Efficiency of uniform standards for transboundary pollution problems : a note
AbstractThis note proposes an example which contradicts the idea that similar countries will negotiate an agreement on a uniform standard. It shows that strictly identical countries may have an interest in reducing their emissions differently, and not in a uniform way. This result relies on the existence of fixed costs in the abatement technology. Identical countries could be better off by signing an agreement on differentiated standards in order to exploit increasing returns to scale in the abatement activities. More specifically, one of the countries abates for both, and pays for the fixed cost of investment. In return, it is compensated by monetary transfers for this effort. We show that the level of fixed cost must be sufficiently high in this case.
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Bibliographic InfoPaper provided by Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne in its series Documents de travail du Centre d'Economie de la Sorbonne with number v07031.
Length: 17 pages
Date of creation: May 2007
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Transboundary pollution; cooperative games; bargaining; standards; transfers; fixed cost.;
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Find related papers by JEL classification:
- Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
- C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-06-30 (All new papers)
- NEP-ENE-2007-06-30 (Energy Economics)
- NEP-ENV-2007-06-30 (Environmental Economics)
- NEP-GTH-2007-06-30 (Game Theory)
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