An Incentive Mechanism for Dynamic Cooperation in International Pollution Control

International pollution control requires cooperation by regions to internalize the negative externalities of pollution. A number of studies proved that the incentives to cooperate will be very sensitive to the way the transfer rule is designed. Based on the idea of Vickrey-Clark-Groves mechanism, this paper designs an incentive mechanism to implement the dynamic cooperation in international pollution control. In our mechanism, the dynamic transfer payment is determined by regions´ flow marginal contribution to the cooperation in international pollutant control.