The Public Economics of the Montreal Protocol on the Ozone Layer

This paperpaper applies the modem theory of voluntary provision of a pure public good to the behavior of nations to curb chlorofluorocarbons (CFCs) emissions in the late 1980s. By devising empirical tests, we demonstrate that these cutbacks in emissions are entirely consistent with non-cooperative behavior. Regression results indicate that the preponderance of the variation in CFCs emission reductions can be explained by national income and two taste parameters. Rank-ordered statistics provide further support that these variables underlie participation in the initial stipulations of the Montreal Protocol on protecting the ozone layer. These findings suggest that the treaty may be more symbolic than a true instance of cooperation. When our procedures are applied to the Helsinki Protocol, which limits sulfur emissions in Europe, we discover that nations are behaving differently than in the case of CFCs emissions. We attribute this difference to impurely public characteristics of sulfur emissions where depositions vary according to location and other considerations. Our procedures can be applied to a wide range of environmental scenarios including those involving a regional group of developing countries.