Evolutionary game analysis on the cooperative mechanism of government subsidies and market-based risk mitigation institutions in managing ecosustainable projects' default risks

Ecosustainable projects (ESPs) face challenges in risk management due to the limitations of single risk control strategies, difficulties in regulatory enforcement, and insufficient market-driven mechanisms, making it hard to effectively reduce default risk. This study moves beyond the traditional focus on single risk management strategies by integrating an evolutionary game model with external disturbances and dynamic strategy coexistence. It provides a comprehensive analysis of the effectiveness of three approaches: entirely government subsidized (EGS), hybrid guarantee (HG), and third-party risk mitigation (TRM). The results reveal several key insights. First, strategic evolution is influenced by regulatory costs, risk-return thresholds, and guarantee premiums. When the cost of high supervision (HS) reaches 80% of an institution's total project investment, institutions tend to shift toward low supervision (LS), which encourages greater government involvement. If the lower risk-return thresholds exceed the project's maximum potential return, the government is more likely to shift the risk burden onto market entities. Additionally, when the premium for TRM falls to about 125% of that for HG, the government is more inclined to adopt the TRM strategy over HG. Second, stronger regulatory oversight helps to mitigate moral hazard under both EGS and HG strategies. Third, the suitability of EGS, HG, and TRM varies across different types of ESPs. In regions with strong public finances but underdeveloped market mechanisms, EGS tends to be more effective. HG serves as a middle-ground approach, balancing fiscal support and market efficiency. TRM is most appropriate in contexts where capital markets are mature and institutional systems are well-developed. Overall, this study offers both theoretical insights and practical guidance for enhancing risk management and regulatory decision-making in ecosustainable project implementation.