Environmental Policy Instruments: Technology Adoption Incentives with Imperfect Compliance

Carmen Arguedas (), Eva Camacho Cuena () and Jose Luis Zofio

No 2009/03, Working Papers in Economic Theory from Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History)

Abstract: In this paper, we study the incentives to adopt advanced abatement technologies in the presence of imperfect compliance. Surprisingly, incentives to adopt advanced abatement technologies remain intact under emission taxes and pollution abatement subsidies when compared to the perfect compliance scenario. However, under emission standards imperfect compliance increases firms’ incentives to invest under certain assumptions, whereas under an emission permit mechanism investment incentives decrease only if widespread non-compliance induces a (sufficient) reduction in the permit price. Our results are valid for fairly general characteristics of the monitoring and enforcement strategies commonly found in both, theoretical and empirical applications.

Keywords: environmental policy; technology adoption; monitoring; non-compliance (search for similar items in EconPapers)
JEL-codes: K42 L51 Q28 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-env and nep-law
Date: 2009-05
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Persistent link: http://EconPapers.repec.org/RePEc:uam:wpaper:200903

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