Trading Sulphur Emissions Under the Second Sulphur Protocol

In the case emission of non-uniformly dispersed pollutants such as SO2 the negative effects depend on the location of the sources. A unit increase at one source must be compensated by either a lareg or smaller reduction at another source to keep the negative effects at the same level. Such trade ratios are referred to as exchange rates. Emission trading between countries is possible under the Second Sulphur Protocol. Exchange rate trading and third party problems are studied within a simultanous model facilitating impositions of various environmental constraints.