Environmental Regulation: Choice of Instruments under Imperfect Compliance
Ines Macho-Stadler ()
UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC)
Compliance is an important issue in environmental regulation. In this paper, we discuss some of the key elements of the problem and analyze a situation where emissions are not random and firms are risk-neutral. We study the firm's decision on emissions and compliance when the environmental regulation is based on standards and the enforcement agency audits the firm with a certain probability. We then compare total emissions when environmental regulation is based on different instruments: standards, taxes, and tradable permits. We show that when compliance is an issue, environmental taxes are superior to the other instruments. We also analyze the (static) efficiency of the solution.
Keywords: environmental regulation; audits and compliance; environmental standards; other instruments. (search for similar items in EconPapers)
JEL-codes: D82 K32 K42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-env, nep-law and nep-reg
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Journal Article: Environmental regulation: choice of instruments under imperfect compliance (2008)
Working Paper: Environmental Regulation: Choice of Instruments under Imperfect Compliance (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:aub:autbar:673.06
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