Regulation with direct benefits of information disclosure and imperfect monitoring

Mary F. Evans, Scott M. Gilpatric and Lirong Liu

Journal of Environmental Economics and Management, 2009, vol. 57, issue 3, pages 284-292

Abstract: We model the optimal design of programs requiring heterogeneous firms to disclose harmful emissions when disclosure yields both direct and indirect benefits. The indirect benefit arises from the internalization of social costs and resulting reduction in emissions. The direct benefit results from the disclosure of previously private information which is valuable to potentially harmed parties. Previous theoretical and empirical analyses of such programs restrict attention to the former benefit while the stated motivation for such programs highlights the latter benefit. When disclosure yields both direct and indirect benefits, policymakers face a tradeoff between inducing truthful self-reporting and deterring emissions. Internalizing the social costs of emissions, such as through an emissions tax, will deter emissions, but may also reduce incentives for firms to truthfully report their emissions.

Keywords: Pollution; control; Environmental; regulation; Compliance; Self-reporting (search for similar items in EconPapers)
Date: 2009

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Persistent link: http://EconPapers.repec.org/RePEc:eee:jeeman:v:57:y:2009:i:3:p:284-292

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