Business-as-usual, High Technology and Coalition Scenarios for Transboundary Pollution in the European Union

Pavlova, Y. (2009). Business-as-usual, High Technology and Coalition Scenarios for Transboundary Pollution in the European Union. IIASA Interim Report. IIASA, Laxenburg, Austria: IR-09-016

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Abstract

The paper addresses the issue of air pollution in the European Union (EU). The focus is on economic and environmental assessment of alternative pollution control scenarios. In order to derive policy-relevant conclusions, we develop an ecology-economy model of the EU by linking an environmental effect from countries' SO2 (sulphur dioxide) abatement with their economic outcomes.

We consider SO2 reduction strategies (GAINS) available for the EU member states during 2015-2020 and, compare environmental and economic impacts in two scenarios assuming that a base-line abatement technology and respectively, an advanced abatement technology are being used. Furthermore, we introduce elements of game theory and consider a possibility for cooperation in air pollution abatement among several Baltic countries (Finland, Sweden, Denmark and Latvia). The optimal choice of the technologies and corresponding levels of SO2 reduction are determined for the given countries. The coalition scenario is shown to be superior to the baseline scenario. We study a positive externality effect and demonstrate that the neighboring countries, Estonia and Lithuania, receive the highest impact from pollution reduction. Possible free-riding by Latvia and Finland is considered. It has been proven that stability of cooperation is achievable.

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