AN ECONOMIC-ANALYSIS OF TRANSBOUNDARY AIR-POLLUTION BETWEEN FINLAND AND THE FORMER SOVIET-UNION

The net benefits of bilateral cooperation between Finland and the former Soviet Union on reducing sulphur emissions are evaluated for both parties. The analysis is based on a sulphur transportation model and on estimated abatement cost functions. It is shown that efficient cooperation may entail financial transfers from Finland to the Soviet Union because it is cheaper to abate sulphur there. It is further demonstrated that a recently signed agreement aimed at reductions in air pollutants is not rational from the Soviet Union's viewpoint and may not, therefore, be carried out without monetary support from Finland.