The progress of existing institutions for Northeast Asia's transboundary pollution problems is not satisfactory so far. The question concerns which type of institutional and financial arrangement should be chosen. This study considers the institutional and financial arrangements for the transboundary pollution problems in Northeast Asia as the cost allocation and cost efficiency problem among the countries in the region. The cost allocation problem refers to the question of who should bear the cost of emission abatement required to avoid environmental aggravation in the region. The cost efficiency problem seeks the most efficient way to mobilize financial resources while giving economic incentives to those who undertake projects. These two problems are related. However, if possible, the separation of the efficiency issue from the cost allocation issue may alleviate the bottleneck of the cooperation. Based on the estimates of transboundary transportation of pollutants in the region, an example of cost allocati
on guided by a commonsense rule, and an example of the incentive for international fincncial transfers, bilateral and regional, are provided. The result supports the superiority of a regional mechanism to a bilateral one. Existing institutions' performances are evaluated from this viewpoint. The authorss suggest more flexible and pragmatic approaches in seeking efficiency. They include the consideration of APEC as a potential ancillary forum for the issue, the use of innovative financing methods involving private sectors, and wider use of economic instruments. At the same time, the existing intregovernmental body addressing the issue should preserve its central role for the issue with a clearer and higher, but flexible mandate.

Contents

I. Introduction

II . State of Transboundary Pollution in Northeast Asia
1. Acid Rain
2. Marine Pollution

III. Progress and Prospects of Northeast Asian Environmental Cooperation
1. Institutional Development
2. NEASPEC'S Vision on a Financial Mechanism
3. APEC 's Environmental Fora
4. Assessment of Progress in Regional Fora

IV. Discussions on Issues for Further Cooperation
1. International Law Applicable to Transboundary Pollution
2. Some Lessons from the U.S.-Canada Air Quality Agreement
3. OECD's Discussion on International Financial Transfers
4. Summary and Implications

V. The Framework and Numerical Examples
1. An Initial Guideline for the Cost Allocation
2. Cost Efficiency
3. Numerical Examples

VI. Suggestions for Further Cooperation and APEC's Potential Role
1. Structure of the Cooperation / Negotiation
2. The Potential Role of APEC
3. Some Innovative Approaches to Be Considered
4. Conclusion

References

Appendix