Transboundary pollution control in asymmetric countries: do assistant investments help?

Area of Science:

• Environmental economics
• International relations
• Game theory

Background:

• Transboundary pollution necessitates international cooperation due to pollution externalities.
• Asymmetric development levels between countries create differing incentives for cooperation.
• Developed nations may hesitate to bear cooperation costs, while developing nations might seek to free-ride.

Purpose of the Study:

• To model transboundary pollution control between two asymmetric countries (developed and developing).
• To analyze the impact of developed countries providing assistant investments to developing countries for pollution reduction.
• To derive optimal equilibrium strategies using a dynamic differential game.

Main Methods:

• Utilized a dynamic differential game model to represent transboundary pollution control.
• Employed the Hamilton-Jacobi-Bellman (HJB) equation to determine optimal equilibrium strategies.
• Conducted numerical illustrations and sensitivity analysis to compare scenarios with and without assistant investments.

Main Results:

• Assistant investments from developed to developing countries effectively reduce common pollution stock.
• Equilibrium emission strategies for both countries increase with the level of assistant investments.
• Increased investments lead to greater economic benefits for both participating nations.

Conclusions:

• Financial assistance from developed to developing countries is a viable strategy for mitigating transboundary pollution.
• Cooperative pollution control, supported by investment, yields mutual economic advantages.
• The study highlights the importance of financial mechanisms in fostering international environmental cooperation.