How to Promote the Formation of Market-Based Mechanisms for Mine Water Recycling and Utilization in China? A Four-Party Evolutionary Game Analysis

Abstract

Mine water is both wastewater and a valuable unconventional water resource, and its recycling is crucial for the sustainable development of coal-resource-based cities. In response to the complex interactions among multiple stakeholders in the process of mine water recycling, this study innovatively develops a four-party evolutionary game model involving local government, coal mining enterprises, mine water operators, and water users. For the first time, key variables—mine water pricing, water volume, water rights trading, water resource taxation, and objective utility of water resources—are systematically integrated into a multi-agent game framework, extending the analysis beyond conventional policies, such as penalties and subsidies, to explore their impact on recycling behavior. The results show the following: (1) There are 10 possible evolutionary stabilization strategies in the system. The current optimal strategy includes supply, input, use, active support, while the ideal strategy under the market mechanism includes supply, input, use, passive support. (2) Local governments play a leading role in collaborative governance. The decisions of coal mining enterprises and mine water operators are highly interdependent, and these upstream actors significantly influence the water users’ strategies. (3) Government subsidies exhibit an inverted U-shaped effect, while punitive measures are more effective than incentives. The tax differential between recycled and discharged mine water incentivizes coal enterprises to adopt proactive measures, and water rights trading significantly enhances the users’ willingness. (4) Mine water should be priced significantly lower than fresh water and reasonably balanced between stakeholders. Industries with lower objective utility of water tend to prioritize its use. This study provides theoretical support for policy optimization and a market-based resource utilization of mine water.

1. Introduction

Coal, a traditional fossil fuel, plays a key role in global industrial development, social progress, and economic growth by ensuring energy security [1]. However, coal mining activities generate substantial volumes of mine water as a byproduct of coal extraction. Due to the pollution in the mining process, mine water is classified as a special type of industrial wastewater, and its chemical composition is more complex than natural wastewater. If not treated and utilized, mine water will not only seriously pollute the ecological environment but will lead to the waste of water resources [2,3]. Mine water can be treated through various technologies, including coagulation, sedimentation, filtration, disinfection, ultrafiltration, and reverse osmosis, enabling it to meet the Class III surface water quality standard. Treated mine water can be preferentially used for industrial processes within the mining area. At the same time, the surplus can be further recycled for industrial purposes in sectors such as coal chemical production and for ecological uses such as mine site restoration and greening. The reuse of mine water—originally regarded as wastewater—holds significant value for environmental protection and water conservation, thereby contributing to the sustainable development of both the economy and society [4,5]. To address the challenges of wastewater recycling and utilization, various initiatives have been implemented globally. For instance, the United Nations’ Sustainable Development Goal (SDG) 6.3 aims to significantly enhance wastewater recycling and safe reuse by 2030 to improve water quality and to mitigate water scarcity. Similarly, the United Nations Educational, Scientific and Cultural Organization (UNESCO) IHP-IX: Strategic Plan of the Intergovernmental Hydrological Programme lists accelerated research on non-conventional water resources as one of five priority areas [6]. The lessons gained from these global efforts provide important guidance for addressing the recycling and utilization of wastewater, including mine water.

According to the Statistical Review of World Energy [7], China’s coal production has reached 4.71 billion tons, accounting for 52% of the global total, making China the world’s largest producer and consumer of coal resources. The country has made active efforts to promote the recycling of mine water. For example, the Water Law of the People’s Republic of China explicitly encourages the use of reclaimed water to improve the recycling rate of wastewater. China has also issued the Special Plan for the Utilization of Mine Water and the Development Plan for the Utilization of Mine Water [8], respectively, to realize the industrialization of mine water recycling and utilization. However, according to the research of Gu et al. [9], in 2018, only 35% of mine water was reused, while the majority was discharged directly into the environment. These findings highlight that mine water recycling and utilization still faces many challenges in China. One of the key issues is that the volume of mine water generated during coal mining far exceeds the actual demand. Statistics indicate that each ton of coal extraction generates about 2 tons of mine water, while only 0.4–1.7 tons are used in production, indicating that a substantial amount of surplus mine water lacks viable utilization channels, which must be allocated and utilized rationally through an effective market mechanism. An effective and sustainable water governance system requires the involvement of many actors, specifically governments, regulators, mining enterprises, water utilities, water users, community organizations, and corporate partners, among others [10]. Coordination and cooperation among these actors are crucial to achieving a sustainable water governance model [11,12], as evidenced by the practice of mine water recycling that has been carried out in Inner Mongolia, Yulin, and other places in China.

Observations from these practices indicate that establishing a market-based mechanism involves multiple stages, including production, treatment, recycling, and utilization, where cooperation and negotiation among various stakeholders play a crucial role. Although coal mining enterprises, mine water operators, water users, and the local government are all involved, their respective goals and demands are often different, and these demands are not fixed throughout the process. Coal mining enterprises focus on the costs associated with mine water treatment, while mine water operators seek higher economic returns, and water users are concerned with the price and stability of the water supply. The government, through incentives, aims to ease the cost pressures on all parties and foster the development of a market-based mechanism. However, due to the heterogeneity of the stakeholders’ needs, the complexity of interests, and the asymmetry of information, it is often difficult for all parties to select the optimal strategy at the initial stage. In this process, stakeholders must adjust their strategies flexibly in response to market changes, policy adjustments, and other factors, continuously optimizing their decisions through long-term interaction and negotiation, ultimately achieving a balance of interests and cooperation. This dynamic adjustment process lays the foundation for the establishment of a stable market-oriented mechanism. Therefore, further research into how stakeholders adjust their strategies in the evolving environment of mine water recycling and the key factors influencing these adjustments is essential for addressing the challenges of mine water recycling and utilization in China and supporting the sustainable development of cities and society.

Several studies have investigated the management of mine water in coal mining. Yu et al. [13] assessed the positive impact of trade in mining waste, including MW, on China’s green development in both the long and short term. Gao et al. [14] found that the infrastructure costs associated with regional mine water sharing are competitive and can assist managers in addressing the challenges posed by extreme climate events. Qi et al. [15] showed that regulatory factors have the most significant impact, and that enhancing incentives and penalties may prove more effective than increasing resource taxes, environmental taxes, or subsidies. Lu et al. [16] noted that policies for mine water reuse are still in the improvement stage. Shi et al. [17] concluded that China currently lacks sufficient policy support for energy conservation, emissions reduction, and environmental protection, and that subsidy programs and incentives should be developed for the treatment of high-salinity wastewater. Barrett et al. [18] indicated that transferring mine water from water-rich to water-poor mine areas would face significant challenges without government incentives. Chen et al. [4] showed that low water prices hinder zero wastewater discharge goals. They also recommended that the government impose additional taxes on companies that do not meet zero discharge standards to increase pollution costs.

Mine water is an important unconventional water resource, as is reclaimed water, rainwater, and seawater [19]. Factors affecting the utilization of unconventional water resources have also been extensively studied. These include, at a policy level, relevant policies [20], regulations, and price subsidy programs [21]; at a market level, the pricing of reclaimed water and the price differential between conventional and reclaimed water [22], treatment costs, and foundational design conditions, etc. [23,24]; at the technological and managerial level, the capacity to utilize unconventional water resources by improving water quality [10,25], as well as the water users’ self-efficacy [26], acceptance [27,28,29], and corporate social responsibility [30].

To promote the recycling and utilization of mine water, it is essential to explore the interactions and strategies of the involved parties. Evolutionary game theory provides a robust framework for understanding these dynamics [31]. This method is particularly effective in addressing complex multi-participant decision-making problems, and is widely used in strategy studies [32,33]. Wang et al. [34] used a tripartite evolutionary game to study the combined effects of government subsidies and the public monitoring of water quality information on the public acceptance of reclaimed water. Zhou et al. [35] developed a tripartite evolutionary game model for local government, polluting enterprises, and third-party enterprises. Mahdevari and Abadi [36] studied the implementation of green mining principles in riverine sand and gravel resources based on evolutionary game theory. Zhou et al. [37] developed a tripartite evolutionary game model involving mining companies, the public, and local governments on the issue of mining waste recycling. Jamali et al. [38] investigated the evolutionary behavior of the energy-intensive producers’ decisions to purchase renewable versus non-renewable energy. Sun and Liu [39] constructed a tripartite evolutionary game model among sewage discharge enterprises, third-party governance enterprises, and local governments, and analyzed the third-party governance of groundwater ammonia nitrogen pollution, considering the reward and punishment distribution mechanism and pollution right trading policy.

Although the earlier research on unconventional water resources and energy recycling has offered valuable theoretical insights, some gaps are still prevalent in the literature. Firstly, the current research on mine water primarily focuses on water quantity prediction, water quality treatment, and comprehensive utilization methods. However, studies on the recycling and utilization of mine water, particularly from a market-based perspective, remain largely unexplored. Secondly, in terms of current policies and market practices, mine water recycling in China generally follows a market-oriented model, with coal mining enterprises handling the initial treatment of mine water, while recycling and operation are managed by professional companies or through the public–private partnership (PPP) model. As a result, compared to conventional water resources and reclaimed water utilization, this process involves multiple stages and more stakeholders, with more complex interactions between the parties involved, and few studies have comprehensively addressed these issues. Furthermore, while studies have highlighted crucial factors in unconventional water use, such as government subsidies, penalties, and water pricing, which are also essential in mine water recycling and utilization, these studies do not fully capture the multidimensional influences specific to mine water recycling and utilization. This limitation leads to a lack of overall understanding of mine water recycling and utilization.

This study makes an innovative contribution by addressing the limitations of the previous research. First, rather than focusing solely on either the buyer or the seller, this study takes an innovative approach by incorporating all four key stakeholders involved in the mine water generation, treatment, recycling, and utilization process: the local government (TLG), the coal mining enterprise (CME), the mine water operator (MWO), and the water user (TWU). This approach offers a comprehensive perspective on the market-driven recycling and utilization of mine water. Second, our analysis of evolutionarily stable strategy (ESS) highlights the intricate stakeholder interactions in the mine water recycling and utilization system and explores its potential evolutionary pathway. Finally, by expanding the analysis to include not only government rewards and punishments but also mine water quantity, price, water rights trading, taxation, the objective utility of water resources, and other relevant factors, this research examines its impact on the utilization and market trading of mine water. Finally, policy recommendations are proposed to address the challenges associated with mine water recycling and utilization in China.

