Paldang Lake has been working as water supply source for the capital Seoul in South Korea and metropolitan area. From geographical features, Paldang Lake has high density of eutrophication material such as phosphorus and nitrogen. And increase of population and development of economy has made water quality deteriorate. Moreover, surrounding area of Paldang Lake cannot be developed from various restrictions by government. Then, resident's dissatisfaction is not improved though the government executed the water quality improvement policy in 1999. And the improvement of the water quality is not yet seen. The government collects 11 yen per ton as the water use charge. But, the distribution of the fund is inappropriate. In this study, we formulate a model which describes socio-economic activities, land use and the load of pollution (nitrogen, phosphorus, COD) and suggest effective policies in order to reduce pollution. First proposal is the region which distributed water-use charge is decreased. And, second proposal is the government subsidize for industries of restricted region. We simulate the model which can promote a sustainable development of Paldang area from the year 2001 to 2010. In conclusion, GRP will increase twice in ten years. Amount of nitrogen, phosphorus, COD's exhaust becomes 55(t/d), 4(t/d), 138(t/d). And it compared with the case of no execution of the policy, nitrogen, phosphorus, COD is reduced by 18%, 26%, and 33%. And, 11 yen per ton for the water supply of 2001 is needed to be raised to 1,100 yen a ton for the policy execution. It was confirmed that the policy proposal in this study is effective. A distribute of fund and the subsidy for industries in the restriction region is effective to reduce the pollution.

JEL classification : Q53, C61, Q58