Environmental Regulation: Choice of Instruments under Imperfect Compliance

Ines Macho-Stadler

No 189, Working Papers from Barcelona School of Economics

Abstract: 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 tradeable 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)
Date: 2015-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
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:bge:wpaper:189

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