2. Methods

2.1. Problem Description

China’s coal resources are distributed unevenly, with a notable pattern of being “abundant in the north and west, and scarce in the south and east”. Among the country’s 14 major coal production bases, 9 are located in the Yellow River Basin, accounting for approximately 70% of the nation’s total coal output. However, there is a significant spatial mismatch between coal and water resources. Although provinces such as Shanxi, Shaanxi, Inner Mongolia, Ningxia, and Gansu—situated in the Yellow River Basin—possess around two-thirds of China’s proven coal reserves, they hold only about 1/25 of the country’s total water resources, making them typically water-scarce regions. This mismatch has led to widespread water shortages in most coal-resource-based cities across China. A large amount of mine water that has long been wasted is, in fact, a potential source of unconventional water with practical significance for alleviating regional water stress. According to recent policy documents in China, it is clearly stated that mine water should be prioritized for use in project construction and production processes, and that various approaches to the utilization of surplus mine water are encouraged. Coal mining enterprises that discharge mine water despite having the conditions for reuse may face policy restrictions and economic penalties. Accordingly, this study focuses on the recovery and utilization of mine water in water-scarce regions, aiming to explore resource-oriented utilization pathways and corresponding policy regulation mechanisms.

The recycling and utilization of mine water is not a unilateral action, but rather a complex, multi-stakeholder system requiring coordinated participation and interaction among various actors. This system primarily involves four key stakeholders. TLG—driven by sustainable development goals and fiscal constraints—chooses whether or not to support mine water recycling initiatives. CME, as the direct generators of mine water, weighs the trade-offs between illegal discharge and standardized treatment. The MWO determines whether to invest in treatment and distribution infrastructure based on potential market returns. Ultimately, TWU determines its willingness to adopt mine water depending on factors such as pricing and supply stability.

Given the complexity of this multi-agent system, the mine water recycling process is affected by both information asymmetry and the bounded rationality of stakeholders. Their strategic decisions are inherently dynamic and uncertain. Therefore, this study adopts evolutionary game theory to analyze the interactive decision-making mechanisms among stakeholders involved in mine water recycling and reuse.

2.2. Basic Assumptions of the Model

Referring to similar studies and based on the practice of mine water utilization in Yulin City, Shaanxi Province, China, the following assumptions were made when constructing the four-party evolutionary game model through fieldwork, interviews, and expert consultations. The relevant parameters are defined as shown in

Table 1. Description of the variable.

Parameter	Description
$R_m$	Fixed income of the CME
$Q$	Volume of mine water
$C_m$	Total investment in constructing deep treatment facilities and water supply networks
$C_f$	Operation and maintenance costs for treatment of each unit of mine water
$V_f$	Additional benefits to the CME when both the CME and the MWO adopt proactive strategies
$V_e$	Additional benefits for the CME in unilaterally implementing the “supply” strategy, where $V_e<V_f$
$T_{m1}$	The water resource tax levied on recycled mine water
$T_{m2}$	The water resource tax levied on discharged mine water, where $T_{m1}<T_{m2}$
$D$	The arbitrary discharge of mine water results in a loss of social welfare, including the wastage of water resources and environmental degradation.
$L_1$	Reputational damage to the CME
$F_1$	The penalty imposed by TLG on the CME for the arbitrarily discharging of each unit of mine water
$C_o$	Total fixed costs of the MWO
$C_t$	The MWO’s operating costs per unit of mine water
$V_o$	Additional benefits to the MWO
$U_1$	The total utility of TWU from using mine water
$U_2$	The total utility of TWU from using fresh water
$u$	The objective utility of using fresh water
$\alpha$	Substitution rate of mine water for fresh water
$P_1$	Mine water price
$P_2$	Fresh water price, where $P_1<P_2$
$T_1$	Water resource tax payable by TWU for the use of mine water
$T_2$	Water resource tax payable by TWU for the use of fresh water
$e_1$	The environmental benefits of mine water use
$\theta$	Environmental protection and water conservation awareness of TWU
$C_n$	Mine water pipeline network construction costs
$C_u$	Fees for fresh water abstraction permits
$C_g$	Costs incurred by TLG in adopting an “active Support” strategy
${\lambda }_1$	Percentage of TLG subsidies for investment costs of the CME
${\lambda }_2$	Percentage of TLG subsidies for investment costs of the MWO
${\lambda }_3$	The price subsidy provided by TLG to TWU for using mine water
$B_s$	Increase in social welfare resulting from the recycling of mine water
$B_m$	Increase in social welfare when both the CME and the MWO adopt proactive strategies
$B_g$	Increase in social welfare when the CME unilaterally adopts the “supply” strategy, where $B_g<B_m<B_s$
$L_2$	Loss of credibility and reputation of TLG
$C_e$	Costs incurred by TLG for water regulation and environmental remediation when TWU adopts conventional water
$F_2$	TLG is penalized by the higher-level government for inaction
$M$	When TLG adopts the “active Support” strategy, higher-level governments allocate special support funds to TLG
$S$	When the CME, MWO, and TWU adopt a proactive approach, leading to a favorable situation for the comprehensive utilization of MW, higher-level government provide incentives to the local government
$x$	The probability of the CME choosing the “supply” strategy.
$y$	The probability of the MWO choosing the “investment” strategy.
$z$	The probability of TWU choosing the “use” strategy.
$w$	The probability of TLG choosing the “active Support” strategy.

.

(1)

All the stakeholders have bounded rationality and cannot initially achieve optimal strategies. They continuously adapt to changes in the environment to optimize strategies for profit maximization. In this study, interactions between individuals within the population are not considered.

(2)

Each stakeholder has two strategy choices: the first is active, and the second is passive. The strategy space for the CME is S_c = [supply, discharge], for the MWO is S_o = [investment, no investment], for TWU is S_u = [use, non-use], and for TLG is S_g = [active support, passive support]. The probabilities of choosing the first positive strategy are x, y, z, w; $x,y,z,w\in [0,1]$.

(3)

The CME has fixed income R_m from mining activities, assuming the volume of mine water is Q. Choosing a “supply” strategy requires the enterprise to invest in deep treatment facilities and pipeline networks, amounting to a total investment of C_m, where each unit of mine water is treated at an additional cost of C_f. If the CME adopts a “supply” strategy and the MWO chooses an “investment” strategy, pollution from random discharge is prevented, demonstrating the enterprise’s commitment to social responsibility, which in turn enhances its reputation and provides additional benefits worth V_f. When the enterprise alone adopts a “supply” strategy without operator investment, its environmental awareness still contributes to improved environmental quality, yielding an additional benefit V_e. Under the latest policy, CME must pay a water resource tax based on their dredged drainage volume, with rates T_m1 for recycling and T_m2 for non-recycling. Choosing a “discharge” strategy causes environmental pollution and water waste, leading to economic and social damages D, reputational loss L₁, and penalties F₁ imposed by TLG for the arbitrary discharging of each unit of mine water.

(4)

A profit-driven MWO that adopts an “investment” strategy incurs costs for facility construction, equipment, and technology, with total fixed costs C_o and operating costs C_t per unit. This strategy enhances the operator’s social image and provides additional benefits, V_o.

(5)

Utility refers to the level of satisfaction that a consumer derives from the consumption of a particular good or service. In the context of water resource management, objective utility reflects the actual, quantifiable benefits that water resources generate in production activities. In this study, objective utility is measured by the direct economic return per unit of water used. Let u represent the objective utility obtained by a water user from using conventional water resources. The substitution coefficient of mine water for conventional water is denoted by α, such that the objective utility of using mine water is expressed as αu. When choosing a “use” strategy, TWU’s total utility is U₁, and they must also pay the mine water price P₂ and the water resource tax T₁. China’s policy prohibits the use of mine water and conventional water in the same pipeline, necessitating an additional pipeline construction cost of C_n. The water user’s awareness of water conservation and environmental protection is θ, and the environmental value of using mine water is e₁. Consequently, $U_1=\alpha u-P_1-T_1-C_n+\theta e_1$. For conventional water, the total utility is U₂, which is influenced by the price P₂ and a water resource tax of T₂. Due to water scarcity, TLG strictly controls conventional water use, and TWU has to apply for a license to take water at an associated fee of C_u. Consequently, $U_2=u-P_2-T_2-C_u$.

(6)

When TLG adopts an “active support” strategy, it is required to formulate standards and planning documents for mine water utilization, incorporate mine water into the unified water resource allocation and management system, and establish systems for metering, online monitoring, regulation, performance evaluation, incentives, and penalties. In addition, the government should carry out public awareness campaigns, collect water resource taxes, and construct and maintain the necessary supporting pipeline infrastructure. The total cost of these activities is denoted as C_g. Moreover, the government provides incentives for the CME and the MWO based on fixed asset investments at ratios of λ₁ and λ₂, respectively. Incentives for TWU depend on the volume of mine water used at a ratio of λ₃. Utilizing mine water helps to prevent environmental pollution, conserve conventional water resources, and increase social welfare B_s. When the CME supplies mine water and the MWO invests, but TWU chooses conventional water, the regional water-carrying capacity still improves, resulting in a social welfare increase of B_m. If the CME supplies mine water but the MWO does not invest, environmental pollution will be avoided, yielding an increase in the social welfare of B_g. By contrast, a “passive support” strategy undermines TLG’s credibility, causing a loss of L₂. Furthermore, when TWU chooses conventional water, TLG incurs extra costs for managing water resources and environmental control, denoted as C_e.

(7)

The higher-level government penalizes TLG to the value of F₂ for inaction that harms the environment or wastes water. A proactive local government receives support funds M. When the CME, the MWO, and TWU collaborate on mine water recycling and utilization, TLG earns incentives S.

2.3. Benefit Matrix of the Stakeholders

Based on the above parameters and assumptions, Figure 1 and Figure 2 show the benefit matrices for stakeholders when TLG adopts the “active support” and “passive support” strategies, respectively.

3. Results of the Evolutionarily Stable Strategies

3.1. Strategies of the Various Stakeholders

In evolutionary systems, the “fitness” of a strategy reflects its effectiveness. If the fitness (benefit) of a strategy is higher than the overall average, it will gradually evolve into the dominant strategy, which reflects the mechanism of “survival of the fittest” in natural selection. To model this mechanism, Taylor and Jonker [40] introduced the replicator dynamics equation, which describes the evolutionary process of the relative proportions of strategies over time. The computational steps are as follows. First, based on the payoff matrix, the expected payoffs for stakeholders choosing two different strategies are calculated using a weighted average. Next, the weighted average of these expected payoffs is computed to obtain the overall average payoff, which helps assess the effectiveness of the overall strategy selection. Then, based on these expected payoffs, the replicator dynamics equation is computed, which describes the rate of change in the probability of the stakeholders’ strategy selection over time. In addition, with reference to the method of Zou et al. [41], the stability theorem of differential equations is utilized to derive which strategies evolve into stable dominant strategies in a given context. Finally, in the inference section, the specific effects of external conditions on strategy evolution are analyzed.

