Water shortage in China is caused by the uneven distribution of water resources, a situation that can worsen given overexploitation and pollution. Chemical oxygen demand (COD) emission is considered the most important water pollutant. Using the logarithmic mean Divisia index (LMDI) method, we analyse the main driving factors of the 2001-2011 changes in China's industrial water consumption-related COD emission. The main driving factors of COD emission are classified into five effects, namely, end-of-pipe treatment, COD emission intensity, water intensity, structural effect, and scale effect. In contrast to previous studies, the current work considers water consumption by using water intensity as an index. Results show that end-of-pipe treatment, with an effect of up to 35%, was the primary factor that influenced emission reduction during the studied period. Pollution reduction policies are key drivers of promoting advancements in technologies for reducing COD emission in industrial sectors, and technical efficiency in 2001-2011.

China has modified its pollution control policy system with such price tools as the pollution charge (PC) policy and the payment for initial emission allowance (PIEA) policy. The aim of PC policy is to compensate for the environment damage caused by pollutants, while PIEA is in charge of the initial emission allowance (IEA) within the emission trading system (ETS). However, since the implementation of PIEA, it has been criticized as redundant because of the similar pricing scheme with the PC. In addition, the existing PIEA pricing approaches have ignored interactions with other policies, such as PC and total emission control (TEC) policies. In this research, we established an optimal control-based model with chemical oxygen demand (COD) and ammoniacal nitrogen (NH3-N), two independent pollutants variables, to simulate the water pollutants' PIEA price. Simulation results indicated that emission quantity and optimal social benefit in the PC-PIEA combination scenario was equal to the situation in the PIEA scenario. Under this design, PC compensated for the emission damage, and PIEA paid for the scarcity rent, while PIEA does not duplicate the PC policy. In addition, the PIEA policy has a complex effect on pollutant emission. Because PIEA policy increases the enterprises' discharging cost, most regions' COD emissions are less than the baseline, excepting Beijing,