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The Acid Rain Game as a Resource Allocation Process, with Application to Negotiations Between Finland, Russia and Estonia

In: Public goods, environmental externalities and fiscal competition

Author

Listed:
  • Veijo Kaitala

    (Helsinki University of Technology)

  • Karl Göran Mäler

    (The Beijer Institute)

  • Henry Tulkens

Abstract

We consider optimal cooperation in transboundary air pollution abatement among several countries under incomplete information, i.e., local information only on marginal emission abatement costs and damage costs. Directions of emission abatement in each country are determined that generate a succession of emissions programs shown to converge to an economic optimum. A cost sharing scheme, that results from appropriately designed international transfers, guarantees that the individual costs of all parties are nonincreasing along the path towards the optimum. A version of Maäler’s (1989) “acid rain game” is used for a numerical application.

Suggested Citation

  • Veijo Kaitala & Karl Göran Mäler & Henry Tulkens, 2006. "The Acid Rain Game as a Resource Allocation Process, with Application to Negotiations Between Finland, Russia and Estonia," Springer Books, in: Parkash Chander & Jacques Drèze & C. Knox Lovell & Jack Mintz (ed.), Public goods, environmental externalities and fiscal competition, chapter 0, pages 135-152, Springer.
    • Handle: RePEc:spr:sprchp:978-0-387-25534-7_9
    DOI: 10.1007/978-0-387-25534-7_9
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