 Transboundary pollution externalities: Think globally, act locally?Davide La Torre, Danilo Liuzzi () and Simone Marsiglio Journal of Mathematical Economics, 2021, vol. 96, issue C Abstract: We analyze the implications of transboundary pollution externalities on environmental policymaking in a spatial setting, in which pollution diffuses across the global spatial economy independently of the specific location in which it is originally generated. This framework gives rise to a simple regional optimal pollution control problem allowing us to compare the global and local solutions in which, respectively, the transboundary externality is and is not taken into account in the determination of the optimal policy by individual local policymakers. We show that it is not obvious that transboundary externalities are a source of inefficiency per se since this is strictly related to the spatial features of the initial distribution of pollution. If the initial pollution distribution is spatially homogeneous then the local and global solutions will coincide and thus no efficiency loss will arise from transboundary externalities, but if it is spatially heterogeneous the local solution will be suboptimal and thus a global approach to environmental problems will be needed to achieve efficiency. From a normative perspective, in this latter (and most realistic) case we also quantify the amount of policy intervention needed at local level in order to achieve the globally desirable goal of pollution eradication in the long run. Our conclusions hold true in a number of different settings, including situations in which the spatial domain is either bounded or unbounded, and situations in which macroeconomic–environmental feedback effects are taken into account. Keywords: Local and global solutions; Regional optimal control; Spatial dynamics; Transboundary pollution externalities (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:96:y:2021:i:c:s0304406821000616 DOI: 10.1016/j.jmateco.2021.102511 Access Statistics for this article Journal of Mathematical Economics is currently edited by Atsushi (A.) Kajii More articles in Journal of Mathematical Economics from Elsevier |
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