AbstractWe provide a theoretical framework to analyze how climate change influences the Ganges and how this influence affects pollution in the river caused by tanneries in Kanpur, India. We focus on two tanneries, and that are situated on the same bank of the Ganges in Kanpur. Both produce leather and leather production requires the use of noxious chemicals. Tannery is situated upstream from tannery Tannery leather production depends on labor use but tannery leather production depends on labor use, the chemical waste generated by tannery and the natural pollution absorbing capacity of the Ganges. In this setting, we perform four tasks. First, we construct a metric that measures the climate change induced mean reduction in the natural capacity of the Ganges to absorb pollution in the time interval Second, we use this metric and determine the equilibrium production of leather by both tanneries in the benchmark case in which there is no pollution. Third, we ascertain how the benchmark equilibrium is altered when tannery accounts for the negative externality foisted upon it by tannery Finally, we study the impact on leather production and on labor use when the two tanneries merge and then discuss the policy implications stemming from our research.