3.1.1. The Coal Mining Enterprise

The expected payoffs for the CME when choosing supply and emission strategies and the average expected payoffs are $E_{x1}$, $E_{x2}$, and $\overline{E_x}$ respectively.

$$E_{x1}=R_m-C_m+V_e-T_{m2}Q-y{V}_e+y{V}_f-C_{f}Q+w{\lambda }_1{C}_m-y{T}_{m1}Q+y{T}_{m2}Q$$

(1)

$$E_{x2}=R_m-L_1-T_{m2}Q-w{F}_{1}Q$$

(2)

$$\overline{E_x}=x{E}_{x1}+(1-x)E_{x2}$$

(3)

The replication dynamics equation for the CME is as follows:

$$\begin{array}{l}F(x)=dx/dt=x(E_{x1}-\overline{E_x})\\ =x(1-x)(L_1-C_m+V_e+w{F}_{1}Q-y{V}_e+y{V}_f-C_{f}Q+w{\lambda }_1{C}_m-y{T}_{m1}Q+y{T}_{m2}Q)\end{array}$$

(4)

According to the stability theorem of differential equations, the probability of the CME’s strategy selection in a stable state must simultaneously satisfy $F\left(x\right)=0$ and $F’\left(x\right)<0$. When $F\left(x\right)=0$, it can be obtained that: $x^{*}=0$, $x^{*}=1$, $y^{*}=(w{\mathsf{\lambda }}_1{C}_m+{w{F}_{1}Q-C_{f}Q+L}_1-C_m+V_e)/(V_e-V_f+T_{m1}Q-T_{m2}Q)$.

Proposition 1.

For the CME, when $y=y^{*}$, ${\left.F’\left(x\right)\right|}_{x=0}=0$ and ${\left.F’\left(x\right)\right|}_{x=1}=0$, indicating that the ESS cannot be determined. When $y>y^{*}$, ${\left.F\left(x\right)\right|}_{x=1}=0$ and ${\left.F’\left(x\right)\right|}_{x=1}<0$, which indicates that $x^{*}=1$ is the only ESS, meaning the CME will tend to treat and supply MW. When $y<y^{*}$, ${\left.F\left(x\right)\right|}_{x=0}=0$ and ${\left.F’\left(x\right)\right|}_{x=0}<0$, which indicates that $x^{*}=0$ is the only ESS, implying that the CME is inclined to discharge untreated mine water arbitrarily.

Proposition 1 demonstrates that the CME’s strategy choices depend on the MWO’s investment willingness. A high MWO investment willingness can prompt the CME to shift its strategy from arbitrarily discharging to supplying treated mine water that complies with regulatory standards. Conversely, if the MWO does not invest in mine water recycling, the CME’s treatment efforts may lose effectiveness, leading to untreated discharges and increased water resource taxes.

Corollary 1.

Strong support from TLG can incentivize the CME to adopt proactive strategies. In particular, strict penalties for unauthorized discharges, combined with rewards for mine water treatment, significantly increase the likelihood that the CME will choose to treat and supply mine water.

Corollary 2.

The CME is more likely to adopt active strategies when facing higher reputational risks, greater benefits, stricter penalties, and larger subsidies, or when the gap in water resource taxes between recycled and discharged mine water is wider. However, as investment, treatment costs increase, the CME tends to prefer discharging mine water.

Corollary 3.

Under strong support from TLG, when the total amount of penalties and reward subsidies for the CME exceeds a certain threshold (i.e., $F_{1}Q+{\mathsf{\lambda }}_1{C}_m>(C_m+C_{f}Q-V_f-L_1+T_{m1}Q-T_{m2}Q)/w)$, the CME will tend to choose active strategies for treating the MW. However, under weaker support from TLG, the CME will only adopt active treatment strategies if the benefits derived from these measures exceed a specified threshold.

The proof of the corollaries regarding the CME can be found in Appendix A.1.

3.1.2. The Mine Water Operator

The expected benefits for the MWO when choosing to invest or not invest strategies, and the average expected payoffs are $E_{y1}$, $E_{y2}$ and $\overline{E_y}$ respectively.

$$E_{y1}=V_o-C_o-x{C}_{t}Q+w{\lambda }_2{C}_o+zx{P}_{1}Q$$

(5)

$$E_{y2}=0$$

(6)

$$\overline{E_y}=\mathrm{y}{E}_{y1}+(1-y)E_{y2}$$

(7)

The replication dynamics equation for the MWO is as follows:

$$F(y)=dy/dt=y(E_{21}-\overline{E_2})=y(1-y)(V_o-C_o-x{C}_{t}Q+w{\lambda }_2{C}_o+zx{P}_{1}Q)$$

(8)

According to the stability theorem of differential equations, the probability of the MWO’s strategy selection in a stable state must simultaneously satisfy $F\left(y\right)=0$ and $F’\left(y\right)<0$. When $F\left(y\right)=0$, it can be obtained that: $y^{*}=0$, $y^{*}=1$, $z^{*}=(C_o+x{C}_{t}Q-V_o-w{\mathsf{\lambda }}_2{C}_o)/x{P}_{1}Q$.

Proposition 2.

For the MWO, when $z=z^{*}$, ${\left.F’\left(y\right)\right|}_{y=0}=0$, and ${\left.F’\left(y\right)\right|}_{y=1}=0$, indicating that the ESS cannot be determined. When $z>z^{*}$, ${\left.F\left(y\right)\right|}_{y=1}=0$ and ${\left.F’\left(y\right)\right|}_{y=1}<0$, which indicates that $y^{*}=1$ is the only ESS, meaning that the MWO chooses the “invest” strategy. When $z<z^{*}$, ${\left.F\left(y\right)\right|}_{y=0}=0$ and ${\left.F’\left(y\right)\right|}_{y=0}<0$, which indicates that $y^{*}=0$ is the only ESS, indicating that the MWO adopts the “non-investment” strategy.

Proposition 2 states that the MWO’s investment strategy is closely related to TWU’s demand for mine water. When the probability of TWU choosing to utilize mine water is high, the MWO tends to invest.

Corollary 4.

The CME’s active treatment or increased mine water volume does not necessarily prompt the MWO to invest. This primarily depends on the mine water price. When the mine water price significantly exceeds operational costs, reaching a certain economic feasibility threshold (i.e., $P_1>C_t/z$), the investment willingness of the MWO will increase as the CME’s enthusiasm for treating the mine water or the volume of the mine water rises.

Corollary 5.

The MWO’s investment willingness is positively correlated with lower total investment or operating costs, and is further enhanced by higher government subsidies or favorable market prices for mine water.

The proof of the corollaries regarding the MWO can be found in Appendix A.1.

3.1.3. The Water User

The expected benefits for TWU when choosing to use or non-use strategies and the average expected payoffs are $E_{z1}$, $E_{z2}$ and $\overline{E_z}$ respectively.

$$E_{z1}=xy{U}_{1}Q+xyw{P}_{3}Q+xyw{\lambda }_{3}Q$$

(9)

$$E_{z2}=U_{2}Q$$

(10)

$$\overline{E_z}=\mathrm{z}{E}_{z1}+(1-z)E_{z2}$$

(11)

The replication dynamics equation for TWU is as follows:

$$F(z)=dz/dt=z(E_{31}-\overline{E_3})=z(1-z)(xy{U}_{1}Q-U_{2}Q+xyw{P}_{3}Q+xyw{\lambda }_{3}Q)$$

(12)

According to the stability theorem of differential equations, the probability of TWU’s strategy selection in a stable state must simultaneously satisfy $F\left(z\right)=0$ and $F’\left(z\right)<0$. When $F\left(z\right)=0$, it can be obtained that $z^{*}=0$, $z^{*}=1$, $w^{*}=(U_{2}Q-xy{U}_{1}Q)/(\mathit{xy}{P}_{3}Q+\mathit{xy}{\mathsf{\lambda }}_{3}Q)$.

Proposition 3.

For TWU, when $w=w^{*}$, ${\left.F’\left(z\right)\right|}_{z=0}=0$, and ${\left.F’\left(z\right)\right|}_{z=1}=0$, so the ESS cannot be determined. When $w>w^{*}$, ${\left.F\left(z\right)\right|}_{z=1}=0$, and ${\left.F’\left(z\right)\right|}_{z=1}<0$, which indicates that $z^{*}=1$ is the only ESS, meaning that TWU chooses to utilize MW. When $w<w^{*}$, ${\left.F\left(z\right)\right|}_{z=0}=0$, and ${\left.F’\left(z\right)\right|}_{z=0}<0$, which indicates that $z^{*}=0$ is the only ESS, signifying that TWU decides not to use the MW.

Proposition 3 indicates that TWU’s decision-making is strongly influenced by TLG’s attitude. When the probability of TLG’s active support is high, TWU is more inclined to use mine water; conversely, when such support is lacking, TWU tends to prefer conventional water resources.

Corollary 6.

Proactive actions taken by the CME and the MWO can significantly enhance TWU’s willingness to utilize the mine water. This indicates that the active participation of key stakeholders plays a crucial role in shifting TWU’s preferences from conventional water resources to the mine water.

Corollary 7.

The water user is more likely to use the mine water when the costs associated with fresh water (e.g., water prices, taxes, extraction fees) rise or when water rights prices, subsidies, and environmental awareness increase. Conversely, TWU prefers fresh water when the costs of the mine water (e.g., prices, taxes, operational costs) rise.

The proof of the corollaries regarding TWU can be found in Appendix A.1.

