Introduction

Twenty-five years ago, in an introductory article to research in environmental economics, Kneese (1971) distinguished between two types of environmental problem: ‘global’ problems which affect the entire planet and ‘regional’ problems which include ‘all those other than global’. In justifying this last classification, Kneese reasoned:

The conclusion to this sentence hints at a possibly important research agenda: international management of environmental resources. Yet, it is only fairly recently that this topic has been the subject of serious examination by economists. The purpose of this chapter is to explain why the transboundary aspect of environmental protection should be ‘one of the main problems’ of environmental management, and to develop elements of a theory which explain the extent to which institutions may be capable of correcting such problems.

The dilemma of international pollution control

The essence of international environmental relations is that countries interact. When any one country chooses its transboundary pollution policy, it will consider what policies other countries will choose, or how others will respond to its own choice. It is in this sense that international pollution control is a ‘game’.