In the paper, we use the differential game method to test the impact of joint implementation (JI) mechanism on pollution\ncontrol in two bilateral countries.The Hamilton-Jacobi-Bellman (HJB) equations of the models are obtained by using the dynamic\nprogramming principle.We obtain the optimal emissions, optimal local and foreign investments in environment projects, optimal\nrevenues, and optimal trajectories of carbon stock under three situations, namely, situation without JI,with JI (noncooperative), and\nwith JI (cooperative), of the two countries by solving these equations. We also compare their optimal Nash equilibrium solutions.\nWe find that the introduction of JI mechanismcan slow down the growth of the carbon stocks by reducing emissions or increasing\ninvestment in emission reduction projects, compared to the situation without JI mechanism. However, the JI mechanism does\nnot reduce the revenue of the two countries under certain conditions. Finally, some numerical tests are provided to illustrate the\ntheoretical results.
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