilityenterprises, tothey be noticedhave less by probability the public to and be thenoticed rights by of the shareholders public and arethe relatively rights of smallershareholders than bigare enterprises.relatively smaller Therefore, than theybig enterpri will notses. actively Therefore, implement they will eco-innovation not actively implement due to the pressureeco-innovation from the due society to the and pressure shareholders, from and the most society small and and shareholders medium-sized, and enterprises most small are under and themedium-sized pressure from enterprises operation are and under financial the subsidies, pressure sofrom their operation goals are and about financial enabling subsidies, the companies so their to survivegoals are in about the fierce enabling market, the and companies they do not to have survive the motivationin the fierce to conductmarket, theand R&D they of do eco-innovation. not have the motivationFor large to conduct enterprises: the R&D of eco-innovation. TheFor large government enterprises: can associate with media, shareholders and other social groups to supervise enterprises.The government In this way, can the associate government with can media, reduce shareholders the cost of supervision. and other Moreover,social groups it can to also supervise reduce theenterprises. rent-seeking In this space way, between the government the government can reduce and enterprises the cost of to supervision. implement effectiveMoreover, supervision. it can also reduce the rent-seeking space between the government and enterprises to implement effective A. The government needs to reduce the impact of ecological R&D on the operation of enterprises supervision. through adjustment of policies on financing and financial subsidies. B.A. TheImplementing government a needs tax deduction to reduce policy the impact in the of investment ecological in R&D eco-innovation, on the operation so that of enterprisesenterprises throughcan actively adjustment carry out of policies eco-innovation. on financing and financial subsidies.

C.B. ImplementingDisseminating a ecologicaltax deduction idea policy through in thethe channelsinvestment of governmentin eco-innovation, so that so most that peopleenterprises will canunderstand actively carry and supportout eco-innovation. Eco-products, which can also reduce advertising costs for enterprises. C. Disseminating ecological idea through the channels of government so that most people will understand and support Eco-products, which can also reduce advertising costs for enterprises. Sustainability 2018, 10, 3482 19 of 25

D. Enterprises can built a platform for sharing resources and knowledge with research institutions to reduce the costs and risks of R&D.

For small and medium-sized paper enterprises:

A. Due to unreasonable production processes and backward equipment, SMEs have become the main source of pollution in the pulp and paper industry. Therefore, the government needs to establish more stringent supervision and punishment measures to raise the SMEs’ awareness of cleaner production. B. In China, the difficulty of financing and loan for SMEs is a common phenomenon. Therefore, government needs to subsidize enterprises so that the enterprise can afford the latest clean equipment and investment in process innovation, and the government also needs to reduce the approval process for their loans. C. For small and medium-sized enterprises that do not have the ability to implement the R&D of eco-innovation, they can achieve clean production by purchasing emission rights from large enterprises and scientific research institutions.

In addition, in view of the important role of the government in leading enterprises to implement eco-innovation, the formulation of policies should also include the revision of the official assessment and accountability system. The government should regard economic efficiency and environment efficiency as the main indicators of assessment for the official. As a result, the official will attach more importance to the protection of environment. By the utilization of permanent system of accountability, officials will not sacrifice the local environment to pursue the economic goal. Besides, due to the fact that the garbage classification standards in China are not complete compared with other developed countries, a large amount of domestic waste paper and industrial waste paper become part of urban waste, which not only affects residents’ lives and ecology, but also affects enterprises’ recycling of waste paper for reuse. Government needs to publicize residents and enterprises through policies and regulations, improving people’s acceptance of ecological products, and facilitating the reuse of waste paper by implementing new waste classification regulations to help enterprises achieve waste.

