Policymakers aiming for the unilateral regulation of transboundary pollutants, such as greenhouse gases, fear as a consequence rising emissions in non-regulating countries. This so-called pollution haven or carbon leakage effect is of particular concern in emission-intensive and trade-exposed...

We explore the possibility of achieving a cooperative outcome when governments act non-cooperatively in a strategic environmental policy model where emission permit markets are linked. We introduce a specific distribution scheme of the permit revenues between the exporting countries so as to...