Circumventing Information and Incentive Problems in Pollution Control

Helge Berglann ()
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Helge Berglann: Norwegian Agricultural Economics Research Institute, Postal: P.O.Box 8024 Dep, 0030 OSLO, Norway

No 04/04, Working Papers in Economics from University of Bergen, Department of Economics

Abstract: To mitigate pollution this note advocates a two-component system. The polluter pays for the damage he causes and for the opportunity to do so. The main motivation is to achieve Pareto e¢ ciency while avoiding problems caused by asymmetric information and strategic moves. The proposed regime induces each polluter to solve the same optimization problem as an altruistic planner. Since the monetary burden of the scheme matches a linear Pigouvian tax, it does not encourage firms to split or merge.

Keywords: externalities; asymmetric information; Pareto efficiency; environmental policy; linear Pigouvian tax; Individual Transferable Fees (search for similar items in EconPapers)
JEL-codes: D82 H21 Q20 (search for similar items in EconPapers)
Pages: 6 pages
Date: 2004-06-10
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