3.1.4. The Local Government

The expected benefits for TLG when choosing to actively support or passively support strategies and the average expected benefits, are $E_{w1}$, $E_{w2}$ and $\overline{E_w}$ respectively.

$$\begin{array}{l}{E}_{w1}=F_{1}Q-C_g-D-C_e+M+T_{2}Q+T_{m2}Q+x{B}_m+xD+z{C}_e\\ -x{F}_{1}Q-x{\lambda }_1{C}_m-y{\lambda }_2{C}_o+xy{B}_g-xy{B}_m-xyz{B}_g+xyz{B}_s\\ +xyzS+xy{T}_{m1}Q-xy{T}_{m2}Q+xyz{T}_{1}Q-xyz{T}_{2}Q-xyz{\lambda }_{3}Q\end{array}$$

(13)

$$\begin{array}{l}{E}_{w2}=T_{2}Q-D-F_2-L_2-C_e+T_{m2}Q+x{B}_m+xD+z{C}_e+x{F}_2+xy{B}_g\\ -xy{B}_m-xyz{B}_g+xyz{B}_s+xyzS+xy{T}_{m1}Q-xy{T}_{m2}Q+xyz{T}_{1}Q-xyz{T}_{2}Q\end{array}$$

(14)

$$\overline{E_w}=w{E}_{w1}+(1-w)E_{w2}$$

(15)

The replication dynamics equation for TLG is as follows:

$$\begin{array}{l}F(w)=dw/dt=w(E_{w1}-\overline{E_w})=w(1-w)(-C_g+F_{1}Q+F_2+L_2+M\\ -x{F}_{1}Q-x{F}_2-x{\lambda }_1{C}_m-y{\lambda }_2{C}_o-xyz{\lambda }_{3}Q)\end{array}$$

(16)

According to the stability theorem of differential equations, the probability of TLG’s strategy selection in a stable state must simultaneously satisfy $F\left(w\right)=0$ and $F’\left(w\right)<0$. When $F\left(w\right)=0$, it can be obtained that $w^{*}=0$, $w^{*}=1$, $z^{*}=(-C_g+F_{1}Q+F_2+L_2+M-x{F}_{1}Q-x{F}_2-x{\mathsf{\lambda }}_1{C}_m-y{\mathsf{\lambda }}_2{C}_o)/\left(\mathit{xy}{\mathsf{\lambda }}_{3}Q\right)$.

Proposition 4.

For TLG, when $z=z^{*}$, ${\left.F’\left(w\right)\right|}_{w=0}=0$, and ${\left.F’\left(w\right)\right|}_{w=1}=0$, so the ESS cannot be determined. When $z>z^{*}$, ${\left.F\left(w\right)\right|}_{w=0}=0$, and ${\left.F’\left(w\right)\right|}_{w=0}<0$, which indicates that $w^{*}=0$ is the only ESS, implying that TLG adopts a passive support strategy. When $z<z^{*}$, ${\left.F\left(w\right)\right|}_{w=1}=0$, and ${\left.F’\left(w\right)\right|}_{w=1}<0$, which indicates that $w^{*}=1$ is the only ESS, signifying that TLG chooses an active support strategy.

Proposition 4 illustrates that TLG’s decision-making largely depends on TWU’s strategy choices. When the probability of TWU choosing the mine water is low, TLG is more likely to adopt active support strategies to a shift in their preferences.

Corollary 8.

When the CME and the MWO adopt active strategies, TLG may shift from active to passive support, reflecting its adaptive policy decisions influenced by stakeholder behaviors.

Corollary 9.

When TLG faces penalties or reputational risks due to inaction, it is more likely to adopt active support strategies to mitigate external pressures and enhance its governance performance.

The proof of the corollaries regarding TLG can be found in Appendix A.1.

3.2. Evolutionary Stability Analysis of the System

To elucidate the conditions for the formation of the ESS in the evolutionary game of mine water recycling and utilization, a replication dynamic system for the four-party game was developed by combining the replication dynamic equations of each single party, as represented by Equations (4), (8), (12) and (16). Let $F\left(x\right)=0,F\left(y\right)=0,F\left(z\right)=0,\mathrm{and}F\left(w\right)=0$, to derive the local equilibrium points of the replication dynamic system, which represent the equilibrium solutions of the evolutionary model involving the CME, the MWO, TWU, and TLG [42]. The 16 pure strategy equilibrium points are $E_1\left(0,0,0,0\right)$, $E_2\left(1,0,0,0\right)$, $E_3\left(0,1,0,0\right)$, $E_4\left(0,0,1,0\right)$, $E_5\left(0,0,0,1\right)$, $E_6(1,1,0,0),$ $E_7(1,0,1,0),$ $E_8(0,1,1,0),$ $E_9(1,0,0,1),$ $E_{10}(0,1,0,1),$ $E_{11}(0,0,1,1),$ $E_{12}\left(1,1,1,0\right)$, $E_{13}\left(1,1,0,1\right)$, $E_{14}\left(1,0,1,1\right)$, $E_{15}\left(0,1,1,1\right)$, and $E_{16}\left(1,1,1,1\right)$. Since the mixed strategy equilibrium in the asymmetric dynamic game cannot be an evolutionary stable equilibrium [43], only the 16 pure strategy equilibrium points of the evolutionary game system are analyzed. According to the method proposed by Friedman [44], the evolutionary stability of the system is derived from an analysis of the local stability of the Jacobian matrix. The Jacobian matrix of the system is constructed based on the replication dynamics equations of the four players as follows in Equation (17). The elements of the matrix, from a11 to a44, are shown in Equations (A1) to (A16).

$$J=\left[\begin{array}{cccc}{\displaystyle \frac{\partial F(x)}{\partial x}}& {\displaystyle \frac{\partial F(x)}{\partial y}}& {\displaystyle \frac{\partial F(x)}{\partial z}}& {\displaystyle \frac{\partial F(x)}{\partial w}}\\ {\displaystyle \frac{\partial F(y)}{\partial x}}& {\displaystyle \frac{\partial F(y)}{\partial y}}& {\displaystyle \frac{\partial F(y)}{\partial z}}& {\displaystyle \frac{\partial F(y)}{\partial w}}\\ {\displaystyle \frac{\partial F(z)}{\partial x}}& {\displaystyle \frac{\partial F(z)}{\partial y}}& {\displaystyle \frac{\partial F(z)}{\partial z}}& {\displaystyle \frac{\partial F(z)}{\partial w}}\\ {\displaystyle \frac{\partial F(w)}{\partial x}}& {\displaystyle \frac{\partial F(w)}{\partial y}}& {\displaystyle \frac{\partial F(w)}{\partial z}}& {\displaystyle \frac{\partial F(w)}{\partial w}}\end{array}\right]=\left[\begin{array}{cccc}{a}_{11}& a_{12}& a_{13}& a_{14}\\ a_{21}& a_{22}& a_{23}& a_{24}\\ a_{31}& a_{32}& a_{33}& a_{34}\\ a_{41}& a_{42}& a_{43}& a_{44}\end{array}\right]$$

(17)

The 16 pure strategy equilibrium points are substituted into the Jacobian matrix, and the eigenvalues of each equilibrium point are obtained, as shown in

Table 2. Eigenvalues of the 16 pure strategy equilibrium points.

Equilibrium Point	${\mathsf{\lambda }}_1$	${\mathsf{\lambda }}_2$	${\mathsf{\lambda }}_3$	${\mathsf{\lambda }}_4$	Symbolic Notation
$\mathrm{A}\left(0,0,0,0\right)$	$L_1-C_m+V_e-C_{f}Q$	$V_o-C_o$	$-U_{2}Q$	$F_{1}Q-C_g+F_2+L_2+M$	$(-,\ast ,\ast ,\ast )$
$\mathrm{B}\left(1,0,0,0\right)$	$C_m-L_1-V_e+C_{f}Q$	$V_o-C_o-C_{t}Q$	$-U_{2}Q$	$L_2-C_g+M-{\lambda }_1{C}_m$	$(-,\ast ,\ast ,\ast )$
$\mathrm{C}\left(0,1,0,0\right)$	$L_1-C_m+V_f-T_{m1}Q+T_{m2}Q-C_{f}Q$	$C_o-V_o$	$-U_{2}Q$	$\begin{array}{l}{F}_{1}Q-C_g+F_2+L_2\\ +M-{\lambda }_2{C}_o\end{array}$	$(-,\ast ,\ast ,\ast )$
$\mathrm{D}\left(0,0,1,0\right)$	$L_1-C_m+V_e-C_{f}Q$	$V_o-C_o$	$U_{2}Q$	$F_{1}Q-C_g+F_2+L_2+M$	$(+,\ast ,\ast ,\ast )$
$\mathrm{E}\left(0,0,0,1\right)$	$F_{1}Q-C_m+L_1+V_e+{\lambda }_1{C}_m-C_{f}Q$	$V_o-C_o+{\lambda }_2{C}_o$	$-U_{2}Q$	$C_g-F_{1}Q-F_2-L_2-M$	$(-,\ast ,\ast ,\ast )$
$\mathrm{F}\left(1,1,0,0\right)$	$C_m-L_1-V_f+T_{m1}Q-T_{m2}Q+C_{f}Q$	$C_o-V_o+C_{t}Q$	$U_{1}Q-U_{2}Q$	$\begin{array}{l}{L}_2-C_g+M\\ -{\lambda }_1{C}_m-{\lambda }_2{C}_o\end{array}$	$(\ast ,\ast ,\ast ,\ast )$
$\mathrm{G}\left(1,0,1,0\right)$	$C_m-L_1-V_e+C_{f}Q$	$V_o+P_{1}Q-C_o-C_{t}Q$	$U_{2}Q$	$L_2-C_g+M-{\lambda }_1{C}_m$	$(+,\ast ,\ast ,\ast )$
$\mathrm{H}\left(0,1,1,0\right)$	$L_1-C_m+V_f-T_{m1}Q+T_{m2}Q-C_{f}Q$	$C_o-V_o$	$U_{2}Q$	$\begin{array}{l}{F}_{1}Q-C_g+F_2+L_2\\ +M-{\lambda }_2{C}_o\end{array}$	$(+,\ast ,\ast ,\ast )$
$\mathrm{I}\left(1,0,0,1\right)$	$\begin{array}{l}{C}_m-F_{1}Q-L_1-V_e\\ -{\lambda }_1{C}_m+C_{f}Q\end{array}$	$V_o-C_o+{\lambda }_2{C}_o-C_{t}Q$	$-U_{2}Q$	$C_g-L_2-M+{\lambda }_1{C}_m$	$(-,\ast ,\ast ,\ast )$
$\mathrm{J}\left(0,1,0,1\right)$	$\begin{array}{l}{F}_{1}Q-C_m+L_1+V_f-T_{m1}Q\\ +T_{m2}Q+{\lambda }_1{C}_m-C_{f}Q\end{array}$	$C_o-V_o-{\lambda }_2{C}_o$	$-U_{2}Q$	$\begin{array}{l}{C}_g-F_{1}Q-F_2-L_2\\ -M+{\lambda }_2{C}_o\end{array}$	$(-,\ast ,\ast ,\ast )$
$\mathrm{K}\left(0,0,1,1\right)$	$F_{1}Q-C_m+L_1+V_e+{\lambda }_1{C}_m-C_{f}Q$	$V_o-C_o+{\lambda }_2{C}_o$	$U_{2}Q$	$\begin{array}{l}{C}_g-F_{1}Q-F_2\\ -L_2-M\end{array}$	$(+,\ast ,\ast ,\ast )$
$\mathrm{L}\left(1,1,1,0\right)$	$C_m-L_1-V_f+T_{m1}Q-T_{m2}Q+C_{f}Q$	$C_o-V_o-P_{1}Q+C_{t}Q$	$U_{2}Q-U_{1}Q$	$\begin{array}{l}{L}_2-C_g+M-{\lambda }_1{C}_m\\ -{\lambda }_2{C}_o-{\lambda }_{3}Q\end{array}$	$(\ast ,\ast ,\ast ,\ast )$
$\mathrm{M}\left(1,1,0,1\right)$	$\begin{array}{l}{C}_m-F_{1}Q-L_1-V_f+T_{m1}Q\\ -T_{m2}Q-{\lambda }_1{C}_m+C_{f}Q\end{array}$	$C_o-V_o-{\lambda }_2{C}_o+C_{t}Q$	$\begin{array}{l}{P}_{3}Q+U_{1}Q\\ -U_{2}Q+{\lambda }_{3}Q\end{array}$	$\begin{array}{l}{C}_g-L_2-M\\ +{\lambda }_1{C}_m+{\lambda }_2{C}_o\end{array}$	$(\ast ,\ast ,\ast ,\ast )$
$\mathrm{N}\left(1,0,1,1\right)$	$C_m-F_{1}Q-L_1-V_e-{\lambda }_1{C}_m+C_{f}Q$	$\begin{array}{l}{V}_o+P_{1}Q+{\lambda }_2{C}_o\\ -C_o-C_{t}Q\end{array}$	$U_{2}Q$	$C_g-L_2-M+{\lambda }_1{C}_m$	$(+,\ast ,\ast ,\ast )$
$\mathrm{O}\left(0,1,1,1\right)$	$\begin{array}{l}{F}_{1}Q-C_m+L_1+V_f-T_{m1}Q\\ +T_{m2}Q+{\lambda }_1{C}_m-C_{f}Q\end{array}$	$C_o-V_o-{\lambda }_2{C}_o$	$U_{2}Q$	$\begin{array}{l}{C}_g-F_{1}Q-F_2-L_2\\ -M+{\lambda }_2{C}_o\end{array}$	$(+,\ast ,\ast ,\ast )$
$\mathrm{P}\left(1,1,1,1\right)$	$\begin{array}{l}{C}_m-F_{1}Q-L_1-V_f+T_{m1}Q\\ -T_{m2}Q-{\lambda }_1{C}_m+C_{f}Q\end{array}$	$\begin{array}{l}{C}_o-V_o-P_{1}Q\\ -{\lambda }_2{C}_o+C_{t}Q\end{array}$	$\begin{array}{l}{U}_{2}Q-U_{1}Q\\ -P_{3}Q-{\lambda }_{3}Q\end{array}$	$\begin{array}{l}{C}_g-L_2-M+{\lambda }_1{C}_m\\ +{\lambda }_2{C}_0+{\lambda }_{3}Q\end{array}$	$(\ast ,\ast ,\ast ,\ast )$