5.3. Farmers’ Ecological Innovation Water pollution and land pollution caused by agricultural operations are becoming one of the hot issues studied by scholars [64]. In the traditional agricultural bamboo forest operation mode, farmers’ excessive pursuit of bamboo forest production has led to the destruction of local species diversity. In the management of bamboo forest, land resources and water resources have also been polluted by the utilization of chemical fertilizers and pesticides. Yuan believed that economic interests and government pressure are the key driving factors for farmers to actively implement eco-innovation, which is also related to the degree of education and scale of operation of farmers [65]. Zhou found through research that farmers’ degree of education significantly influences their choice of advanced technology and equipment [66]. Lu believed that agriculture has irreplaceable ecological functions [67]. Additionally, it is also necessary to strengthen farmers’ education and training. After research, Zhang found that the livelihood method of farmers is positively correlated with the social effects, economic effects and ecological effects [68]. Su and Shang believed that the government needs to reduce the risk factors of farmers after implementing ecological livelihood, and improve the ability of farmers to take risks as much as possible [69]. As the improvement of the degree of education of farmers is a long-term project with huge investment, the bamboo forest park model can quickly and effectively manage farmers to reduce the pollution caused by agricultural operations. Farmers can achieve scientific planting of bamboo forests by purchasing improved bamboo species and planning planting density. In the cultivation process, the use of chemical fertilizers and pesticides is reduced, and the bamboo forestland is fertilized by the organic fertilizer which is produced by the characteristic animal husbandry, and the bamboo forest Sustainability 2018, 10, 3482 20 of 25 pests are treated by biological control, thereby reducing the environment impact. The waste materials for making bamboo chips are collected and processed to make bamboo-related crafts, such as bamboo furniture and souvenirs, to achieve efficient carbon sequestration. In addition to passing through the park model, the government and enterprises carry out brand promotion of characteristic agriculture and animal husbandry to increase the sales premium, and farmers can also carry out bamboo forest farmhouses according to their own characteristics, which can not only increase the economic source, but also increase the sales of handicrafts and agricultural products through bamboo forest farmhouses. From the perspective of long-term development, it is necessary for the government and enterprises to contribute to the improvement on the degree of education of farmers through the financial aid and training.

5.4. Improving Ecologically Fragile Areas At present, scholars have different definitions of ecologically fragile regions. It is generally believed that ecologically fragile areas refer to regional ecosystems with poor anti-interference ability or self-recovery ability [70]. When they are interfered by various factors, they are easy to evolve into another state, and it is difficult to return to the initial state according to existing technical conditions. According to the research in China, there is a coupling relationship between ecologically fragile areas and poverty areas. Qi and Ye believed that it is difficult to achieve a win-win goal of protecting ecology and poverty alleviation in poor areas, since the local government cannot coordinate the interests of various stakeholders [71]. Liu and Zhou divided 18 key ecologically vulnerable areas in China, and it provides theoretical basis for ecological management in different regions [72]. Lu and Ding identified that fragile ecological environment and poverty areas are the most essential manifestations of China’s ecologically fragile areas, and it is hard to achieve sustainable development in these areas [73]. Generally speaking, the local government often fails to balance the relationship between the protection of the environment and the development of economy, resulting in the poverty-strike traps [74]. For the special topography and ecological problems in Southwest China, Huang and Ai divided the fragile areas in Southwest China into moderately vulnerable areas, severely vulnerable areas, and low-level vulnerable areas according to regional environment pollution status and population density [75]. Therefore, the government can carry out special treatments in areas with serious geological disasters. The causes of ecologically fragile areas include ecological imbalances, lack of stability, and poor resistance to external disturbances. With the analysis of local disaster types and soil structure, the goal of improving ecologically fragile areas and protecting people’s property and safety is achieved. Based on the unique ecological landforms and other conditions in the southwestern region, Qiao and Gao proposed the application of an agricultural production technology model and an ecological agriculture tourism management model to improve regional ecological vulnerability [76]. Chen and Li established a returning farmland to forest model with local characteristic by designing the management model of returning farmland to forests [77]. Measures: Government, enterprises, and farmers should divide different governance areas in terms of local soil structure, types of disasters, and severity of ecological vulnerability. Research institutions such as universities should be associated with the government and enterprises to measure the land to help farmers achieve improvements in regional ecological vulnerability. The agricultural production technology and ecological agriculture tourism mode is combined to improve ecological agriculture fragile areas. The specific method is to combine agricultural production technology with the bamboo planting, ecological agriculture sightseeing mode and bamboo forest agritainment. Firstly, by evaluating the soil and pollution degree in different areas, the appropriate bamboo planting density is obtained and supplemented with suitable associated crops to adjust the crop structure and increase the ground cover space to improve the regional ecological environment. Secondly, through the planning of some bamboo forests, such as the implementation of the garden orchard model and the forest agritainment model, not only can we promote the awareness of bamboo forest culture in this Sustainability 2018, 10, 3482 21 of 25 way, but also achieve local soil and water conservation and economic development, thus achieving regional ecological protection and precise poverty alleviation. In addition, solutions to restore the environment that has been destroyed by enterprises or farmers can be provided by scientific research institutions to alleviate the government’s financial pressure, and put pressure on polluting enterprises to force them to implement ecological production.

