The recent debacle in Copenhagen over a climate change treaty has highleghted a large rift between developing and developed economies over what should be done and how. The way it was presented, the issue was about a right to develop like the currently rich ones did, by polluting your way to wealth. Thus, the rich should either allow the poor to pollute, or compensate them for avoiding the pollution they would entitled to.
But reading a paper by Fabio Mariani, Agustín Pérez-Barahona and Natacha Raffin got me thinking that there is another reason. Think about why we care about the environment. It is because we live in it. Now, life expectancy is markedly shorter in developed economies, thus it would make only sense that they would care less about the environment. What the paper highlights is that there is a potential for multiple equilibria; As people living in polluted environments have shorter lives they care less about the environment, which is then more polluted. This makes it even more necessary to provide them with a transfer to entice them out of this loop.