Certification as a Rationale for Voluntary Agreements

Patrick Gonzalez ()

No 117827, Working Papers from University of Laval, Center for Research on the Economics of the Environment, Agri-food, Transports and Energy (CREATE)

Abstract: I model the participation of firms in a voluntary agreement as a costly certification process whereby a firm informs the Regulator of its pollution intensity. Without this knowledge, the Regulator imposes the same tax on all firms in a heterogeneous industry, unduly hurting the clean ones with the lowest intensity. Certification allows clean firms to get a tax rebate. It also entails an informational externality as the dispersion of types decreases within the pool of non-participating firms, following an unraveling process. Because participation is a firm’s private decision, there is such a thing as a bad voluntary agreement.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 35
Date: 2011-11
New Economics Papers: this item is included in nep-env
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Working Paper: Certification as a Rationale for Voluntary Agreements (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ulavwp:117827

DOI: 10.22004/ag.econ.117827

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