5.5. Limitations and Discussion on Future Research The pollution of pulp and paper enterprises is mainly concentrated in small and medium-sized enterprises. Because of the lack of supervision and regulations, most SMEs can not be fully regulated, especially a large number of household-based papermaking workshops, which generate a lot of pollution due to backward production equipment and processes. In 2017, Sichuan Province carried out special rectification and closed more than 1200 household- based papermaking workshops with a small amount of compensation. Although it helped to alleviate pressure on the environment, it also caused most family workshops to lose economic sources. The existing emission standards are uniformly formulated by the Ministry of Environmental Protection, but the ecological conditions and vulnerabilities are diverse in different regions. Therefore, even if the enterprises meet the emission standards, they will cause serious damage to the local ecosystem. The establishment of bamboo forest park for enterprises and farmers may result in the concentration of bamboo resources in the hands of a few large enterprises due to different operating conditions. As a consequence, the price of bamboo chips may be easily manipulated by large enterprises, which is not conducive to healthy competition among enterprises. Farmers lack professional knowledge and may have potential safety problems in the production of bamboo forest culture-related handicrafts, which may lead to the difficulty in spreading bamboo culture. Future research might therefore examine the proposed eco-innovation model from an environmental behavior perspective, including cross-culture and cross-industry comparisons.

6. Conclusions The pulp and paper industry is a pillar industry in China, but it is also a traditional heavy pollution industry. In order to achieve sustainable development of the paper industry, the present aims to achieve sustainable production and enhance the competitiveness of enterprises through ecological innovation in the paper industry chain. Additionally, poverty areas are helped to increase their economic income to take targeted measures in poverty alleviation. In addition, through the construction of the bamboo forest park, it helps ecologically fragile areas to alleviate ecological pressure and achieve the goal of protecting the ecology and developing a win-win economy. A park model composed of government enterprise farmers to realize the virtuous circle development of regional paper enterprises by the application of eco-innovation was proposed. From the perspective of technology of eco-innovation, how to reduce emissions of greenhouse gas and improve the efficiency of wastewater treatment was discussed. Research has found that improving energy efficiency and upgrading equipment are the direct means to reduce emissions of carbon dioxide from production. Moreover, improving the structure of energy consumption in the region can also indirectly reduce emissions of greenhouse gas. For the treatment of wastewater, this paper gives advice to the large enterprises and SMEs. Large enterprises should actively track the advanced technology of treatment in the international scope and clear the obstacles for the diffusion of these technologies. Additionally, the best strategies for SMEs are to improve the traditional processing technology by improving the shortcomings of existing technologies of treatment. As can be seen in Figure1 from Section2, enterprises can improve the recycling rate of waste paper by tracking the flow of the final product. From the perspective of policies of eco-innovation, the relationship between the government, enterprises and farmers through game theory was analyzed, and suggestions for how to make policies Sustainability 2018, 10, 3482 22 of 25 affect enterprises by the utilization of system dynamics model was proposed. It has been found that increasing the fines for polluting production and the cost of restoring the environment can encourage enterprises to implement eco-innovation. However, excessive costs of supervision will make it difficult for the government to implement effective supervision. Therefore, the introduction of social groups is necessary to the government, as it can reduce the cost of government supervision. Besides, by using the system dynamics model, the government should adjust policies in time according to the change in ecological environment, and for the region with serious pollution, increasing in subsidy to enterprises will be the most effective ways to improve the local environment. From the perspective of farmers of eco-innovation, improvement on the enthusiasm of farmers for ecological innovation from both long-term and short-term perspectives was proposed. From the long-term perspective, the study found that improving the education level of farmers can increase the probability of implementing ecological production. However, this project needs to invest a lot of money, and it requires the government and enterprises to achieve the goal through years of operation. From the short-term perspective, it is possible to reduce the environmental impact of farmers in production by scientifically managing the activities of farmers from sowing to cultivating bamboo species. Based on the results in Section4, the government can increase the fines for the pollution from farmers to increase the possibility of farmers to implement ecological production. Additionally, enterprises can also achieve the same results by increasing investment in ecological innovation. From the perspective of improving ecological vulnerability, the present study suggests that the government and enterprises should associate with research institutions to classify the severity of ecological vulnerability in different regions, so that targeted bamboo forest park can be constructed to improve ecologically fragile areas. In addition, combined with different ecological agriculture models, the goal of improving ecologically fragile areas can be achieved.

Author Contributions: J.H. developed and wrote the first draft of the paper. L.M. was involved in literature research, modelling simulation and measures discussions. All authors read, improved and approved the final manuscript. Funding: This research was funded by the National Natural Science Foundation of China, grant number [71273140], the Jiangsu Social Science Foundation (grant no. 18GLB003) and The APC was funded by [71273140, 18GLB003]. Acknowledgments: This research is supported by the National Natural Science Foundation of China (71273140), the Jiangsu Social Science Foundation (grant no. 18GLB003), and the China Meteorological Administration Soft Science Project “Research on collaborative innovation mechanism of meteorological information resources in big data environment” (Grant No. 2014-27). We are also grateful to our fellows for their constructive comments, which have improved the quality and presentation of this paper. Conflicts of Interest: The authors declare no conflict of interest.

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