The acid rain problem in East Asia is discussed, specifically in the context of China, South Korea, and Japan. The main objective is to analyse the transboundary pollution in East Asia, and propose an efficient policy to deal with this issue. A downwind country such as Japan is a net importer of sulphur deposition from China and South Korea. For achieving a regional optimal solution, it would be necessary for all participants including polluters to benefit more from cooperating than not. A possible strategy of ‘side-payments’ by Japan to S. Korea and China will be analysed, as well as cost reduction in pollution abatement.
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