An Equilibrium Framework for Global Pollution Problems

The paper analyzes global pollution problems from the point of view of the benefit approach to the allocation of public costs. Special attention is paid to the possibility that the optimum abatement vector may have negative elements. An appropriate cost-share equilibrium is defined and characterized, and conditions under which the equilibrium is beneficial to all parties are derived. An implementation mechanism whose Nash equilibrium yields positive abatement levels under appropriate conditions is described.