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Efficiency of uniform standards for transboundary pollution problems: a note

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Abstract

This 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

Suggested Citation

  • Basak Bayramoglu & Jean-François Jacques, 2007. "Efficiency of uniform standards for transboundary pollution problems: a note," Documents de travail du Centre d'Economie de la Sorbonne v07031, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  • Handle: RePEc:mse:cesdoc:v07031
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    Keywords

    Transboundary pollution; cooperative games; bargaining; standards; transfers; fixed cost;

    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

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