Note: “+” represents a positive number, “−” represents a negative number, and “*” represents uncertainty.

. According to the first theorem of Lyapunov [45], when all the eigenvalues of the Jacobian matrix have negative real parts, the equilibrium point is the asymptotic Stability Point, and the corresponding strategy combination is the ESS of the four-party evolutionary game. According to the parameters and the basic assumptions, it can be determined that, among the 16 equilibrium points, 6 are unstable points, and the remaining 10 equilibrium points are stable points under certain conditions, as shown in

Table A1. Possible stable points and their stability conditions.

Stable Points	Symbolic Notation	Stability Conclusion	Stability Conditions
$\mathrm{A} \left(0,0,0,0\right)$	(−, −, −, −)	ESS	$\begin{array}{l}{V}_o<C_o\\ L_1+V_e<C_m+C_{f}Q\\ F_{1}Q+F_2+L_2+M<C_g\end{array}$
$\mathrm{B} \left(1,0,0,0\right)$	(−, −, −, −)	ESS	$\begin{array}{l}{V}_o<C_o+C_{t}Q\\ C_m+C_{f}Q<L_1+V_e\\ L_2+M<C_g+{\lambda }_1{C}_m\end{array}$
$\mathrm{C} \left(0,1,0,0\right)$	(−, −, −, −)	ESS	$\begin{array}{l}{C}_o<V_o\\ L_1+V_f+T_{m2}Q<C_m+T_{m1}Q+C_{f}Q\\ F_{1}Q+F_2+L_2+M<C_g+{\lambda }_2{C}_o\end{array}$
$\mathrm{E} \left(0,0,0,1\right)$	(−, −, −, −)	ESS	$\begin{array}{l}{V}_o+{\lambda }_2{C}_o<C_o\\ F_{1}Q+L_1+V_e+{\lambda }_1{C}_m<C_m+C_{f}Q\\ C_g<F_{1}Q+F_2+L_2+M\end{array}$
$\mathrm{F} \left(1,1,0,0\right)$	(−, −, −, −)	ESS	$\begin{array}{l}{U}_{1}Q<U_{2}Q\\ C_o+C_{t}Q<V_o\\ C_m+T_{m1}Q+C_{f}Q<L_1+V_f+T_{m2}Q\\ L_2+M<C_g+{\lambda }_1{C}_m+{\lambda }_2{C}_o\end{array}$
$\mathrm{I} \left(1,0,0,1\right)$	(−, −, −, −)	ESS	$\begin{array}{l}{V}_o+{\lambda }_2{C}_o<C_o+C_{t}Q\\ C_m+C_{f}Q<F_{1}Q+L_1+V_e+{\lambda }_1{C}_m\\ C_g+{\lambda }_1{C}_m<L_2+M\end{array}$
$\mathrm{J} \left(0,1,0,1\right)$	(−, −, −, −)	ESS	$\begin{array}{l}{C}_o<V_o+{\lambda }_2{C}_o\\ F_{1}Q+L_1+V_f+{\lambda }_1{C}_m+T_{m2}Q<C_m+T_{m1}Q+C_{f}Q\\ C_g+{\lambda }_2{C}_o<F_{1}Q+F_2+L_2+M\end{array}$
$\mathrm{L} \left(1,1,1,0\right)$	(−, −, −, −)	ESS	$\begin{array}{l}{U}_{2}Q<U_{1}Q\\ C_o+C_{t}Q<V_o+P_{1}Q\\ C_m+T_{m1}Q+C_{f}Q<L_1+V_f+T_{m2}Q\\ L_2+M<C_g+{\lambda }_1{C}_m+{\lambda }_2{C}_o+{\lambda }_{3}Q\end{array}$
$\mathrm{M} \left(1,1,0,1\right)$	(−, −, −, −)	ESS	$\begin{array}{l}{P}_{3}Q+U_{1}Q+{\lambda }_{3}Q<U_{2}Q\\ C_o+C_{t}Q<V_o+{\lambda }_2{C}_o\\ C_m+T_{m1}Q+C_{f}Q<F_{1}Q+L_1+V_f+{\lambda }_1{C}_m+T_{m2}Q\\ C_g+{\lambda }_1{C}_m+{\lambda }_2{C}_o<L_2+M\end{array}$
$\mathrm{P} \left(1,1,1,1\right)$	(−, −, −, −)	ESS	$\begin{array}{l}{U}_{2}Q<U_{1}Q+P_{3}Q+{\lambda }_{3}Q\\ C_o+C_{t}Q<V_o+P_{1}Q+{\lambda }_2{C}_o\\ C_m+T_{m1}Q+C_{f}Q<F_{1}Q+L_1+V_f+{\lambda }_1{C}_m+T_{m2}Q\\ C_g+{\lambda }_1{C}_m+{\lambda }_2{C}_0+{\lambda }_{3}Q<L_2+M\end{array}$

Note: “−” indicates that the eigenvalue of the stable point is negative.

.

Based on the 10 stable points, the development of mine water recycling and utilization can be divided into four stages:

(1)

Nascent Stage. In the initial phase, the system is in its least favorable state, with all parties adopting inactive strategies, which correspond to the ESS of (0, 0, 0, 0).

(2)

Rapid Development Stage. As water shortages and environmental pressures intensify, TLG, the CME, and the MWO gradually recognize the significance of mine water utilization. This stage is marked by the first shifts in strategy from one of the stakeholders, leading to the emergence of new ESSs, such as (1, 0, 0, 0), (0, 0, 0, 1), and (0, 1, 0, 0). Over time, multiple forms of bilateral cooperation arise—e.g., (1, 0, 0, 1), (0, 1, 0, 1), and (1, 1, 0, 0)—eventually evolving toward the more collaborative state of (1, 1, 0, 1). However, despite favorable market conditions, negative attitudes from TWU prevent the full realization of mine water utilization.

(3)

Basic Formation Stage. With improved policies and a shift in TWU’s attitude, all stakeholders begin to cooperate actively, enabling the system to reach the ESS of (1, 1, 1, 1), which signifies the realization of mine water recycling and utilization.

(4)

Mature and Stable Stage. In this final stage, advancements in technology, heightened environmental awareness, and a stronger sense of social responsibility enable the CME, the MWO, and TWU to sustain mine water recycling and utilization through market mechanisms alone, without government intervention. The system ultimately stabilizes at the optimal ESS of (1, 1, 1, 0).

3.3. Evolutionary Pathway Analysis

To evolve from equilibrium point A to point B, the stability conditions of point A must first be satisfied, followed by those of point B. By comparing the eigenvalues of points A and B, it is found that the condition for the evolutionary pathway A → B is $C_m-L_1-V_e+C_{f}Q<0$. By analogy, the evolutionary pathways for the four parties are constructed, as shown in Figure 3. Starting from the initial state A (0, 0, 0, 0) and reaching the most ideal state L (1, 1, 1, 0), multiple evolutionary pathways exist, with the following three most likely scenarios:

Scenario 1.

The evolutionary pathway is A → B → F → L. Once conditions 1, 5, and 13 are sequentially satisfied, the CME, the MWO, and TWU adopt positive strategies, enabling the system to reach the stable state L (1, 1, 1, 0) without support from TLG. This represents the optimal path for utilizing the mine water through market mechanisms in the absence of TLG intervention. However, despite being the most ideal, this evolutionary pathway is also the most difficult to achieve in practice.

Scenario 2.

The evolutionary pathway is A → E → J → M → P → L. Through the sequential satisfaction of conditions 1, 3, 8, 11, 14, and 15, the system evolves from the initial state A (0, 0, 0, 0) to the ideal ESS L (1, 1, 1, 0). In this path, TLG plays a leading role by initially incentivizing the MWO to collect and operate the mine water. Subsequently, the CME begins to treat and supply the mine water, and TWU ultimately adopts the mine water, bringing the system to a cooperative state P (1, 1, 1, 1). As the mine water recycling market gradually matures, TLG withdraws from its active support role, and the system transitions to the ideal state L (1, 1, 1, 0), led by market-driven behavior. While this path is viable, it could be improved in terms of the sequence of stakeholder engagement.

