Why regulators adopt voluntary programs: a theoretical analysis of voluntary pollutant reduction programs

Takuro Miyamoto

Environmental Economics and Policy Studies, 2016, vol. 18, issue 4, No 8, 599-623

Abstract: Abstract To explain why regulators continue to implement voluntary emission reduction programs (VP), this study presents a model with multiple polluting firms, a trade association, a regulator, and a legislator who sets a mandatory standard and is politically influenced by the trade association, a representative of the polluting firms. We show that the regulator can implement a voluntary program, which generates less social cost and more aggregate abatement than a mandatory standard. We also find that assigning the greatest importance to the abatement rates of individual firms generates the highest level of social welfare if the damage due to individual firms’ emissions does not depend on other firms’ emissions. However, the importance of the participation rate will increase relatively to the abatement rate as the damage due to individual firms’ emissions becomes more sensitive to other firms’ emissions.

Keywords: Environmental policy; Lobbying; Voluntary programs; Cooperation under threat; free riding (search for similar items in EconPapers)
JEL-codes: D72 D78 Q58 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1007/s10018-015-0133-2

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