An Economic Interpretation of the Compensation Mechanism in the RAINS Model

Forsund, F.R. (2000). An Economic Interpretation of the Compensation Mechanism in the RAINS Model. IIASA Interim Report. IIASA, Laxenburg, Austria: IR-00-036

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Abstract

In 1999 the optimization mode of the Regional Air Pollution Information and Simulation (RAINS) model was used to support international environmental negotiations on the Protocol to Abate Acidification, Eutrophication and Ground-level Ozone of the UN/ECE Convention on Long-range Transboundary Air Pollution and on the Directive for National Emission Ceilings of the Commission of the European Union. The optimization determines the cost-minimal set of emission reductions that bring acid deposition below user-specified constraints.

In the original formulation of the optimization problem in the RAINS model, such deposition constraints were specified for each of the 750 grid cells in Europe, for which acid deposition is calculated, and emissions had to be reduced in such a way that all constraints are fully met. During the course of the negotiations it was recognized that, using such a formulation, deposition targets for individual grid cells might impose undue emission control burdens, which might not always be fully supported by verified scientific data. As a consequence, a "compensation" mechanism was developed, which introduces a certain spatial flexibility to the achievement of the deposition targets while maintaining the overall level of environmental achievements.

This paper provides an economic interpretation of the compensation mechanism.

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