Equilibrium Investment Strategies in Foreign Environmental Projects

This paper proposes a two-player, finite-horizon differential game model to analyze joint implementation in environmental projects, one of the flexible mechanisms considered in the Kyoto Protocol. Using a nonlinear specification for the damage costs, we show that, if joint implementation is available, both players will invest in environmental projects in their own location and one of the players will invest abroad, the identity of that player changing at most once during the planning horizon.

[1]  L. Fernandez.  Trade's Dynamic Solutions to Transboundary Pollution☆ , 2002 .

[2]  F. Ploeg,et al.  International aspects of pollution control , 1992 .

[3]  Georges Zaccour,et al.  Differential Game Models of Global Environmental Management , 1995 .

[4]  D. H. Howard,et al.  External adjustment in selected developing countries in the 1990s , 1994 .

[5]  Veijo Kaitala,et al.  The Acid Rain Game as a Resource Allocation Process with an Application to the International Cooperation among Finland, Russia and Estonia , 1995 .

[6]  E. Dockner,et al.  International Pollution Control: Cooperative versus Noncooperative Strategies , 1993 .

[7]  M. Pohjola,et al.  Sustainable International Agreements on Greenhouse Warming — A Game Theory Study , 1995 .

[8]  David E. Pingry,et al.  An Experimental Investigation of the Hahn-Noll Revenue Neutral Auction for Emissions Licenses , 1993 .

[9]  K. Mäler,et al.  The Acid Rain Differential Game , 1998 .

[10]  Georges Zaccour,et al.  Incentive equilibrium strategies and welfare allocation in a dynamic game of pollution control , 1999, Autom..

[11]  G. Zaccour,et al.  Time-consistent Shapley value allocation of pollution cost reduction , 1999 .

[12]  J. List,et al.  Optimal Institutional Arrangements for Transboundary Pollutants in a Second-Best World: Evidence from a Differential Game with Asymmetric Players , 2000 .

[13]  Zili Yang,et al.  Reevaluation and renegotiation of climate change coalitions—a sequential closed-loop game approach , 2003 .

[14]  John E. Rijnsdorp.  Interaction in two-variable control systems for distillation columns - II : Application of theory , 1965, Autom..

[15]  N. Hanley,et al.  International dynamic pollution control , 1998 .

[16]  Andrea Beltratti,et al.  Consumption of Renewable Environmental Assets, International Coordination and Time Preference , 1995 .

[17]  F. Wirl.  Global warming and carbon taxes: Dynamic and strategic interactions between energy consumers and producers , 1994 .

[18]  Robert H. Patrick,et al.  A Dynamic Game of a Transboundary Pollutant with Asymmetric Players , 1993 .

[19]  Georges Zaccour,et al.  A differential game of joint implementation of environmental projects , 2004, Autom..

[20]  John A. List,et al.  Spatial aspects of pollution control when pollutants have synergistic effects: Evidence from a differential game with asymmetric information , 1999 .