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A Montero payment mechanism for regulating non-point pollution emissions

Lars Hansen ()

Resource and Energy Economics, 2020, vol. 61, issue C

Abstract: Regulating externalities from pollution is difficult when the regulator can not observe individual firms’ externality generation. Taxing the aggregate emissions of a group of polluters, which can often be observed, has been suggested. However, these taxes are vulnerable to collusion and strategic behavior, and they generate distorted entry-exit incentives. To address these disadvantages, I suggest combining an aggregate tax mechanism with the quota payment mechanism suggested by Montero for allocating emission quotas. The suggested tax system induces compliance with quotas and solves the noted problems for a subset of these regulation problems.

Keywords: Non-point pollution; Incentive regulation; Truthful revelation (search for similar items in EconPapers)
JEL-codes: Q00 D62 D82 L51 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.reseneeco.2020.101166

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