THE ACID-RAIN DIFFERENTIAL GAME

This paper considers an acid rain differential game. Countries emit su lphur which is partly transferred to other countries. Depositions abov e critical loads ultimately destroy the soil. Countries face a trade-o ff between the costs of emission reductions and the damage to the soil due to the depletion of the acid buffers. Because of the transboundar y externalities the outcome will depend on whether the countries coope rate or not. This paper presents the cooperative outcome and the open- loop and Markov-perfect Nash equilibria of the acid rain differential game. It will be shown that the depositions always converge to the cri tical loads but the steady-state levels of the buffer stocks differ. T he theory is used to analyse the acid rain differential game for sulph ur between Great Britain and Ireland. Finally, some results are given for the whole of Europe.