Scenario 3.

The evolutionary pathway is A → E → I → M → P → L. The only distinction from Scenario 2 is that TLG prioritizes its incentives and penalties toward the CME rather than the MWO. As Wolkersdorfer et al. [46] emphasized, the CME plays a pivotal role in addressing mine water issues. As the initial actor in the mine water production, discharge, treatment, and reuse chain, the CME should be the first target for regulatory intervention. Early engagement—through penalties or subsidies—enables the CME to take primary responsibility for water treatment, which reduces pollution at the source and lays the foundation for subsequent mine water operations and utilization. This scenario is considered the most reasonable and practically feasible pathway among the three.

4. Simulation Analysis and Discussion

This section conducts numerical simulations using MATLAB R2023b software, based on the results of the theoretical analysis presented above, to facilitate a more precise analysis of the evolutionary game mechanisms among various stakeholders in mine water recycling and utilization. First, the initial values for the probabilities and exogenous variables are assigned. The parameter settings need to satisfy the conditions for the stability of each equilibrium point in Table A1. This study collected the practical cases of mine water recycling and utilization in Yulin City, Shaanxi Province, and conducted field visits to relevant organizations to obtain the necessary data. Specifically, key information—including the total investment, operating costs, and water pricing associated with mine water recycling—was obtained through an investigation of a mine water recycling enterprise. In addition, policy-related data, such as water resource tax and fresh water pricing, were gathered from government documents. Furthermore, interviews with officials from the Shaanxi Provincial Water Resources Department and the Yulin Municipal Water Affairs Bureau provided insights into government regulatory costs, reputational losses, incentive and penalty measures, environmental management expenses, and social benefits. To enrich the data sources further, information on the total investment in mine water treatment facilities, operating costs, and corporate reputation was obtained during a field visit to a coal mining enterprise in Yulin City. Moreover, water utility data from industrial park water users in the vicinity of the coal mine were also collected. For specific indicators that were difficult to quantify directly, parameter values were assigned based on established cases in consultation with industry experts. The following values were assigned to the parameters: $T_{m1}=0.4$, $T_{m2}=0.5$, $C_m=360$, $C_f=7.73$, $F_1=6,$ $C_o=130$, $C_t=1.76$, $P_1=3.85$, $P_2=6$, $P_3=0.3$, $T_1=0$, $T_2=0.4$, $C_g=550$, ${\mathsf{\lambda }}_1=0.1$, ${\mathsf{\lambda }}_2=0.4$, and ${\mathsf{\lambda }}_3=0.798$. It should be emphasized that, according to the existing literature and scholarly experience, numerical simulation is intended to reveal the intrinsic mechanisms of system evolution effectively [46,47,48,49]. Thus, the treatment of parameter assignment in this context does not substantially affect this study’s main conclusions.

4.1. Simulation Scenarios

Scenario 3 represents the most feasible evolutionary pathway; therefore, detailed numerical simulations were conducted for each stage within this scenario. As shown in Figure 4a, the initial evolutionary state A (0, 0, 0, 0) corresponds to the early phase of rapid economic development, during which the government’s mine water management was weak, resulting in widespread direct discharge by the CME.

As the economy progresses, TLG begins to prioritize mine water recycling and utilization by introducing incentive policies, penalty mechanisms, and planning documents. Consequently, the system evolves into Stage I, and the ESS shifts to E (0, 0, 0, 1), as shown in Figure 4b.

Driven by policy measures and environmental, social, and governance (ESG) initiatives, the CME gradually recognizes the importance of environmental protection. They begin to treat the mine water to meet Class III surface water quality standards, aligning with TWU’s usage requirements. This enhances the CME’s ecological reputation and moral capital, and advances the system to Stage II, where I (1, 0, 0, 1) becomes the ESS, as shown in Figure 4c.

In recent years, China has actively promoted third-party pollution control, public–private partnership (PPP) models, and environment-oriented development (EOD) models, thereby enhancing the commercial viability of mine water projects and providing the MWO with more significant investment incentives. For example, in 2023, the Yuyang District Government in Yulin City adopted a PPP operational model with a dedicated mine water environmental management company. The system evolves to Stage III at this stage, with the ESS at M (1,1,0,1), as shown in Figure 4d.

As TLG integrates mine water into regional water resource planning and invests in pipeline infrastructure, conditions are created for TWU to adopt the mine water. Policies promoting strict water resource management [50] and tax exemptions for unconventional water sources enhance TWU’s awareness of environmental responsibility and water conservation. This leads TWU to utilize the mine water actively, and the system advances to Stage IV, reaching the ESS P (1, 1, 1, 1), as shown in Figure 4e.

Once a robust market mechanism for mine water recycling and utilization is established among the CME, the MWO, and TWU, the role of TLG diminishes. The system ultimately stabilizes at the ideal ESS L (1, 1, 1, 0), fostering a sustainable win–win situation among the stakeholders, as shown in Figure 4f. At present, China is transitioning from Stage II to Stages III and IV.

The numerical simulation of the evolutionary pathway in Scenario 3 aligns well with the theoretical analysis, validating the evolutionary game model and confirming the accuracy of the theoretical analysis. Moreover, this study reveals that the ESS (1, 1, 1, 1) and the ESS (1, 1, 1, 0) represent the most desirable outcomes. Thus, the ESS (1, 1, 1, 1) is selected as the initial condition for subsequent simulation experiments.

4.2. Effect of Initial Probabilities on Evolutionary Game Outcomes

By setting x = y = z = {0.1, 0.3, 0.5, 0.7, 0.9} and w = {0, 0.2, 0.4, 0.6, 0.8}, the impact of the initial probability of each party’s strategy choice on the evolutionary outcome is analyzed (Figure 5). The results indicate that the magnitude of the initial probability directly affects the time required for the evolutionary game system to reach convergence; however, it does not alter the evolutionary direction of the system.

As shown in Figure 5a–c, increasing the initial probability of the CME, the MWO, and TWU adopting active strategies shortens the time required for these three stakeholders to reach a significant steady state while extending the time for TLG evolution to converge to 1. This implies that, as the CME, the MWO, and TWU become more proactive in mine water recycling and utilization, the dependence on TLG intervention gradually decreases—indicating a favorable shift toward stakeholder-driven cooperation.

Furthermore, Figure 5d demonstrates that, when TLG adopts a “passive support” strategy, the system fails to converge to state 1. This highlights the indispensable role of TLG in promoting mine water recycling and utilization.

4.3. Single-Factor Sensitivity Analysis

4.3.1. Effects of Local Government Punishment Strength

To investigate the impact of TLG penalties (F₁) on the CME that arbitrarily discharge substandard mine water, this study simulates different levels of F₁, set explicitly at {5, 6, 9, 15}. As shown in Figure 6, when F₁ is relatively low, the system eventually stabilizes at the state (0, 1, 0, 1), indicating that the penalty is insufficient to incentivize the CME to treat the mine water effectively. However, as the F₁ increases, the system converges to the ideal stable state (1, 1, 1, 1), and the convergence time of the CME decreases. These results suggest that rising penalties can compel the CME to treat the mine water.

4.3.2. Effects of Local Government Subsidy Proportions

To compare the effectiveness of different subsidy mechanisms implemented by TLG, the subsidy coefficient (λ₁) is set to {0.05, 0.1, 0.15, 0.3, 0.4}, and the resulting strategy evolution processes are illustrated in Figure 7. The results indicate that, when TLG adopts a lower subsidy ratio (e.g., 0.05), the strategy choices of the CME and TWU shift significantly, causing the system to evolve to a non-ideal state (0, 1, 0, 1). Conversely, when λ₁ is increased to 0.1 or 0.15, the system eventually stabilizes at the ideal state (1, 1, 1, 1). However, further increasing λ₁ to 0.3 and 0.4 results in strategic choice fluctuations among specific stakeholders, with some strategy trajectories failing to converge, and others converging to state 0.

Next, the values of λ₂ are set to {0.2, 0.3, 0.4, 0.6, 0.8}, and their impact on the system’s evolutionary strategies is depicted in Figure 8. When λ₂ is too low, the system stabilizes at state (0, 0, 0, 1), indicating insufficient incentive for the stakeholders to invest. When λ₂ increases to a reasonable range, the system reaches the ideal stable state (1, 1, 1, 1), with higher values leading to shorter convergence times. However, when λ₂ exceeds a rational threshold, the system evolves toward the (*, 1, 1, *), suggesting over-subsidization may undermine stakeholder coordination.

Referring to the Yinchuan city water conservation reward and subsidy measures (trial implementation) [51], industrial enterprises using non-conventional water will be subsidized based on the annual replacement water amount. Taking the Yellow River water as an example, the benchmark value for water rights in industrial use is 0.798/m³. Consequently, λ₃ is set to 0.2, 0.5, 1, 1.5, 3, and 5 times the benchmark value for the industrial use of water from the Yellow River. As shown in Figure 9, when λ₃ is too low, the strategy of TWU evolves toward rejecting the use of mine water, resulting in an ESS of (1, 1, 0, 1). However, as the subsidy value increases to a reasonable range, TWU gradually shifts its strategies, and the system evolves toward the ideal ESS of (1, 1, 1, 1).

4.3.3. Effects of Mine Water Treatment Costs

This section explores the impact of varying mine water treatment costs (C_f) on the evolutionary game (Figure 10). When C_f decreases from 9.73 to 7.73, the system transitions from a steady state of (0, 1, 0, 1) to the ideal equilibrium of (1, 1, 1, 1). This indicates that declining mine water treatment costs significantly increase the likelihood of the CME adopting active treatment strategies and substantially reduce its convergence time. Similarly, the convergence times for the MWO and TWU are markedly reduced. However, the convergence time for TLG is extended, implying that, as market mechanisms strengthen, the role of government intervention becomes less immediate or necessary in later stages.

4.3.4. Effects of Mine Water Volume

To explore whether the volume of mine water (Q) influences the dynamics of the four-party evolutionary game, this study tests various values of Q, specifically {5, 10, 15, 20}. As shown in Figure 11, an excessively large Q leads to treatment costs exceeding the CME’s economic capacity. In response, the CME may alter its strategy by refraining from supplying the treated MW, which induces instability in the system. This shift will reduce the MWO’s profits and negatively impact TWU’s willingness to use the mine water. Furthermore, the increased volume of the mine water significantly increases the risk of environmental pollution, thereby heightening the urgency to address these risks. Consequently, TLG’s convergence time is shortened under the mounting pressure to intervene.

