Financial transfers to ensure cooperative international optimality in stock pollutant abatement

Marc Germain, Philippe Toint and Henry Tulkens
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Marc Germain: Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), Louvain la Neuve, Belgium
Philippe Toint: Département de Mathématique, Facultés universitaires Notre-Dame de la Paix,

No 1997001, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: It is well known that the transnational character of many environmental problems requires cooperation amongst the countries involved, if a social optimum is at all to be achieved. Most of the numerous contributions dealing with the problems raised by the cooperation issue bear only on pollutants that do not accumulate: they are thus only relevant in a static, or a-temporal, context. On the other hand, many contributions which deal with the dynamic dimension of the problem when the pollutant accumulates leave aside the issue of the voluntary implementation of the international optimum. The aim of the present contribution is to overtake the two above limita- tions. Using both cooperative and differential game theories, we design a scheme of financial transfers between countries such that aggregate abatement costs are covered in a way that makes cooperation both individually rational and strategically stable.

Date: 1997-01-01
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