Domestic environmental policy and international cooperation for global commons

The paper analyzes the strategic behavior of several countriesengaged in capital accumulation, pollution mitigation, and envi-ronmental adaptation in the context of an environmental commongood. Both cooperative and non-cooperative strategies are dis-cussed. The non-cooperative strategy is a dynamic game in whicheach country makes its own environmental decision following theopen-loop Nash equilibrium. The cooperative social planner prob-lem assumes an international environmental agreement in force.The non-cooperative and cooperative solutions are compared inthe symmetric case of two countries and extended to several iden-tical countries. It is shown that the non-cooperative strategy inmulti-country world leads to over-production, over-consumption,over-pollution, and over-adaptation.