Regulators and Environmental Groups: Substitutes or Complements?

Ana Espinola-Arredondo, Eleni Stathopoulou () and Felix Munoz-Garcia
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Eleni Stathopoulou: University of Leicester

No 2019-1, Working Papers from School of Economic Sciences, Washington State University

Abstract: This paper examines green alliances between environmental groups and polluting firms, which have become more common in the last decades, and analyzes how they a¤ect policy design. We first show that the activities of regulators and environmental groups are strategic substitutes, giving rise to free-riding incentives on both agents. Nonetheless, we find that the presence of the environmental group alone yields no welfare bene?t, as firms have no incentives to alter their abatement decisions when they do not face regulation. Therefore, the introduction of environmental groups yields a welfare gain when firms are already subject to regulation, suggesting that the former cannot completely replace environmental policy.

Keywords: Abatement; Emission fees; R&D disruptive e¤ects; Equilibrium pro?les; Spillovers (search for similar items in EconPapers)
JEL-codes: H23 L12 Q58 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2019-03-12
New Economics Papers: this item is included in nep-ene, nep-env, nep-gth and nep-reg
Note: http://ses.wsu.edu/wp-content/uploads/2019/03/WP2019-1.pdf
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