On the existence of efficient, individually rational, and fair environmental agreements

Suppose a group of agents are engaged in economic activity that produces emissions pollutants. Emissions yield private benefits and impose negative externalities. The status-quo is assumed to be inefficient so the willing negotiate an improved allocation emissions. In this context, we interested allocations satisfying Pareto efficiency, individual rationality, principle fairness generalizes concepts encountered practice. While existence such not guaranteed, derive necessary sufficient condition for it. This succinct its verification computationally tractable. Uniqueness will generally hold, describe procedure generates with desired properties discuss ways selecting from them. We apply our model setting climate-change policy based on Nordhaus (2015). Our results show it possible achieve large reduction global CO2 enhances every region’s welfare, while at same time achieving efficiency respecting norms fairness.