4.3.5. Effects of Mine Water Resource Tax

In 2016, China launched a pilot reform of the water resource tax system, implementing a volume-based tax on mine water drainage. Recycled and discharged mine water are taxed at different rates, denoted as T_m1 and T_m2, respectively, and these rates vary across the major mining provinces. For instance, in Shaanxi Province, T_m2 is 0.5 CNY/m³, and T_m1 is 0.4 CNY/m³ [52]. In Shanxi Province, T_m2 is 1.2 CNY/m³, and T_m1 is 1 CNY/m³ [53]. In the Inner Mongolia Autonomous Region, T_m2 is 5 CNY/m³, and T_m1 is 2 CNY/m³ [54]. In Ningxia, T_m1 is 0.05 CNY/m³, while direct discharges are taxed at the groundwater standard [55].

Based on T_m1 and T_m2 collected in the provinces mentioned above, this study examines the impact of water resource taxation on the evolutionary process (Figure 12). The results show that a widening tax differential between T_m1 and T_m2 accelerates the convergence of strategies among the CME, the MWO, and TWU toward active participation while slowing the convergence of TLG strategies. This occurs because a more significant tax gap incentivizes the CME to treat the mine water, which, in turn, enhances the participation of the MWO and encourages TWU to utilize the mine water, thereby creating a positive synergistic effect. As the mine water is recycled and used, the risk of environmental pollution is significantly reduced, thereby diminishing the need for TLG intervention and resulting in slower convergence of their strategies.

4.3.6. Effects of Mine Water Operator’s Operating Costs

To investigate the impact of mine water operating costs (C_t) on the evolutionary game, this study sets C_t at {4.76, 2.76, 1.76, 0.76}; the results are shown in Figure 13. Higher operating costs lead to significant fluctuations in the strategy choices of the mine water operator, as reduced profitability weakens its investment incentives. This instability subsequently affects the strategic decisions of the coal mining enterprise, resulting in an inconsistent supply of treated mine water and reducing the likelihood that the water user will choose to utilize it.

4.3.7. Effects of Mine Water Prices

This section examines the influence of mine water price (P₁) on the evolutionary game (Figure 14). When P₁ is relatively high, the system eventually evolves to (*, *, 0, 1). As P₁ gradually decreases, the system evolves to the ideal equilibrium state of (1, 1, 1, 1). Furthermore, a lower P₁ accelerates the convergence of TWU while slowing the convergence of the MWO. When P₁ drops too low, the system evolves to (*, *, 1, 1). The results indicate that mine water price directly influences the MWO and TWU’s strategy choices. A lower mine water price reduces the water fees paid by TWU, thereby increasing their benefits and enhancing their motivation to utilize the mine water. However, it simultaneously reduces the MWO’s revenue, weakens profitability, and lowers the incentive to invest in treatment and recycling efforts, which in turn indirectly affects the CME’s strategy choices, resulting in fluctuations and instability in their strategies.

4.3.8. Effects of Water Use Rights Trading

China’s Ministry of Water Resources and other departments have jointly issued the Guiding Opinions on Promoting the Reform of Water Use Rights [56], which proposes to “promote water use rights trading for water resources replaced by unconventional water resources”. This study simulates the impact of water trading on the evolutionary game. The variable P₃ represents different water trading scenarios, where P₃ = 0 indicates the absence of trading. Values of P₃ are set to 0.3, 0.6, and 1.2 to reflect varying trading price levels. As shown in Figure 15, implementing water use rights trading significantly increases TWU’s willingness to utilize the mine water. In particular, higher trading prices further accelerate TWU’s convergence to state 1. The convergence times for the CME and the MWO to reach state 1 are also moderately reduced, although the overall impact remains relatively modest. Conversely, TLG experiences a slight extension in its convergence time.

4.3.9. Effects of Objective Utility of Water Resources

The utility of water resources varies across industries. To analyze the impact of the objective utility (u) of unit water resources, the value of u is set to {8, 10, 12, 14, 16} in this study. As shown in Figure 16, the time required for the system to converge to the ideal state (1, 1, 1, 1) increases as u rises. When u becomes excessively high, the system instead converges to the state (1, 1, 0, 1), which suggests that u plays a crucial role in shaping the strategy choices of TWU. However, it exerts minimal direct influence on the strategies of other parties, primarily manifesting in the form of prolonged convergence times. This phenomenon arises because of the widening utility gap between the use of mine water and fresh water usage as u increases, reflected in the relationship U₁ < U₂. As a result, the convergence time for TWU to utilize the mine water is extended. If TLG subsidies and the water use rights trading mechanisms fail to close this utility gap effectively, TWU may ultimately forgo the use of the mine water altogether.

4.4. Two-Factor Sensitivity Analysis

4.4.1. Joint Effect of Fresh Water Resource Tax and Water Users’ Environmental Awareness

Due to potential interactions among the parameters, changes in the specific parameters may generate linkage effects on others. A typical example is the government’s imposing a water resources tax (T₂) on fresh water. This policy is expected to exert not only economic constraints but enhance the environmental awareness of TWU (θ) [57]. Based on this, this study conducts a joint perturbation simulation involving the fresh water resources tax (T₂) and the environmental awareness of TWU (θ), and designs three representative scenario combinations: Scenario 1 involves a low water resources tax and the absence of environmental awareness; Scenario 2 features a high water resources tax, but still no environmental awareness; Scenario 3 considers both a high water resources tax and a high level of environmental awareness.

The evolutionary results of the system are shown in Figure 17. In Scenario 1, TWU fails to recognize the potential advantages of substituting the mine water for fresh water and does not choose to adopt it. In Scenario 2, as the government gradually increases the fresh water resources tax (T₂: 0.2 → 0.8), the rising cost of fresh water leads TWU to shift toward using the mine water gradually. Scenario 3 represents the case in which an increase in the water resources tax leads to an enhancement of TWU’s environmental awareness. The results show that the strategy of choosing to use the mine water converges significantly faster than in Scenario 2, indicating that the combined effect of the two mechanisms is considerably more substantial than that of either one alone.

The simulation results demonstrate the following: first, as an external cost-based constraint mechanism, the fresh water resources tax can directly influence TWU’s marginal decision-making behavior by increasing the cost of fresh water usage; second, the tax policy can also indirectly promote behavioral transformation by stimulating or enhancing environmental awareness at the cognitive level, thereby achieving a synergistic incentive effect for the utilization of mine water resources.

4.4.2. Joint Effect of Penalties and Reputational Losses

In environmental regulatory practice, economic penalties (F₁) and reputational losses (F₁) are not entirely independent mechanisms; rather, they may exhibit interactive effects in constraining corporate behavior. On the one hand, economic penalties exert direct deterrence by increasing the cost of violations; on the other hand, the public often perceives such penalties as signals of corporate misconduct, thereby generating reputational losses that further reinforce the deterrent effect. Based on this premise, this study conducts a joint simulation of economic penalties and reputational damage, establishing three composite scenarios: Scenario 1 involves economic penalties without reputational loss; Scenario 2 includes both economic penalties and reputational loss; Scenario 3 combines high-level economic penalties with high-level reputational loss. The results of the evolutionary game simulation are illustrated in Figure 18.

The findings indicate that, under Scenario 1, the CME still tends to adopt pollutive discharge strategies, suggesting that relatively low levels of economic penalties alone are insufficient to fundamentally alter established patterns of non-compliance. Further, given that economic penalties in real-world settings are often accompanied by reputational damage, Scenario 2 incorporates both mechanisms. In this case, the probability that the CME actively treats the mine water increases significantly, and ultimately stabilizes, implying that reputational loss—an indirect consequence triggered by economic penalties—amplifies the deterrent effect of the penalties themselves.

Moreover, in Scenario 3, where both economic penalties and reputational loss are high, the CME behavior converges to compliance at the fastest rate. This indicates a synergistic relationship between the two mechanisms, with their combined effect significantly stronger than that of either mechanism alone.

5. Discussion

5.1. Applicability and Complexity of the Four-Party Evolutionary Game

This study focuses on the interaction mechanisms among multiple stakeholders involved in the recycling and utilization of MW. Unlike the traditional three-party evolutionary game models commonly applied in reclaimed water utilization, agricultural water conservation, and environmental governance, this research introduces two critical actors—the MWO and the CME—in addition to the conventional governance entities. This inclusion enables the construction of a more comprehensive four-party evolutionary game model tailored to the context of mine water recycling.

The analysis of evolutionarily stable strategies reveals that up to ten equilibrium points may emerge among the four stakeholders. Moreover, there are eight possible evolutionary paths from the initial state (0, 0, 0, 0) to the ideal state (1, 1, 1, 0), indicating a significantly higher complexity level than traditional three-party models. This underscores the intricate interdependencies among actors in mine water utilization, and reinforces the need for cross-sectoral coordination and multi-stakeholder collaboration.

5.2. Strategic Interactions Among Stakeholders

Based on the propositions and corollaries, the utilization of mine water involves a complex and evolving strategic interaction among TLG, the CME, the MWO, and TWU. Their decisions are mutually interdependent and subject to dynamic adjustments within the evolutionary game framework. Numerical simulations of the initial probabilities further validate this.

The local government plays a central role in the recycling and utilization of the MW. Acting as both system designer and market facilitator, TLG guides the CME, the MWO, and TWU in actively participating in mine water recycling and utilization. This is achieved by establishing reward and subsidy systems, enhancing regulatory measures, and employing other multifaceted policy instruments, thereby promoting the (1, 1, 1, 1) strategy to become the system’s ESS, and this is also consistent with the conclusions of the study conducted by Liu and Li [47] and Zhou et al. [37]. Notably, during the system’s evolution toward the (1, 1, 1, 1) state, the convergence speeds of the CME, the MWO, and TWU are negatively correlated with that of TLG. This negative correlation fully reflects the government’s core role in maintaining system stability. Specifically, when market mechanisms are not yet fully developed, and market participants display a fluctuating willingness to engage, the government compensates for market failures by intensifying its interventions. Furthermore, this indicates that the government’s strategic choices demonstrate significant determination and dynamic regulatory capabilities. With technological advances, the gradual reduction in mine water treatment and operating costs, and heightened environmental awareness among TWU, the endogenous motivation of market participants is strengthened. Consequently, through gradual policy withdrawal, the government facilitates the emergence of a new stable equilibrium at (1, 1, 1, 0). This shift from direct intervention to an institutional guarantee not only prevents the accumulation of fiscal pressure but ensures that the market mechanism operates effectively within the framework of rules established by the government. Overall, this evolutionary process underscores the irreplaceable effectiveness of governance in the field of resource recycling. The efficient use of mine water ultimately represents a government-led institutional innovation that transforms positive environmental externalities into an endogenous impetus for market-based cooperation, thereby validating the synergistic mechanism between an “active government” and an “effective market” in environmental governance.

