International Transfer, Environmental Policy, and Welfare

Abstract:     
This paper examines the effects of international transfer on pollution permits, which are determined non‐cooperatively by a donor and a recipient. First, we show that the untied international transfer decreases the pollution permits of the recipient, and may be welfare‐improving for both countries if pollution is transboundary. Second, we introduce a full‐compensatory emission‐contingent transfer and show that it may reduce the emission of pollution in the recipient country and may increase the welfare of the donor, while keeping the recipient's welfare constant.

Number of Pages in PDF File: 12

JEL Classification: F35

Accepted Paper Series