ABSTRACT

In the interest of reducing the emission of ozone-depleting chemicals into the atmosphere, the U.S. government has taken various preliminary regulatory steps to reduce the production and sales of offensive products in the United States. These steps have been unilateral, involving no binding commitments nor informal understanding with other governments that they also place complementary restrictions on such chemical emissions. The consequences of such a unilateral U.S. initiative is investigated in this chapter by combining elements of general equilibrium international trade models with those of pure public goods models to examine the economic structure of worldwide pollution emissions and control. At a theoretical level we examine the economics of production, and trade of a good which is produced and consumed in more than one country, which is traded among countries, and which generates pollution in the production/consumption process. At the regulatory or policy level, the purpose of this synthesis is to judge the likely effects of one form of regulation or another, or of varying degrees of regulation, to anticipate how manufacturers, counties, or consumers will react to alternative methods of control. The investigation is new in that it examines the effects of unilateral U.S. action on the allocation of factors of production within and among interdependent countries in the world economy. Both short-run and long-run effects are examined.