The strategic choices of the CME and the MWO are highly interdependent. When the MWO invests in mine water recycling, the CME is more likely to treat and supply the MW. Conversely, if the MWO is unwilling to invest, the CME may adopt a passive strategy of discharging the untreated mine water. The reverse also holds, reflecting a mutually reinforcing relationship between the two actors.

The water user’s decisions to utilize the mine water depend on the strategies of the CME and the MWO. When the CME actively supplies treated water, and the MWO is committed to investment, TWU is more inclined to use the mine water due to its relatively high cost-effectiveness; however, if either the CME or the MWO is not proactive, TLG support becomes more critical, potentially through measures such as subsidizing TWU to encourage mine water recycling.

5.3. Key Factors in Promoting Mine Water Recycling and Utilization

There is a significant critical threshold effect on the stability of cooperation among the four stakeholders. Only when the cooperation benefits of all parties exceed a specific threshold can mine water recycling and utilization evolve stably to the equilibrium state; otherwise, the system is vulnerable to external interference and deviates from the cooperation track. Once the threshold condition is satisfied, the initial strategy of the participating subjects only affects the convergence speed, but does not change the final equilibrium result.

The single-factor sensitivity analysis reveals a typical inverted U-shaped effect of government subsidy policies. When the subsidy ratio is below a certain threshold, subsidies can remedy market failures and motivate the stakeholders to adopt proactive strategies. However, exceeding this threshold leads to market imbalances and resource wastage. This phenomenon is primarily due to excessively high subsidies imposing a heavier fiscal burden on the government, which may result in inefficient resource allocation [34]. Such behavior is analogous to the overcapacity issues triggered by excessive subsidies in the renewable energy sector [58]. The non-linear nature of this effect underscores the need for policy design to strike a balance between incentive effectiveness and fiscal sustainability.

Unlike traditional three-party evolutionary game models, which typically overlook the strategic behavior of the CME, this study evaluates the effectiveness of punitive versus incentive-based policy tools targeting the CME. The comparative analysis reveals that punitive policies have a higher marginal utility than subsidies. This finding can be attributed to two main factors. First, a typical zero-sum relationship exists between TLG and the CME in the context of mine water governance—where the benefit of one party often corresponds to the cost borne by the other. As a result, punitive measures tend to generate more direct and immediate regulatory outcomes in the short term. Second, due to loss aversion behavior among the CME, its response to potential losses is stronger than to equivalent gains. Substantial fines can amplify the perceived cost of non-compliance, prompting firms to adopt stricter mine water control and management practices proactively. Moreover, such penalties can function as a “punishment-induced compliance” mechanism, further encouraging the CME to increase investment in mine water treatment technologies and infrastructure.

This study innovatively investigates the incentive effects of a differentiated water resource tax policy. Historically, mine water was often regarded as a “valueless” byproduct, and thus was frequently wasted. Under the current policy framework, the CME must pay water resource taxes based on their water withdrawal volumes, with differentiated tax rates applied to reused versus discharged mine water. The greater the tax differential, the stronger the economic leverage effect on the CME, enhancing their awareness of resource management and further incentivizing improvements in mine water recycling and utilization.

Cost is a critical factor influencing the CME’s strategic decisions. Reducing mine water treatment costs significantly enhances their willingness to participate in proactive management. When treatment costs are perceived to be too high, the CME may not only lose motivation for compliance but may take the risk of illegally discharging the mine water. Therefore, reducing treatment costs and improving the economic viability of treatment technologies are key pathways to encouraging proactive governance by the CME and promoting the recovery and reuse of the mine water.

The regulation of mine water volume presents a paradoxical effect. On the one hand, reduced water volumes lower treatment costs for the CME, thereby enhancing their willingness to adopt proactive strategies; on the other hand, reduced water volumes diminish the revenue of the MWO, which in turn affects the willingness of TWU. This contradiction reflects the imbalance of the interests among the various parties involved in the utilization of the MW. However, in essence, the generation of mine water is destroying groundwater resources. In the context of serious over-exploitation and destruction of groundwater resources in China, it makes more sense for the CME to adopt water retention coal mining from the perspective of water resource protection.

The MWO faces cost-benefit constraints. Reduced operating costs can significantly enhance its willingness to invest, while fluctuations in mine water trading prices may adversely affect its returns through TWU’s strategic responses. The findings indicate that the strategic interactions between the MWO and TWU constitute a bilateral game. Only when the price of mine water remains within a reasonable range below that of fresh water (i.e., 1.85 to 3.85) can the returns of both parties be balanced, thereby ensuring the system’s evolution toward a stable equilibrium. This conclusion is broadly consistent with the findings of He and Zhang [59], which suggest that the price of reclaimed water should not exceed half that of tap water.

In addition, this study innovatively incorporates the impact of user-specific heterogeneity on strategic decision-making. As the final link in the resource-oriented utilization of mine water, the strategies of TWU are influenced not only by price factors but by the dual constraints of environmental awareness and industry characteristics. The findings reveal that enterprises in industries with higher objective utility of water resources tend to prefer fresh water over mine water. This suggests that the promotion of mine water reuse should initially target industries with lower objective water utility, such as agricultural irrigation. Moreover, heightened environmental awareness can accelerate the convergence rate of TWU’s strategy selection, which aligns with the findings of Darko et al. [60] on the demand drivers of green buildings.

This study further explores the moderating role of the water rights trading mechanism, which injects market dynamism into the overall policy framework. By substituting mine water for conventional water, TWU can exchange the conventional water rights quota freed up through this substitution for additional economic benefits, thereby increasing their flexibility in weighing costs and benefits.

Finally, the two-factor joint simulation results indicate that when there is a positive interaction between the promoting factors of mine water utilization, such mutual reinforcement can significantly accelerate the system’s convergence and promote the recovery and utilization of MW.

5.4. Policy Impacts and Recommendations

5.4.1. Establishing a Strict Penalties and Dynamic Subsidy System

The current relatively low level of penalties and subsidies can hardly motivate stakeholders to pay more attention to the utilization of mine water resources. Therefore, the government should first impose high-intensity penalties for coal mining enterprises’ arbitrary discharge of mine water, including establishing a stepped fine mechanism based on the magnitude of the exceedance of the illegal emissions and the additional cost of ecological environment restoration. At the same time, it is recommended that an environmental credit evaluation system be introduced to impose multi-level sanctions, such as credit demerit points, financing restrictions, and project approval limitations, on serious violators. Regarding subsidy policy, differentiated subsidy ranges should be established based on the MWO and TWU’s actual revenues. Moreover, a dynamic adjustment mechanism should be formulated by considering prevailing market water prices and treatment costs, thereby ensuring both the subsidy measures’ flexibility and incentive effectiveness. In addition, a performance evaluation mechanism is advised to periodically assess the efficacy of subsidy fund utilization to prevent the over-reliance on policy measures and market imbalances.

5.4.2. Promoting Technological Innovation to Reduce Mine Water Production and Operating Costs

Technological innovation is the core driving force that promotes the utilization of mine water resources. The government should set up a special scientific research fund focusing on supporting technical research and development in mine water desalination, multi-way disposal, comprehensive utilization, and promoting key technology research. In addition, coal mining enterprises and mine water operators should strengthen the cooperation between industry, academia, and research, and set up a technology joint research platform, focusing on overcoming technical bottlenecks in the process of mine water treatment and gradually realizing a highly efficient and low-cost treatment mode, reducing the dependence on government subsidies. At the same time, it is recommended that digital and intelligent management technologies, such as remote monitoring, intelligent scheduling, and automated operation and maintenance, be promoted further to reduce mine water’s production and operating costs.

5.4.3. Enhancing Water Users’ Water Conservation and Environmental Awareness

The government should enhance information transparency by developing a blockchain-based mine water management platform. This platform can disclose real-time data on water quality, treatment processes, and discharge standards, and incorporate third-party certification to increase user confidence in mine water safety. Mine water should be incorporated into the regional water resources’ unified allocation and management system. Utilization standards and development plans should be formulated to guide water users in regulated and efficient use. At the same time, the use of unconventional water should be included in the performance assessment system for corporate water resource management, promoting the institutionalization of water-saving responsibilities. Public awareness and acceptance of mine water as a viable water resource can be effectively enhanced by promoting the environmental and economic benefits of mine water utilization and combining these efforts with exemplary demonstration projects.

5.5. Study Limitations

First, this study only considered TLG, the CME, the MWO, and TWU as the stakeholders in mine water recycling and utilization. Future research should also consider other groups, such as the central government and the general public. Second, this study only considered single-factor sensitivity analysis; future work should examine the correlations among quantified parameters and employ system dynamics or agent-based modeling to analyze multi-parameter coupling effects comprehensively. Finally, the evolutionary game model in this study mainly considered the situation in water-deficient areas, and future studies should consider the spatial heterogeneity problem, collect information on water-rich areas, build a separate game model for water-rich areas, and compare it with the strategies in water-deficient areas.

6. Conclusions

The utilization of mine water not only aligns with the sustainable development of China’s coal mining industry but helps to reduce environmental risks, alleviate water scarcity, and supports the high-quality development of the energy resources industry. This study constructs a four-party evolutionary game model that includes TLG, the CME, the MWO, and TWU to provide insights into the challenges of mine water recycling and utilization in China. The main conclusions are as follows.

(1) The system can encompass up to ten ESSs, among which the (supply, investment, use, active support) strategy is the optimal ESS under current conditions in China. This strategy relies on TLG support to encourage stakeholder engagement and positive actions to facilitate mine water recycling and utilization. As the recycling and utilization of mine water mature, TLG’s role will diminish, allowing the remaining three players to achieve the ideal ESS in a market-oriented mechanism (supply, investment, use, passive support).

(2) The stakeholders’ strategic choices are mutually influential and dynamically adjusted. The local government plays a pivotal role in promoting the recycling and utilization of mine water by guiding the CME, the MWO, and TWU to collaborate through multifaceted policies, thereby establishing a market-oriented mechanism.

(3) Strategies, such as enhancing TLG support, imposing stricter penalties on the CME, reducing production costs, widening the tax gap on water resources, and raising water trading prices, can expedite the recycling and utilization of mine water. However, reductions in water volume benefit the CME but adversely affect the MWO. The recycling of mine water should be promoted first in industries where water resources have low objective utility.

(4) Mine water prices must be within a reasonable range below the price of fresh water to balance the benefits of the MWO and TWU. Local government subsidies must remain within a specific threshold since subsidies below this range are ineffective, while those exceeding it can lead to system instability.