Swap bonds or stocks, or balance trade! : a game of implicit environmental policy

This paper develops a mechanism to correct production externalities between several parties, such as externalities motivating environmental policy between countries, using asset ownership. Efficiency can be obtained if each party retains less than the full share of their own gain from resource use materialized in gross product. The remainder of the product can be earned by other parties. in a reciprocal way. The resulting swaps can be enforced by using bonds or stocks or with balanced trade of shares, hindering free-riding. The best international climate policy thus may be swap contracts.