Abstract
We develop and analyse a two-country transboundary air pollution model in a dynamic game setting. Air pollution is mainly due to sulphur and nitrogen emissions that are partially deposited onto the ground in the emitter countries. However, due to transboundary transport of pollutants by winds, large amounts of the emissions fall on the ground in the neighboring countries as well. Sulphur and nitrogen compounds affect the properties of soil, surface water, and ground water, and hence, the pollution process is referred to as acidification. The acidification dynamics model is based on recent models of ion exchange dynamics in soil. The empirical data are based on the estimates of sulphur emissions as well as sulphur depositions in Finland and in four nearby regions in the USSR, namely the Estonian SSR, and the regions of Karelia, Leningrad and Kola. The main part of this paper is devoted to the identification of the structure and the dynamics of the acid rain game and to the estimation of the emission abatement costs and the benefits from emission reductions. We compare the non-cooperative and cooperative game solutions. The USSR loses from the environmental cooperation. Finland needs to compensate the USSR to negotiate a bilateral agreement on reductions of sulphur emissions.
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Kaitala, V., Pohjola, M., Tahvonen, O. (1991). Transboundary air pollution between Finland and the USSR — A dynamic acid rain game. In: Hämäläinen, R.P., Ehtamo, H.K. (eds) Dynamic Games in Economic Analysis. Lecture Notes in Control and Information Sciences, vol 157. Springer, Berlin, Heidelberg. https://doi.org/10.1007/BFb0006240
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DOI: https://doi.org/10.1007/BFb0006240
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